Non-Life Insurance Products and Policy Provisions
Non-Life Insurance Products and Policy Provisions tests property, liability, motor, marine and accident covers, and the clauses that determine how much is paid.
Product families
- Property: fire, allied perils, business interruption, burglary, all-risks. Cover is usually on a sum-insured basis; reinstatement or agreed-value bases are alternatives.
- Motor: own-damage and third-party liability. Third-party bodily injury cover is compulsory in most jurisdictions; own-damage is optional and subject to excess.
- Marine: hull and cargo, with Institute Cargo Clauses (A), (B) and (C) offering different breadth, and general average contributions.
- Liability: public, product and professional indemnity, written on a claims-made or occurrence basis; defence costs may sit inside or outside the limit.
- Personal accident: fixed benefits for death, disability and medical expenses, not indemnity-based.
Key provisions
- Indemnity means market value or repair cost less depreciation; betterment is usually excluded.
- Sum insured is the maximum payable. If it is less than the value at risk, the average (underinsurance) clause reduces the claim proportionately.
- Excess or deductible is deducted from each loss; a franchise applies only when the loss exceeds the stated amount.
- Total loss: actual total loss where the subject matter is destroyed or irrecoverable; constructive total loss where recovery cost exceeds value, allowing abandonment.
- Salvage belongs to the insurer after payment; subrogation recovers from third parties.
- Exclusions: wear and tear, inherent vice, faulty design, war, nuclear risks, deliberate acts.
Worked example
A building worth 100,000 is insured for 80,000 with a 1,000 excess. Fire damage costs 40,000 to repair. The average clause applies: 40,000 x 80,000/100,000 = 32,000, less 1,000 excess = 31,000 paid. The insured bears 9,000, being the co-insurance share plus the excess.
Traps
Forgetting the average clause. Treating betterment as recoverable. Assuming defence costs are always outside the liability limit. Ignoring the difference between claims-made and occurrence cover.