III IC-72 cheat sheet

Fire insurance standard cover per the All India Fire Tariff legacy structure comprises fire, lightning, and explosion of gas used for domestic or lighting purposes; these three perils form the basic scope.

Utmost good faith (uberrimae fidei) requires the proposer to disclose all material facts; non-disclosure or misrepresentation renders the policy voidable at the insurer's option.

Insurable interest must exist at the time of loss for property insurance (not necessarily at inception), and the insured must suffer pecuniary loss for the claim to be payable.

Indemnity is the governing principle: the insured is restored to the pre-loss financial position, subject to sum insured, average clause, and policy conditions.

Subrogation transfers the insured's recovery rights against third parties to the insurer after payment; it cannot exceed the amount paid and arises only under indemnity policies.

Contribution applies when multiple policies cover the same property and peril; each insurer pays rateably, and the insured cannot recover more than the loss.

Proximate cause is the dominant, effective cause of loss; remote causes are excluded, so a loss is payable only if the proximate cause is an insured peril.

The average clause reduces claims proportionately when the sum insured is less than the property's value at risk: claim = (sum insured / value at risk) × loss.

Standard fire and special perils policy exclusions include war and nuclear risks, ionising radiation, pollution, and loss by theft (unless specifically covered).

Special perils typically added by endorsement: storm, tempest, flood, inundation, earthquake, riot and strike, malicious damage, impact damage, and subsidence/landslide.

Reinstatement value policy pays the cost of replacing the asset with a new one of same type and capacity, subject to the sum insured being at least the reinstatement value at inception.

Declaration policy suits fluctuating stocks; the insured declares periodic values, a provisional premium is charged, and a minimum premium (commonly 50% of provisional) is retained.

Floater policy covers property at multiple locations under a single sum insured; the sum insured floats across declared locations rather than being location-specific.

Spontaneous combustion, fermentation, and inherent vice are excluded because they are internal deterioration rather than accidental external perils.

Removal of debris cover pays costs of clearing debris after an insured loss, typically subject to a specified percentage of the claim or sum insured.

Architects', surveyors', and consulting engineers' fees cover professional costs necessarily incurred to reinstate the damaged property, within a stated limit.

Risk inspection precedes acceptance for large or hazardous risks; the surveyor's report informs rating, deductibles, and warranty imposition.

Rating factors include occupancy/construction class, fire protection (hydrants, sprinklers, alarms), process hazards, housekeeping, and past claims experience.

Deductibles reduce small claims and moral hazard; an excess is the first amount borne by the insured, while a franchise means no payment unless loss exceeds the threshold.

Claims procedure: immediate notice, claim form, documentary evidence (invoices, stock records, books), surveyor appointment, and loss assessment before settlement.

A surveyor's loss assessment report is mandatory for claims above the threshold prescribed by the insurance regulator; the insurer is not bound by it but weighs it heavily.

Salvage value of damaged property is deducted from the assessed loss; the insured cannot retain salvage and claim full loss simultaneously.

Total loss versus partial loss: a constructive total loss arises where reinstatement cost exceeds the insured value, entitling the insured to treat it as a total loss.

Premium adjustment at expiry under declaration policies: actual premium computed on declared values, compared with provisional premium, with balance refunded or charged.

Business interruption (consequential loss) indemnifies loss of gross profit and increased cost of working following an insured material damage, for the indemnity period chosen.

Business interruption sum insured is the annual gross profit; the rate of gross profit = (net profit + insured standing charges) / turnover.

Machinery breakdown covers sudden and unforeseen mechanical or electrical breakdown; it excludes wear and tear, gradual deterioration, and faulty design.

Electronic equipment insurance covers computers and electronic systems against accidental damage, breakdown, and electrical surges, often on a reinstatement basis.

Burglary insurance requires forcible and violent entry or exit as evidence of burglary; theft by employees or mysterious disappearance is excluded.

Money insurance covers cash in transit and on premises within stated limits per carrying, per safe, and per occurrence.

Public liability covers legal liability to third parties for bodily injury or property damage arising from the insured's premises or operations.

Fidelity guarantee covers loss of money or property due to fraud or dishonesty of employees, subject to per-employee limits and discovery-period conditions.

Insurance is regulated under the Insurance Act, 1938, the IRDA Act, 1999, and IRDAI regulations; the IRDAI issues and renews insurer registrations and sets solvency margins.

The Insurance Act, 1938, Section 64VB prohibits risk assumption before receipt of premium, ensuring premium is paid in advance of cover.

Policy documents must state the sum insured, perils covered, exclusions, conditions, warranties, and the grievance redressal mechanism.

The Insurance Ombudsman handles complaints up to the prescribed monetary limit, with jurisdiction by location; awards are binding on the insurer if accepted by the complainant.

Utmost good faith and fair dealing require the insurer to disclose material terms; non-disclosure by the insurer may allow the insured to avoid the contract.

Grievance redressal hierarchy: insurer's grievance officer, then the Insurance Ombudsman, then consumer forums or courts.

IRDAI's protection of policyholders' regulations prescribe timelines for claim settlement and communication of decisions to the insured.

Reinsurance arrangements do not affect the insured's rights; the insurer remains solely liable to pay the full claim under the policy.

Risk identification, measurement, control, and financing form the risk management cycle; insurance is a financing tool, not a substitute for loss control.

Physical hazards (construction, storage, housekeeping) increase loss frequency and severity; moral hazards relate to dishonest intent; morale hazards relate to indifference.

Fire protection grading: Class A (hydrant and sprinkler), Class B (hydrant only), Class C (no protection); grading influences tariff and premium discounts.

Sprinkler systems, automatic alarms, and fire-resistant construction reduce expected loss and justify premium credits.

Loss prevention surveys recommend improvements and may impose warranties; breach of warranty can entitle the insurer to avoid liability.

Risk retention is appropriate for small, frequent, predictable losses; transfer is appropriate for low-frequency, high-severity exposures.

Catastrophe exposure (flood, earthquake, cyclone) requires accumulation monitoring and reinsurance protection, not just individual risk rating.

Business continuity planning reduces business interruption severity by enabling early resumption after a loss.

Conditions precedent to liability (e.g., notice of loss, submission of documents) must be satisfied by the insured before the insurer is liable.

Warranties are promises that must be literally complied with; breach allows the insurer to repudiate the claim, subject to statutory relief for non-material breach.

The doctrine of proximate cause determines liability; a chain of events is traced to the dominant cause, not the last event.

Misrepresentation and concealment of material facts allow the insurer to avoid the contract; materiality is judged by the prudent insurer test.

Contribution and subrogation are corollaries of indemnity; both prevent the insured from profiting from a loss.

The insured's duty to mitigate loss requires reasonable steps to minimise damage; costs reasonably incurred are recoverable.

Arbitration clauses in property policies resolve disputes over claim quantum; the insured must exhaust the insurer's grievance process first.

Limitation periods for filing claims in consumer forums and courts apply; the insured must act within the prescribed time from the date of repudiation.