Multiple choice

Sum insured under an insurance policy means

  1. it is the agreed value of subject matter insured

  2. the amount payable when there is a loss

  3. the amount on which the premium is calculated

  4. the maximum limit of liability under the policy
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D Correct answer
Explanation

In Public Liability Policy, the sum insured is referred to as Limit of Indemnity. This limit is fixed per accident and policy period which is called Any One Accident (AOA) limit and Any One Year (AOY) limit, respectively. The AOA limit which is the maximum amount payable for each accident, should be fixed taking into account the nature of activity of the insured and the maximum number of people who could be affected and the maximum property damage that could occur, in the worst possible accident in the insured's premises. 

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