General insurance is also known as non-life insurance policies including vehicles and homeowners insurance policies and provides payments depending on the loss caused from a particular financial damage. General insurance typically means any kind of insurance that is not determined to be life insurance. It is also called property and casualty insurance in the U.S. and Non-Life Insurance in Continental Europe. General insurance is a financial mean of protecting items from certain events. General Insurance comprises of insurance of property against fire, burglary etc., personal insurance such as Accident and Health Insurance, and liability insurance which covers legal liabilities. It could be applied to car, home, boat or any other valuables, depending on what type of policy the person will buy and what type of insurance the individual is looking for. Insurance other than ‘Life Insurance’ falls under the category of General Insurance. There are also other covers such as Errors and Omissions insurance for professionals, credit insurance etc.
Non-life insurance companies have products that cover property against Fire and allied perils, flood storm and flood, earthquake and so on. There are products that cover property against burglary, theft etc. The non-life companies also offer policies covering machinery against breakdown. There are policies that cover the hull of ships and so on. A Marine Cargo policy covers goods in transit including by sea, air and road. Further, insurance of motor vehicles against damages and theft forms a major chunk of non-life insurance business. When a customer buys vehicles he should pay money to have the insurance. Then, if something happens to the items that are insured, the insurance company is supposed to compensate the insured for that thing For example, if a person has general insurance on his home, and this home is damaged in a storm, the insurance will cover the repairs that need to be made, as long as the insured are up to date on the policy that he have.
General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance. It is called property and casualty insurance in the U.S. and Non-Life Insurance in Continental Europe.
Different types of general insurance
General insurance comprises of
- Property insurance
- Liability Insurance
- Other forms of insurance
Property insurance covers loss in the event that damage, injury, or death occurs and the person who owns the property that caused or was involved in the event is liable for the cost of the loss. Today this type of insurance is usually bundled with liability, or casualty, coverage, which insures the loss incurred by a third party that is caused by the property or property owner. Property insurance is also a contract of indemnity whereby the insurer in consideration of a certain periodical payment undertakes to indemnify the other party against financial loss which the later may sustain by reasons of certain subject matter being damaged or destroyed by the risks or reasons affecting adversely up to an agreed amount. The property is the subject matter in property insurance. Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance. Property is insured in two main ways open perils and named perils. Open perils cover all the causes of loss not specifically excluded in the policy. Common exclusions on open peril policies include damage resulting from earthquakes, floods, nuclear incidents, acts of terrorism and war. Named perils require the actual cause of loss to be listed in the policy for insurance to be provided. The more common named perils include such damage-causing events as fire, lightning, explosion and theft.
The following are the main forms of property insurance.
- Marine insurance
- Fire insurance
- Miscellaneous insurance: Under this type of insurance we can insure property, machine, goods, automobile, furniture etc. against the damage or destruction due to accident or disappearance due to theft.
Marine insurance is the oldest form of Insurance. It is closely related to import and export trade overseas. It is an insurance against the perils of the sea which are likely to occur during sea transport. Marine risks generally related to the ship or cargo and the traders and owners of the ship always like to ensure the safe arrival of the ships and cargo. Marine insurance covers a lot of risks such as sinking, burning of ships, accident, collision of ships, jettison, barratry, piracy, explosion, sea dacoits, stormy winds causing losses to the ship and cargo and many other perils of the sea. Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination. Marine insurance is a type of insurance that covers boats and ships, as well as their cargo and in some instances the places where the boat or ship is docked.t has a colorful history, beginning informally in England during the 17th century. In 1906, the Marine Insurance Act was passed under British law, creating a standard operating procedure for policies that dictates the world’s policies to this day. The standards set forth by the act are considered reasonable, but due to changes in technology and social standards, the act is generally seen as obsolete and is being replaced by more modern legislature.
According to section 2(13) A of the Insurance Act 1938 a marine insurance defined as the following. “Marine insurance business means the business of effecting contracts of insurance upon vessels of any description, including cargos, freights and other interests which may be legally insured in or in relation to such vessels, cargoes, freights goods, wares, merchandise and property of whatever description insured for any transit by land or water or both, and whether or not including warehouse risks or similar risks in addition or as accidental to such transit and includes any other risks customarily included among the risks insured against in marine insurance policies.”
According to Arnold marine insurance is a contract whereby one party for an agreed consideration, undertakes to indemnify the other against loss arising from certain perils and sea risks to which a shipment and other interest in a marine adventure may be exposed during a certain voyage or a certain time.
Subject matter of marine insurance
Marine hull insurance, cargo, freight and liability are the subject matter of marine insurance.
Marine Hull Insurance:
This pertains to insurance of ocean going steamers and other vessels. “Hull” refers to the body or frame of the ship. Machinery is the equipment that generates the power to move the vessel and control the lighting and temperature system such as boiler, engine, cooler and electricity generator. Hull insurance provides the cover for the hull and machinery as well as in respect of materials and outfit and stores and provisions for the officers and crew. In addition cover for liabilities is included.
Marine Cargo Insurance:
This being cargo insurance, it provides cover for various transit perils in respect of goods and or merchandise in transit from one place to another by sea, air, road or registered post. Transit or Marine risks or perils are covered under Marine Insurance. Marine insurance plays a pivotal role in Import, Export and internal trade. Trade involves movement of goods from one place to another place. Goods while in transit are liable to be lost or damaged through one or other of various perils from the time it leaves the warehouse of the supplier till it is received at the final warehouse of the consignee. Goods while in transit are generally exposure of perils leading to total loss or damage. The loss or damage suffered due to these perils is to be transferred to the Insurer in lieu of the premium, as these are included in the Marine cover. It has coverage of loss or damage caused by war, civil war, revolution, rebellion, insurrection or civil strife or any hostile act, capture, seizure, arrest, restraint detainment, general average and salvage charges Strikes, riots etc.
Freight is the charge payable for the carriage of cargoes. If the vessel is a chartered one, the money is to be paid for the use of the vessel. In case the cargo or ship gets destroyed, the shipping company will also lose the freight on the carriage of cargo. If the cargo owner pays freight for the goods shipped at the time of shipment and the goods do not reach the destination, he loses the fright. The policy covers such risk is called freight insurance.
Features of marine insurance
The following are the important features of marine insurance contract.
- In this type of insurance cargo, ship and fright is to be insured.
- There is a contract between insurer and insured.
- The insured is liable to pay a certain amount to the insurer as premium for the insurance.
- Insurance can be taken for a single journey or number of journeys during a period of time.
- The insurer guarantees to indemnity the loss incurred by the insured from sea perils.
- .Marine insurance can be taken against losses incurred in inland also.
- It also includes third party insurance.
KINDS OF MARINE POLICIES
The document containing the terms and conditions of the contract is called the Marine Policy. It must contain the names of the assured and the insurer or insurers. The subject-matter insured and the risk covered the voyage or period of time or both and the sums insured. It must be duly signed by the insurer and stamped under the Stamp Act. 1899. The Marine Insurance Act deals with the following types of policies:
When the contract is to insure the subject matter at and from one place to another, the policy is called a “Voyage policy”. In this case the risk attaches only when the ship starts on the voyage.
Where the subject-matter is insured for a definite period of time, it is called a “Time Policy. The ship may pursue any course it likes; the policy would cover all the risks from perils of the sea for the stated period of time. A time policy cannot be for period exceeding one year, but it may contain a continuation clause.
It is a combination of voyage and time policies and covers the risk during particular voyage for a specified period of time.
It is a policy, which specifies the agreed value of the subject matter insured. If there is no fraud or misrepresentation, the value in a valued policy is conclusive as between the insurer and the insured, whether the loss is partial or total.
Open or Un-valued Policy
In this policy the value of the subject-matter insured is not specified. Subject to the limit of the sum assured, it leaves the value of the loss to be subsequently ascertained.
The practice of taking out floating policies has come in vogue because of the difficulty of knowing by which ship or ships the goods are to be shipped. Such a policy therefore only mentions the amount for which the insurance is taken out and leaves the name of the ship(s) and other particulars to be defined by subsequent declarations.
Fire insurance is designed to provide financial protection or property against loss or damage by fire and other specified perils. Basically it is a contract of indemnity. In this case the insured cannot claim anything more than the value of goods lost or damaged by fire or the amount insured whichever is less. Fire insurance is a contract to indemnify the insured for destruction of or damage to property or goods, caused by fire, during a specified period. The contract specifies the maximum amount, agreed to by the parties at the time of the contract, which the insured can claim in case of loss. This amount is not, however, the measure of the loss. The loss can be ascertained only after the fire has occurred. The insurer is liable to make good the actual amount of loss not exceeding the maximum amount fixed under the policy.
Fire insurance is a form of property insurance which protects people from the costs incurred by fires. When a structure is covered by fire insurance, the insurance policy will pay out in the event that the structure is damaged or destroyed by fire. Some standard property insurance policies include fire insurance in their coverage, while in other cases; fire insurance may need to be purchased separately.
Property owners should check with their insurance companies if they are not sure whether or not fire insurance is part of their policies, and if fire insurance is not included, it should be purchased.
Depending on the terms of the policy, fire insurance may pay out the actual value of the property after the fire, or it may pay out the replacement value. In a replacement value policy, the structure will be replaced in the event of a fire, whether it has depreciated or appreciated: in other words, if homeowners purchase a home and the value increases, as long as it is covered by a replacement value policy, the insurance company will replace it. An actual cash value policy covers the structure, less depreciation. Most accounts come with coverage limits which may need to be adjusted as property values rise and fall.
Fire insurance, provision against losses caused by fire, lightning, and the removal of property from premises endangered by ire. The insurer agrees, for a fee, to reimburse the insured in the event of such an occurrence. The standard policy limits coverage to the replacement cost of the property destroyed less a depreciation allowance. Indirect loss, such as that resulting from the interruption of business, are excluded but may be covered under a separate contract. Insurance rates are influenced by the quality of fire protection available where the building is located, the type of building construction, the kind of activity conducted within the building, and the degree to which the building is exposed to losses originating outside it.
Certain kinds of property, such as accounting records, currency, deeds, and securities, are frequently excluded from fire-insurance coverage or are declared uninsurable. Loss from such causes as war, invasion, insurrection, revolution, theft, and neglect by the insured are also customarily excluded. Coverage is suspended if the insured does anything that increases the hazard or if the property is vacant beyond a specified period. The policy may be canceled by either party for any reason, but the insurer must give the insured prior notice of cancellation. The policy may specify in addition that the insurer may replace or rebuild the damaged property rather than make cash settlement.
Fire insurance is an agreement between the insurer and the insured, under which the insurer agrees to indemnify the loss caused by lire, to the insured, in consideration of certain payment, called premium.
According to T.R Smith fire insurance may be defined as a contract whereby the insurers in return for a consideration, known as premium, undertakes to indemnify the insured against financial loss which may sustain, by reason of certain defined property, known as property insured, being damages or destroyed by fire or other perils within a stated period of liability of insurer, being limited to a specified amount called the sum insured.
Section 2 of the insurance act 1938 defines fire insurance as,” the business of effecting, otherwise than incidentally to some other class of insurance business, contract of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured against in fire insurance policies.”
Fire insurance is a device to compensate for the loss consequent upon destruction by fire. According to Halsbury it is a contract of insurance by which the insurer agrees for consideration to indemnify the assured up to a certain extent and subject to certain terms and conditions against loss or damage by lire, which may happen to the property of the assured during a specific period.
Thus, fire insurance is a contract whereby the person, seeking insurance protection, enters into a contract with the insurer to indemnify him against loss of property by or incidental to fire or lightning, explosion etc. This policy is designed to insure one’s property and other items from loss occurring due to complete or partial damage by fire.
In its strict sense, a fire insurance contract is one:
- Whose principle object is insurance against loss or damage Occasioned by fire.
- The extent of insurer’s liability being limited by the sum assured and not necessarily by the extent of loss or damage sustained by the insured: and
- The insurer having no interest in the safety or destruction of the insured property apart from the liability undertaken under the contract.
Features of fire insurance
- Fire insurance contract is a contract of indemnity. The insured cannot claim anything more than the value of the goods or properties lost or damaged by fire or the amount of policy whichever is less.
- . It should fulfill all essentialities required for a valid contract.
- It is a contract of utmost good faith in which the insurer and the insured must disclose all material facts related with the subject matter of the insurance.
- Fire insurance policy is issued for a lawful consideration.
- A fire policy is taken generally for one year and it can be renewed according to the terms of the policy.
- In fire insurance the insured must have insurable interest in the goods or properties insured against fire, both at the time of taking the policy and also at the time of incurring loss and the claim is filed for compensation.
- Fire policies cover loss against fire.
- We can assign the fire policy with the prior permission of the insurer.
- The scrap left after the fire, automatically passes in the hands of the insurer alter the payment of insurance claim.
- The cause of the tire is immaterial for admitting the fire insurance claim. At the same time if the fire is caused due to fraud or misconduct on the part of the insured, the loss will not be indemnified.
- On occurrence of fire, the insurer should be intimated immediately so that he could protect the remainder of the property and can also determine the amount of loss.
- The claim may be settled in cash or the goods or properties damaged are reinstated.
The standard Fire and Special perils policy
The perils specified in the policy are Fire, lightening. Aircraft damage, riots, strike and miscellaneous damages, storm, cyclone, typhoon, Tempest, Hurricane, Tornado and Flood and inundation.
These policies cover stocks at various specific locations under one sum insured. The insured may have stocks in two or more go downs. The insured is able to declare for insurance the total value of goods in all godowns but not separate values for each godown.
This is a fire policy in which the reinstatement value clause is attached. The clause provides that in the event of loss, the amount payable is the cost of reinstating property of same kind, by new property.
Industrial all risks policy This is a package cover designed for industrial risks (both manufacturing and storage facilities) with an overall sum assured of Rs 100 crores and above. The policy covers the following: Fire special perils, Burglary, Machinery breakdown and Business interruption
Liability insurance is a part of the general insurance system of risk financing to protect the purchaser (the “insured’) from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy. Originally, individuals or companies that laced a common peril formed a group and created a self- help fund. Out of which compensation is paid to any member who incur loss. The modern insurance system is profit oriented. They offer protection against specified perils in consideration of a premium.
Liability insurance is designed to offer specific protection against third party insurance claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract. In general, damage caused intentionally as well as contractual liability is not covered under liability insurance policies. Under liability insurance policy the insurer promises to indemnify the loss caused to a third party, resulting in death or injury or fatal accident with third party or loss of third party’s property due to the negligent act of employer, hiss employees’ or insured’s property. When a claim is made, the insurance carrier has the duty (and right) to defend the insured. The legal costs of a defense normally do not affect policy limits unless the policy expressly states otherwise; this default rule is useful because defense costs tend to rise when cases go to trial. Fidelity insurance, automobile insurance, machine insurance etc. falls under this category.
Product liability Policy
The structure of the policy is more or less than public liability policy. The indemnity applies to claims arising out of accidents during the period of insurance and first made in writing against the insured during the policy period arising out of any defects in the products specified.
This policy is designed for owners of passer lifts in building to cover third party liabilities for personal injuries or property damage arising out of the use of operation of lifts.
Employer’s Liability Policy or workman compensation insurance
This policy protects the employers against their legal liability for payment of compensation arising as a result of death or disablement of the employees arising out of and in the course of employment.
Directors and Officers Liability Policy
This is a highly specialized type of insurance newly introduced in India. This policy is designed to provide protection to Directors and Officers against their personal civil liability.
OTHER FORMS OF INSURANCE
It consists of export credit insurance, state employees insurance, etc.
Full coverage is required for new cars or those under financing, although regulations vary by state. Auto insurance is designed to help to pay for repairs or replacement in the event of an accident. It may also cover medical costs for a driver or passengers, or even those tor individuals in another vehicle if the insured is deemed to be at fault. Auto insurance also covers a vehicle in the event of theft or other forms of damage depending on the chosen policy.
Disability insurance may protect the insured from financial ruin if he is injured or disabled and can no longer work. This type of insurance is meant to help with monthly fiving expenses and health care expenses not covered by a health insurance policy. Disability insurance is available in short- term and long-term policies. Short-term insurance pays for approximately 6 months. Long-term insurance starts at the end of 6 months and may last until a person reaches age 65. If an employee is covered through the employer, coverage may average between 60% and 70% of the employee’s current income.
Homeowner’s insurance helps to cover losses of a home or property due to fire, natural disaster, faulty electrical work, bad plumbing and more. If the insured have a mortgage, he will most likely be required to carry some form of homeowner’s insurance.
Long-Term Care Insurance
Long-term care protection is designed for those diagnosed with chronic illnesses and the elderly. It may help to provide for nursing home or at-home health care. Long-term care policies may also help to pay for adult day care services and assisted living facilities.
Miscellaneous or Liability Insurance
‘Miscellaneous Insurance’ refers to contracts of insurance other than these of Life, Fire and Marine insurance. This branch of insurance is of recent origin and it covers a variety of risks.
Personal Accident Insurance
This means insurance for individuals or groups of person against any personal accident or illness. In India this type of insurance is done by the General Insurance Corporation. The risk insured in personal accident insurance is the bodily injury resulting solely and directly from accident caused by violent, external and visible means. Under this policy the insurer pays the specified sum, if the insured sustains any bodily injury resulting solely and directly from accident caused by external violent and visible means.
Property risks relate to burglary, house breaking, theft, crop insurance, etc. Any property, movable or immovable, present or future, vested or contingent can be insured from my losses by accidents other than fire and marine adventure. The most popular in this branch is burglary insurance.
Just as a person can insure himself against the risk of death and personal injury, or damage, determination or destruction of property, there can also be an insurance against the risk of incurring liability to third parties. The risk of liability arising out of the use of property comes under the category commonly called liability insurance”. It includes
Public Liability Insurance
That is, insurance against a liability imposed by law. For example, a house owner may obtain an insurance against his liability to invitees or licensees, arising from body injury or damage to property.
Professional Negligence Insurance
These policies give professional indemnity cover to accountants, solicitors, lawyers, from any loss or injury due to any negligence in the conduct of their professional duties.
The ESI Act makes it compulsory for the employers (covered under that Act) to insure their workmen by providing certain benefits to them in the event of their sickness, maternity and employment insurance. The employees insured are entitled to (a) Sickness benefit, (b) Maternity benefit, (c) Disablement Benefit, and (d) Dependent’s benefit.
Employer’s Liability Insurance
The liability of an employer under the modern labour laws has considerably extended and the employers are tempted to take out insurances against such liabilities. For examples, when the employees retire, substantial amount become immediately payable by way of gratuity, commuted pension, leave salary compensation, etc. and also the uncommuted pension becomes payable in future. Employers often take insurance policies which assure payment of such amounts, as and when these becomes payable.
The main types of policies included in guarantee insurance are a) insurance for performance of contract, policies, the guarantor/ underwriter insures the promisee or employer against the loss arising by non-performance by the promisor or the dishonesty of the employee.
Fidelity policies are the most common type of guarantee policies, taken under contracts of employment where the employee has an opportunity to be dishonest. Such policies cover the risk of losses arising by theft or embezzlement of money or securities, or by fraud, on the part of employees.
Motor Vehicle Insurance
A policy for motor vehicle insurance is, ordinarily, a combined insurance against the damage to the motor vehicle and its accessories, death of or injury to the, occupant of the vehicle and also against the risk of liability for injury to, or the death of, third parties caused by the driver’s negligence.