Policy Documentation, Endorsements and Claims Settlement
Domain 3 tests the paperwork and the money: what the schedule, wording, warranties and endorsements do, and how a claim is quantified from repair estimates, depreciation, excesses and salvage. Calculation items here reward careful sequencing more than memorised formulas.
Core rules
- The schedule fixes the insured, the sum insured, the period and the premium; the wording defines cover; endorsements amend both and prevail over the standard wording to the extent of the amendment.
- A warranty is a condition precedent to liability: breach allows the insurer to decline the claim even if the breach did not cause the loss, unless the breach is cured or waived.
- Depreciation is normally applied to parts, not to labour, on own-damage motor claims.
- Compulsory excess is deducted first; any voluntary (additional) excess chosen by the insured is deducted as well.
- Salvage value on a total loss is either deducted from the settlement or retained by the insured by agreement.
- Cashless settlement does not change the admissible amount - the same deductions apply before the workshop is paid.
Worked example
A motor own-damage claim shows a repair estimate of 80,000, of which parts are 50,000 and labour 30,000. Depreciation is 15% on parts: 7,500. Compulsory excess is 1,000 and no voluntary excess was chosen. Admissible = 80,000 - 7,500 - 1,000 = 71,500. Reasoning: labour is not depreciated, and both deductions are applied after the depreciation adjustment because they reduce the insurer's liability, not the cost of repair.
Traps
- Deducting the excess before depreciation, which changes the arithmetic.
- Depreciating labour as well as parts.
- Treating an endorsement as subordinate to the standard wording.