Insurance Policies and Claims

Proximate cause literally means the ‘nearest cause’ or ‘direct cause’. This principle is applicable when the loss is the result of two or more causes. The proximate cause means the most dominant and effective cause of loss is considered. This principle is applicable when there are series of causes of damage or loss.

Renewal notice for motor insurance is issued by insurer before the expiry of the policy.

The following contingencies are usually excluded under motor insurance: -Not having a valid driving license -Under influence of intoxicating liquor/drugs -Accident taking place beyond geographical limits -While vehicle is used for unlawful purposes -Electrical/Mechanical breakdowns  

A free-look period is a period where a new insurance policy owner is able to terminate the contract without penalties such as surrender charges. A free-look period often lasts for 10 or more days (depending on the insurer), allowing the contract holder to decide whether or not to keep it; if he or she is not satisfied, the contract purchaser can receive a full refund for it.

Hazards can be classified into physical and moral. Physical hazard refers to the risk arising from material features of the subject matter of insurance, whereas moral hazard may arise from human weakness (e.g. dishonesty, carelessness, etc.) or from general economic and social conditions. At the operating level, ratemaking process involves assessment of physical and moral hazards. An insurance agent should report to the insurer any detection of moral hazard.

Underwriter decides whether to accept the risk or not. Underwriting, in a technical sense, comprises the following steps:

i. Assessment and evaluation of hazard and risk in terms of frequency and severity of loss ii. Formulation of policy coverage and terms and conditions iii. Fixing of rates of premium

Off Duty Covers - If cover is required only for the restricted hours, that is when the employee is not at work and / or not on official duty, the reduced premium of 50% of the appropriate premium can be charged.

In burglary, following can be the physical hazards:-

i.   The nature of the stocks Articles of high value in small bulk (e.g. Jewellery) and easily disposable, are considered to be bad risks. ii.  Situation Ground floor risks are inferior to upper floor risks. Private dwellings situated in isolated areas are hazardous. iii. Constructional hazard Too many doors and windows constitute physical hazard.

Aviation insurance is an insurance coverage geared specifically to the operation of aircraft and the risks involved in aviation. Aviation insurance policies are distinctly different from those of other areas of transportation and tend to incorporate aviation terminology, as well as limits and clauses specific to aviation insurance.

Correct Answer: Premium, Claims 

Insurance is based on transfer of risk to the insurer. By purchasing an insurance policy, the insured is able to reduce the impact of financial losses arising from the peril, against which the property is insured. The whole mechanism of insurance involves pooling of a large number of statistically similar risks, so that the law of large numbers would operate and the probability of number of losses (frequency) as well as the extent of loss (severity) becomes predictable. Thus, probability and severity of risks are the two important factors.

The use of large deductible policies has increased dramatically during the last 5 to 10 years for the following reasons:

1. Insurance cost savings;
2. Loss control incentives;
3. Reduced residual market burdens; and
4. Cash flow advantages.

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. 

Vehicle insurance (also known as car insurance, motor insurance or auto insurance) is insurance purchased for cars, trucks, motorcycles, and other road vehicles. Its primary use is to provide financial protection against physical damage and/or any bodily injury resulting from traffic collisions and against liability that could also arise from there. Thus, it is mandatory to be kept in the vehicle (motor car). 

The administrator of motor third party insurance is General Insurance Corporation of India.