General Insurance Products and Practice
Domain 4 covers non-life covers and the indemnity mechanics that decide how much a claimant receives. Expect product-identification questions and an average-clause calculation.
Core rules
- Fire insurance covers property damage by fire and allied perils; marine insurance covers cargo and hull in transit under the Marine Insurance Act, 1963; motor insurance has compulsory third-party cover under the Motor Vehicles Act, 1988 and optional own-damage cover.
- Health insurance may be indemnity or fixed-benefit; waiting periods, pre-existing-disease clauses, sub-limits and cashless facilities matter.
- Sum insured is the maximum liability; sum assured is more usual in life and fixed-benefit policies.
- A deductible/excess is the first portion of loss borne by the insured. The average clause reduces a claim where the sum insured is less than the property’s value.
- Motor IDV is the insured declared value, not the resale price in the market. No-claim bonus rewards claim-free years.
Worked example
Property worth ₹10,00,000 is insured for ₹6,00,000. A fire causes a ₹4,00,000 loss. The average clause applies: claim = (sum insured ÷ property value) × loss = (6,00,000 ÷ 10,00,000) × 4,00,000 = 0.6 × 4,00,000 = ₹2,40,000. Reasoning: the insured carried only 60% of the risk, so the insurer pays only 60% of the loss, subject to the deductible and policy terms.
Traps that cost marks
- Paying the full loss despite under-insurance.
- Treating IDV as market value.
- Forgetting that third-party motor cover is compulsory.
- Ignoring health-policy waiting periods and sub-limits.