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III IC-99 study materials
III IC-99 study resources

III IC-99: General Insurance Principles and Policy Contract Provisions

III IC-99 · Work through your exam, one topic at a time.

All guide sections

General Insurance Principles and Policy Contract Provisions

Scope

This domain tests the seven principles that decide whether a loss is payable, plus the anatomy of the policy document and the rules of construction applied to it. Expect short scenarios asking "which principle governs?" and "what does this clause mean?".

Core rules

  • Insurable interest must exist at the time of loss in general insurance (in life insurance it must exist at inception). It must be pecuniary and recognised by law - ownership, mortgage, custody, liability.
  • Indemnity restores the insured to the pre-loss financial position, never better. Subrogation and contribution are its corollaries; proximate cause identifies the dominant, effective cause of loss.
  • Utmost good faith obliges disclosure of every material fact. Non-disclosure or misrepresentation of a material fact lets the insurer avoid the contract.
  • A valid contract needs offer, acceptance, consideration (premium), capacity, lawful object and consensus. Section 64VB of the Insurance Act, 1938 requires premium to be received before risk is assumed.
  • Policy anatomy: recitals/preamble, operative clause, schedule, definitions, conditions (precedent and subsequent), exclusions, endorsements. Ambiguity is construed against the drafter (contra proferentem).

Worked example

A storm fells a boundary wall, and the collapsing wall crushes machinery stored beside it. The policy covers "storm, tempest, cyclone" but is silent on machinery. Payable? Reasoning. The proximate cause is the storm; the wall collapse and machinery damage are direct, unbroken consequences, not a new intervening cause. The loss is therefore payable under the storm peril unless a specific exclusion (for example, damage to property in the open, or faulty design) applies. Cite proximate cause, not "flood" or "impact damage".

Traps

Applying life-insurance timing of insurable interest to property. Treating subrogation as available before the insurer pays. Assuming contribution applies across different interests or different perils.