Property and Casualty Insurance
Property cover
Property policies insure physical assets against named or all-risks perils. Know replacement cost versus actual cash value (replacement cost less depreciation), co-insurance, average, deductibles, and limits including per-item and aggregate limits. Understand business interruption, which covers loss of profit and continuing expenses following insured physical damage, subject to an indemnity period. Distinguish direct damage from consequential loss.
Casualty and liability cover
Liability policies respond to legal liability for injury or damage to third parties. Key concepts include occurrence versus claims-made triggers, retroactive dates, aggregate limits, defence costs within or outside the limit, and sub-limits. Public, product, employers', and professional liability each have distinct exposures. Know that liability insurance does not pay fines or deliberate wrongdoing.
Traps in questions
Watch the trigger: an occurrence policy responds to when the injury or damage happened; a claims-made policy responds to when the claim is made and reported, subject to retroactive cover. Beware of exclusions for wear and tear, faulty workmanship, pollution, and cyber events, and of the difference between a peril and an exclusion. Replacement cost cover normally requires insurance to value.
Worked example
A warehouse with replacement value 1,000,000 is insured for 600,000 with an 80% coinsurance clause. Required insurance is 800,000. A 400,000 fire loss is paid at 600,000/800,000 × 400,000 = 300,000, less the deductible, because the limit is below the requirement. Rule of thumb: always test the limit against the coinsurance percentage of value before applying the loss formula.