Insurance Products and Cover
How cover is built
A policy is a contract with an operative clause, definitions, exclusions, conditions, schedule and endorsements. The operative clause states what is insured; exclusions remove cover; conditions set obligations such as notification, mitigation and record-keeping. A warranty is a promissory condition: breach suspends cover for the period of breach under the Insurance Act 2015 rather than automatically avoiding the contract.
Main product families
- Property: household and commercial fire, theft, flood and accidental damage; business interruption covers loss of gross profit following insured damage.
- Liability: public, products and employers' liability. Employers' liability is compulsory for most UK employers, minimum £5 million, under the Employers' Liability (Compulsory Insurance) Act 1969. Motor third-party liability is compulsory under the Road Traffic Act 1988.
- Personal lines: motor, household, travel, pet, life, critical illness and income protection.
- Commercial: package, commercial combined, marine cargo, cyber and professional indemnity.
- Life and health: protection products pay on death, diagnosis or incapacity; they are not indemnity and can be valued at inception.
Key limits and features
Sum insured is the maximum for property; liability limits may be 'any one occurrence' or 'in the aggregate'. Excess is the first part of each loss borne by the insured. 'All risks' cover is still subject to exclusions such as wear and tear, inherent vice and gradual deterioration. Indemnity versus reinstatement affects settlement.
Worked example
A retailer insures stock for £50,000 on a theft policy requiring forcible entry. Thieves enter through an unlocked rear door and steal £8,000 of stock. The operative clause covers theft, but the condition requires forcible entry; the claim is declined. If entry had been forced, the insurer would pay £8,000 less the £500 excess = £7,500, subject to the sum insured and any average condition. The reasoning turns on the precise wording, not on the general label 'theft cover'.
Traps that cost marks
- Assuming 'all risks' means 'all perils'.
- Ignoring exclusions that override the operative clause.
- Confusing a warranty with a condition precedent to liability.
- Forgetting compulsory employers' liability and motor limits.
- Treating life cover as indemnity.