UNIT – 4

INTRODUCTION TO GENERAL INSURANCE

All About General Insurance
Leaving with family for a weekend getaway? Just think of all the
assets you possess like your home, car, jewellery and other
valuables. What if you lose all of it due to some fire, theft or a
natural calamity? It would be all gone even before you might think
about saving it.
Safety is the prime concern and avoiding any mess falls as the next.
At times, you might end up facing some unexpected losses for which
you were completely unaware. What then? Do you definitely look for
some security system? Or just leave things on destiny?
Well! Nothing would work except a security system that backs us. In
other words, we need an insurance cover.
“To insure is to protect and indemnify. It does not mean Prevention of
loss”.

What are the different types of Insurance?

There is a distinction between the types of insurance one is life
insurance and other is non-life or general insurance. As an individual,
you will be covered under the Life insurance policy. The
reimbursement under the policy can be withdrawn on the event of
death or maturity of the policy.
On the other hand, a General Insurance Policy will pay for the losses
that may occur during the policy period only.

What is a General Insurance

 A policy or agreement between the policyholder and the
insurer which is considered only after realization of the
premium.
 The premium is paid by the insurer who has a financial
interest in the asset covered.
 The insurer will protect the insured from the financial
 liability in case of loss.

How does the concept of General Insurance work?

Insurance is a concept that applies to a large group of people which
may suffer the same risk in the same conditions or region. The money
collected as the premium can be called as a pool and when anyone
faces a loss, the person is paid from that pool.
Still perplexed at how does a general insurance policy come into
play? Consider that your mother suffered a heart attack suddenly
and she needs a transplant. At the same time, your daughter’s college
fee was due. It definitely is a huge expense to be made at the same time
and none can be preferred over the other. In this time of stress, the
family’s health insurance policy can save your burden and the fees
can be paid from the savings. A General Insurance Policy here works
to save your burden for money.
Once we've understood what General Insurance is, let us understand
how and when will the policy apply.

A Digit’s disclose on how does a loss occur?

The loss may occur due to perils like fire, storm and flood,
earthquake, theft, accident, health, travel, and other similar factors.
So now, we know that there exists an asset which is exposed to risk.
And in case of the occurrence of losses (subject to the limit of the
policy) plays the insurance which pay for the damages.

Why do we need General Insurance?

Imagine you're driving back home in your car and suddenly, a taxi hits
you from behind. Your car has a dent and its bumper has come off
too. Now you need about Rs. 2000/- for the dent and Rs.7500/- for the
bumper to be able to fix it all.
A car insurance policy, in this case, will play well. You can get the
amount reimbursed under the insurance policy. Your car is the asset
here in which you have a financial interest. But remember, an
insurance policy will pay only as per its predefined conditions.

Difference between General Insurance and Life Insurance

General Insurance
Life Insurance
Applicability of claim
Arun took a Fire Insurance Policy for his factory. The Sum Insured
for the factory was Rs.1 cr and the premium was Rs. 10 lakhs. In case
of fire or loss due to any peril, the insurance company will pay the
claim amount after the deductible (as applicable).
Arun took a Life Insurance Policy for Rs. 1 crore. He had to give an
annual premium of Rs. 20000 for 50 years. After 10 installments, Arun
met with an accident and passed away. Arun’s family received an
amount of Rs.1 crore. The reimbursement under the life insurance is
made either at the time of maturity or death.
Amount of Reimbursement
Sheela got her car insured for Rs.5 lacs. She got her car banged and
her car’s bumper came off. The repair charges for the bumper was
Rs.15,000/-. The insurance company will pay off the amount after the
deductible. General insurance works as per the policy limits and
conditions.
Sheela chose to buy a Life Insurance Policy worth Rs.50 lakhs. The
total time for which she had to deposit the premium was 10 years.
After 10 years, she received Rs. 50 lakh. The Life Insurance Policy is an
investment policy which is paid on maturity of the policy.
Functional Period
Prakash bought a Fire Insurance for his factory and got the building,
equipment, and other fixtures. The policy was issued on 2.03.2019 and
will be renewed on 1.03.2020. The General Insurance Policies are
issued for a period of 1 year.
Prakash bought an Endowment Policy which will pay him some
proceeds on the maturity or otherwise pay some amount to his family
members in the event of Prakash’s death. The Life Insurance Policy is
issued for Life Time or till the time of the maturity period.
Payment of Premium
Madhur bought a car and got its insurance also. The next year, he
sold his car. He bought a bike and did not get the renewal for the car.
Under the General Insurance Policy, the premium will be paid for one
year till the renewal. Madhur sold his car and hence, no renewal or
no payment of premium.
Madhur bought a Money Back Policy for 20 years. He will have to pay
the premium for 20 years with money being received after every 3
years. The premium will be paid till the total term of the policy, that
is, 20 years. Under the Life Insurance Policy, the premium will be paid
for the total term of the policy.
Insurable Interest
Rikant bought a Tata Safari in the year 2018. He got its insurance at
the same time.The next year, he sold the car to Shweta and the policy
was renewed again as the vehicle will be in use. The policy was
renewed by Shweta and not Rikant. Under the General Insurance
Policy, the insurable interest of the policyholder should be present
at the time of renewal and the loss.
Rikant took a Term Plan and got his policy issued from ABC Life
Insurer. It is important for Rikant to be present at the time of
contract. Under the Life Insurance the individual who has the
insurable interest should always be present.
Types of General Insurances in India
Almost everything is insurable. However, General Insurance in India is
bifurcated as Fire, Engineering, Marine and Miscellaneous Insurance.
Let us look at them as per the use and general acceptability.
Following are the different types of General Insurances in India:
1. Health Insurance
2. Travel Insurance
3. Motor Insurance
4. Marine Insurance
5. Home Insurance
6. Commercial Insurance
Digit Insurance also offers insurance policies for Mobile, Bicycle,
Shop Protection, and others.
Health Insurance
The Health Insurance cover from Digit offers protection for the
medical expenses incurred due to hospitalization caused because of
an accident or illnesses. Although every policy is different, based on
who it's being purchased for, it mainly covers:
 Accidental Hospitalization (pre & post)

 Accidental illness and hospitalization

 Daycare procedures

 Psychiatric Support

 Annual Health Checkups

 Daily Hospital Cash

The cover can be extended to cover the following with some

predefined conditions:
 Maternity benefit with Infertility benefit
 Critical Illness

 Organ Donation

 AYUSH (Alternate Treatment)

The premium for the health insurance is charged on the basis of:
 Age
 Pre-existing illness

 Lifestyle Habits

 Type of coverage

 Your family health history

Travel Insurance
Travel Insurance covers your financial liability, if any, when you
travel within or beyond the Indian boundaries. The financial liability
may arise due to medical or non-medical emergencies.
The duration of the travel for one time can be 180 days at the
maximum. The policyholder can take more than one trip in a year. Your
Travel Insurance will cover:
  Loss of Baggage
 Loss of Passport
 Hijacking
 Medical Emergencies
 Delayed Flights
 Accidental Deaths
 Adventure Sports

Digit’s Travel cover comes with worldwide support and special

features like:
 Zero Deductibles.

 Smart phone enabled claim process.

 Customized Travel Plan Cover.

 Missed call claim facilitation.

Motor Insurance
A Motor Insurance Policy is mandatory to be able to drive legally in
India. Broadly there are two types a) Third-Party
Liability b) Comprehensive Package Policy.
A Third-Party Policy covers for losses faced in a situation where
your vehicle damages any third-party such as a public property,
person or third-party vehicle. The same is the minimum requirement to
be able to drive legally in India, as stated by the Motor Vehicles Act.
A Comprehensive Package Policy covers both third-party damages and
liabilities and damages/losses caused to you and your own vehicle.
The losses may arise due to an accident, theft, fire, natural
calamities, and others.
Digit Insurance provides some add-ons under its Comprehensive
Package Policies for Cars and Bikes that act as additional shields to
your vehicle, such as:
 Tyre Protect Cover
 Zero Depreciation Cover
 Return to Invoice
 Engine and Gearbox Protection
  Breakdown Assistance Cover

Home Insurance
You build your home with your toil and hard earned money.
Everything you buy is a priceless possession for you and hence it
needs to be protected. A Home Insurance Policy protects your
valuable and other assets. It is a comprehensive package policy that
covers all valuables.
Digit Insurance gives protection for Home against Burglary,
Loss/Damage of Jewelry, Fire and Natural Disasters.

Commercial Lines
The lines of insurance that affects the business operations in the
real terms are categorized under the Commercial Lines of Insurance.
Type of the insurance covers that one can buy may include:
 Property Insurance

 Engineering Insurance

 Liability Insurance

 Marine Insurance

 Employees Benefit Insurance

 Business Interruption

Depending on the type of occupation, risk exposure, and the money

involved, the insurance could be different for each industry or
business. For example; an insurance that is specific to a cement plant,
versus one for an IT company will be different. The premium charged
for a cement plant will be higher than a showroom of air conditioner.
Therefore, Insurance is completely based on the level of the risk
exposure. A worker in the cement plant is more prone or susceptible
to injury than to the one who is working in the showroom.

Mobile Insurance
Simple as it reads. A mobile insurance protects the phone from
accidental damage. Under the mobile protection cover, Digit
Insurance compensates for repair of accidental screen damage to
your phone. The buyers can have mobile insurance for both an old or
new phone. A very affordable insurance protection for the most
expensive phones you buy.

Bicycle Insurance
Not just the cars and two wheelers, people are now passionate for
expensive bicycles also. Call it a fashion or change of
lifestyle, Bicycle Insurance is another sought product these days.
Digit Insurance offers cover against Personal Accident, Theft,
Accidental Damage, and Hospital woes.
“Insurance is to manage Cash Flow after a loss occur”.

What is Fire Insurance?

A fire insurance is an important part of a Property Insurance policy,
that helps protect your home and business properties such as
apartment buildings, office spaces and shops from any damages and
losses that could occur due to a fire.
What Is Fire Insurance?
The term fire insurance refers to a form of property insurance that
covers damage and losses caused by fire. Most policies come with
some form of fire protection, but homeowners may be able to
purchase additional coverage in case their property is lost or
damaged because of fire. Purchasing additional fire coverage helps
to cover the cost of replacement, repair, or reconstruction of
property above the limit set by the property insurance policy. Fire
insurance policies typically contain general exclusions such
as war, nuclear risks, and similar perils.

KEY TAKEAWAYS

 Fire insurance is property insurance that provides additional

coverage for loss or damage to a structure damaged or
destroyed in a fire.
 Fire insurance may be capped at a rate that is less than the cost
of the losses accrued, necessitating a separate fire insurance
policy.
 The policy pays the policyholder back on either a replacement-
 cost basis or an actual cash value basis for damages.
 Although some homeowners insurance policies include fire
coverage, they may not be extensive enough for some
homeowners.
How Fire Insurance Works
Homeowners insurance provides policyholders with coverage against
loss and/or damage to their homes and possessions, also referred to
as insured property. This is a blanket term used to describe both the
interior and exterior of the home as well as any assets that are kept
on the property itself. Policies may also cover injuries someone
sustains while on the property. If you have a mortgage, there's a very
good chance that your lender won't advance your loan if your
property isn't covered. Even if it isn't a requirement, it's a good idea
to protect yourself. There are additional forms of coverage you can
purchase including fire insurance.

Fire insurance covers a policyholder against fire loss or damage

from a number of sources. These include fires brought about by
electricity, such as faulty wiring and gas explosions, as well as
those caused by lightning and natural disasters. A burst and
overflowing water tank or pipes may also be covered by the policy.

Most policies provide coverage regardless of whether the fire

originates from inside or outside of the home. The limit of
coverage depends on the cause of the fire. The policy reimburses the
policyholder on either a replacement-cost basis or an actual cash
value (ACV) basis for damages.

If the home is considered a total loss, the insurance company may

actually reimburse the home's current market value. The insurance
typically provides a market value compensation for lost possessions,
with the total payout capped based on the home's overall value. If,
for example, a policy insures a house for $350,000, the contents are
usually covered for at least 50% to 70% of the policy value—or a
range of $175,000 to $245,000. Many policies limit how much
reimbursement covers luxury items such as paintings, jewelry, gold,
and fur coats.

Special Considerations
A policyholder should check the home's value each year to determine
if there is a need to increase the coverage amount. A policyholder
cannot get insurance for more than a home's actual value. Insurance
companies may offer stand-alone policies for rare, expensive, and
irreplaceable items that are otherwise not covered in standard fire
insurance.

Some standard homeowners insurance policies include coverage for

fire, but they may not be extensive enough for some homeowners. If
an insurance policy excludes coverage for fire damage, a homeowner
may need to purchase separate fire insurance—especially if the
property contains valuable items that cannot be covered with
standard coverage. The insurance company’s liability is limited by the
policy value and not by the extent of damage or loss sustained by
the property owner.

Fire insurance provides extra coverage to offset any additional

costs to replace or repair property that surpasses the limit set by
homeowners insurance.

Fire insurance policies provide payment for the loss of use of the
property as a result of a fire or for additional living expenses
necessitated by uninhabitable conditions, as well as damage
to personal property and nearby structures. Homeowners should
document the property and its contents to simplify the assessment
of items damaged or lost in the event of a fire.

A fire insurance policy includes additional coverage against smoke

or water damage due to a fire and is usually effective for one year.
Fire insurance policies on the verge of expiration are usually
renewable by the homeowner, under the same terms as the original
policy.

What is Marine Insurance?

Marine Insurance is a type of insurance that covers cargo losses or

damage caused to ships, cargo vessels, terminals, and any transport
in which goods are transferred or acquired between different points
of origin and their final destination. Providing protection against
transport-related losses, this voyage policy provides a haven for
shipping companies and couriers because it protects them from
costly potential losses while transporting goods by water.
Despite following laws and safety regulations, transporters can’t
control natural occurrences that might disrupt the cargo or vessel.
Things like weather hazards, encounters with pirates, and cross
border conflicts are very common in water transportation and the
damages associated with these situations can cause a significant
financial hardship for ship owners. This is where a marine insurance
policy comes to the rescue, protecting the interests of shipping
corporations and transporters by providing them with insurance
coverage needed to defend against possible losses.
Another great feature of marine insurance is that transporters can
choose coverage options applicable to their specific trade. Coverage
requirements can differ, so shipping businesses can choose an
insurance plan that is customized. Different policies are available to
provide coverage according to the size of the ship and routes taken.
What are the different features of a Marine Insurance Policy?

Insurance policies are well-defined contracts and marine insurance

has strict policy requirements. Insurer requirements should always
be followed because minor discrepancies or any violations can lead
to rejected claims. Policy providers follow narrow guidelines when
reimbursing claims, and a simple deviation to the route might result
in a loss of coverage for an expensive claim. With this in mind, it’s
important to understand the features and requirements of your
policy to ensure you have coverage.
Open Policy – an inland marine insurance policy provides coverage for
inland movement of a consignment for a specific duration of time,
usually up to one year. This policy is applicable for shipping
companies with numerous transactions per year as it offers
continuous coverage during the active policy period. Inland marine
insurance, in the context of extended coverage for marine insurance,
covers goods shipped by land, such as after the goods have arrived
ashore and are being shipped to a storage facility.
Comprehensive Protection – provides more expansive coverage against
different types of loss or damage, protecting the value of your
merchandise against total loss of goods, partial loss of goods, and
other related expenses while your cargo is still in transit.
Customization – for businesses with varying needs, obtaining
customized marine insurance is generally recommended. You can
choose your policy coverage limits as well as policy options that
would be useful to your business and your specific needs.
Mark up Value – known as markup in the marine industry, this type of
policy allows a portion of your profit to be included in the insured
value.
A marine insurance policy provides comprehensive protection, though
keep in mind that there are coverage exclusions that need to be
considered. Insurance companies will not cover your claim if:
 It is caused by willful negligence
 It is caused by improper packaging
 There is contamination as a result of radioactive rays
 It is caused by strike, riot, or civil commotion
 Other exclusions may apply, another reason to review your
coverage closely
What types of Marine Insurance Exist?

Ocean marine insurance is such a broad term that it is usually

applied to a group of coverages to provide protection against
certain losses or damages. Generally, there are three common types
of marine insurance that provide different protections.
Hull Insurance – offers protection for physical damages to the boat
or vessel along with its operating equipment, including machinery.
This policy is applicable for all water vessels and limited to
commercial-based ocean crafts. Barges, tugboats, oil rigs located
offshore, floating equipment, and other similar installations can
benefit from this type of insurance.
Cargo Insurance – provides coverage for physical damage to cargo
that is conveyed or travelled as part of the shipment process.
Depending on the chosen coverage, some policies offer theft
protection or coverage for other forms of losses besides physical
damage.
Marine Liability Insurance – also called P&I or protection and
indemnity, this coverage offers protection for third-party liabilities
that owners and corporations are exposed to during water
operations. It includes coverage for injuries, illnesses, or even loss
of life caused by vessel operation. Medical expenditures, damage to
other vessels and cargo, collision incidents, and related expenses as
a result of quarantine may also be covered.