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Property & Casualty Insurance

Insurance provides protection from the risks associated with everyday life – something that is essential to our peace of mind.

Homes and property can be insured against the risk of burglary, businesses can be indemnified against unexpected loss; our retirement can be secured by a pension; and our financial assets can be protected in the event of death, injury or illness.

The basic principles of insurance are straightforward. Risks are assessed and premiums calculated to cover injury or loss. If an insured event occurs, the insurer pays out the specified level of claim to the policyholder.

Overall, the total premiums must cover the total claims that may need to be paid out. To help ensure that costs are kept as low as possible, and that customers’ needs are met, insurance companies also invest in stocks, bonds and other securities.

The main classifications of insurance are general, life, and health.

BENEFITS OF INSURANCE

Reducing Risk

There is more to general insurance than simply compensating loss. It is one of the most effective mechanisms ever developed for assessing, managing and reducing risk.

In this way, insurance makes a major contribution to society. It drives up standards by placing pressure on the factors that generate insecurity. It breaks the spell of risk and releases us to take rational choices.

General insurance provides freedom from crushing personal and business liabilities, protects against accidents, crime, fires and natural dangers and supports innovation and risk-taking. A world without insurance would be a more daunting and poorer place.

As a result, the insurance industry has applied years of pressure to improve road safety, reduce accidents in the workplace, and prevent fires and thefts.
Insurers have worked to a simple principle for several hundred years: the greater the risk, the higher the premium. Detailed classification allows insurers to set premiums for different kinds of risk, reflecting the probability of loss.

Premiums are based on the experiences of hundreds of similar policyholders. For example, motor insurance is generally based on the make and model of car, the ease with which it can be repaired, the age and sex of the driver and the number of thefts reported for that type of vehicle.

As a general rule the more careful we are the less we will pay. Accidents and losses push up the price of insurance, particularly if those losses are avoidable.

So it makes good business sense for insurers to help customers to avoid or reduce their risks by encouraging safer behaviour. The industry also contributes to broader initiatives, often in partnership with government, to make our lives safer.

The insurance industry is a powerful contributor to national prosperity – by liberating enterprise and protecting businesses.

GENERAL INSURANCE

General insurance is vital to our modern economy, allowing individuals and businesses to minimise the impact of unexpected and unwelcome events, and organise their activities with greater certainty.

Policies can insure your home and its contents, your business, your car, your vacation, your mortgage, and your liability in the event that you cause injury or loss to someone else. General insurance is basically insurance that protects you against losses and damages other than those covered by life insurance. The coverage period for most general insurance policies and plans is usually one year and the risks that are covered by general insurance are:

  • Property Loss – For example, a stolen car or a burnt house
  • Liability arising from damage caused by yourself to a third party
  • Accidental death or injury

The main products of general insurance include:

  • Motor Insurance: By law, you need motor insurance when you buy a motor vehicle. Motor insurance covers your vehicle in case of accidents or theft. There are three common types of motor insurance available and the level of your coverage dictates what you can claim if your vehicle sustains loss or damages.
  • Personal Insurance: You buy Personal Accident insurance to protect you against injuries, disability or death caused solely by violent, accidental, external and visible events. In this way, it is different from life insurance and health insurance. In this policy, you can get coverage for permanent or temporary disablement, accidental death, medical expenses, funeral expenses, etc.
  • Fire/Homeowners Insurance: Your home is one of the largest investments you will make and Homeowners Insurance is designed to cover your home for loss or damage as a result of certain perils. The usual Homeowners Policy provides cover against Fire, Explosion, Riot, Strike, Malicious Damage, Hurricane, Storm, Earthquake, Burst pipes, Flood, Smoke Damage and Impact.
  • Liability Insurance: Liability insurance protects the insured from the risks of liabilities imposed by lawsuits and similar claims for events which fall within the scope of cover.

Under Insurance and the Condition of Average

Are you Fully Protected?

If a property is insured for less than what it is worth (known as under-insurance) the policyholder will not be reimbursed for the full amount of any loss.

In the event your property is under-insured, the net amount you will receive from a valid claim will be in direct proportion to the amount of under-insurance.

For example, if you have a sum Insured that is only half of what it should be, you will receive only half of any valid claim. The following serves to illustrate this principle:

Sum Insured $100,000
Replacement Cost $200.00
Amount of Loss $

Calculation Formula:

Sum Insured x Loss
Replacement

Cost

$100,000 x $50,000 = $25,000.00

$200,000

Policy Payment    $25,000.00
(Before deductible) Insured’s Contribution    $25,000.00

Any deductible will be subtracted from the final claim payment.

In the event of a total loss the policy will pay the lower of the amount of the loss or the sum insured. This means that in the event of you being under insured and having a total loss you will receive only the sum insured.

The basic concept of insurance is that insured persons contribute to a pool based on the risk (the value of their property) they bring to the pool. If the insured does not pay premium based on his full exposure (i.e. if he only insures 50% of his risk) then he has contributed less to the pool than he should, and cannot take out of the pool the full amount of his loss.

The basis for calculating the sum insured is set out in the policy document. A professional valuation should be undertaken at regular intervals.