General Insurance Principles and Practice
What the domain tests
This domain tests the practical lifecycle of a general-insurance policy: proposal, acceptance, schedule, wording, endorsements, premium, claims, survey, loss assessment, salvage, and reinsurance. It also tests indemnity mechanics such as deductibles and average clauses.
Core rules and concepts
- The policy schedule identifies the insured, property or liability, sum insured, period, premium, and deductible. The wording supplies cover, conditions, and exclusions.
- Endorsements amend cover during the policy term, for example adding a location or changing a vehicle.
- On a claim, the insurer checks notification, policy validity, cause of loss, exclusions, and documentation. A licensed surveyor may assess a large loss.
- Salvage is the residual value of damaged property; it reduces the claim. Subrogation supports recovery from a negligent third party.
- An average clause applies where the sum insured is less than the value at risk; the claim is reduced proportionately.
- Reinsurance is insurance for the insurer and does not change the original insured’s contract.
Worked example
Property worth ₹1 crore is insured for ₹80 lakh. A fire causes a ₹20 lakh loss. The average clause pays ₹20 lakh × 80/100 = ₹16 lakh, less any deductible. The reasoning is that the insured carried only 80% of the required sum insured, so the insured bears 20% of the loss. If the policy were on an agreed-value basis, the calculation would differ.
Traps that cost marks
Do not confuse a deductible with a franchise. Do not pay the full loss when average applies. Do not ignore salvage. Do not treat a surveyor as the final claims authority. Do not assume reinsurance gives the insured a direct claim against the reinsurer.