III IC-72 flashcards

36 cards. Read the term and the definition here. The deck at the top of this page is optional.

Utmost good faith

A mutual duty requiring the proposer to disclose all material facts and the insurer to disclose material terms; breach lets the aggrieved party avoid the contract.

Insurable interest

A pecuniary relationship with the insured property such that the insured benefits from its preservation and suffers loss from its damage; required at the time of loss.

Principle of indemnity

The insured is restored to the same financial position as before the loss, no better and no worse, subject to the sum insured and policy conditions.

Subrogation

After paying a claim, the insurer acquires the insured's right to recover the loss from a negligent third party, limited to the amount paid.

Contribution

Where several policies cover the same property and peril, each insurer pays rateably, and the insured cannot recover more than the actual loss.

Proximate cause

The dominant and effective cause of a loss; liability depends on whether this cause is an insured peril, not on the last event in the chain.

Average clause

If the sum insured is less than the value of the property at risk, the claim is reduced proportionately: claim equals sum insured divided by value at risk, times loss.

Standard fire perils

The basic fire policy covers fire, lightning, and explosion of gas used for domestic or lighting purposes, subject to exclusions and conditions.

Reinstatement value policy

Settles a total loss by paying the cost of replacing the asset with a new one of the same type and capacity, provided the sum insured reflects reinstatement value.

Declaration policy

Covers fluctuating stocks; the insured declares periodic values, pays a provisional premium, and settles the balance at expiry subject to a minimum retained premium.

Floater policy

A single sum insured covers property at multiple declared locations; the sum insured floats across locations rather than being fixed per site.

Special perils endorsement

Adds cover for storm, flood, earthquake, riot, malicious damage, impact, and subsidence to the standard fire policy, usually for an additional premium.

Removal of debris cover

Pays the cost of clearing debris after an insured loss, subject to a stated percentage of the claim or sum insured.

Spontaneous combustion exclusion

Loss caused by internal heating or fermentation of goods is excluded because it is inherent deterioration, not an accidental external peril.

Risk inspection

A pre-acceptance survey of large or hazardous risks that informs rating, deductibles, warranties, and protective measures required by the insurer.

Deductible versus franchise

An excess is the first amount borne by the insured on every claim; a franchise means no payment at all unless the loss exceeds the threshold.

Surveyor's loss assessment

An independent assessment of the cause and quantum of loss, mandatory above the prescribed claim threshold, guiding the insurer's settlement decision.

Salvage deduction

The value of damaged property retained or sold is deducted from the assessed loss so the insured does not recover more than the indemnity.

Constructive total loss

A loss is treated as total where the cost of reinstatement exceeds the insured value, entitling the insured to claim as for a total loss.

Gross profit calculation

Gross profit equals net profit plus insured standing charges; the rate of gross profit is this figure divided by annual turnover.

Business interruption cover

Indemnifies loss of gross profit and increased cost of working following insured material damage, for the indemnity period selected by the insured.

Machinery breakdown policy

Covers sudden and unforeseen mechanical or electrical breakdown of machinery, excluding wear and tear, gradual deterioration, and faulty design.

Burglary insurance

Covers loss by burglary evidenced by forcible and violent entry or exit; excludes employee theft and mysterious disappearance.

Fidelity guarantee

Covers loss of money or property caused by fraud or dishonesty of employees, subject to per-employee limits and a discovery-period condition.

Public liability policy

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

Money insurance

Covers cash and negotiable instruments against loss in transit and on premises, within stated limits per carrying, per safe, and per occurrence.

Section 64VB

The Insurance Act, 1938 provision prohibiting an insurer from assuming risk before receipt of premium, ensuring cover begins only after payment.

Insurance Ombudsman

A quasi-judicial authority that resolves policyholder complaints up to a prescribed monetary limit; awards bind the insurer if accepted by the complainant.

Grievance redressal hierarchy

Complaints proceed from the insurer's grievance officer to the Insurance Ombudsman, then to consumer forums or courts if unresolved.

IRDAI role

The regulator registers and renews insurers, prescribes solvency margins, protects policyholders, and issues regulations governing conduct and claims.

Warranty in insurance

A promise by the insured that must be literally complied with; breach may allow the insurer to repudiate liability, subject to relief for non-material breach.

Duty to mitigate

The insured must take reasonable steps to minimise loss after an event; costs reasonably incurred in doing so are recoverable under the policy.

Risk retention versus transfer

Retention suits small, frequent, predictable losses; transfer suits low-frequency, high-severity exposures better handled by insurance.

Fire protection grading

Class A requires hydrant and sprinkler protection, Class B hydrant only, and Class C none; grading influences tariff rates and premium discounts.

Moral and morale hazard

Moral hazard is dishonest intent to cause or exaggerate loss; morale hazard is indifference or poor housekeeping that increases loss likelihood.

Catastrophe accumulation

Flood, earthquake, and cyclone exposures can hit many insured risks at once, requiring accumulation monitoring and reinsurance protection.