sample copy. not for distribution. - educreation is a director with “embee insurance brokers ......

Sample Copy. Not For Distribution.

i

Insurance Tips


ii

Publishing-in-support-of,

EDUCREATION PUBLISHING

RZ 94, Sector - 6, Dwarka, New Delhi - 110075 Shubham Vihar, Mangla, Bilaspur, Chhattisgarh - 495001

Website: www.educreation.in __________________________________________________

© Copyright, Author

All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form by any means, electronic, mechanical, magnetic, optical, chemical, manual, photocopying, recording or otherwise, without the prior written consent of its writer.

ISBN: 978-1-61813-501-8

Price: ` 265.00

The opinions/ contents expressed in this book are solely of the author and do not represent the opinions/ standings/ thoughts of Educreation.

Printed in India


iii

121

+ Tips

To Avoid Legal Disputes in Life

General And Health Insurance

Sudhir Kumar Jain

Sanjay Gupta

EDUCREATION PUBLISHING (Since 2011)

www.educreation.in


iv


v

About Author

Sudhir Kumar Jain

M.Com, CMA, SAS (Commercial), AIII, Broker

Examination is a well reputed professional of 37

years of rich experience in varied fields of Finance,

Accounts, Costing, Insurance, Taxation, Teaching,

Software development etc. He is a visiting faculty to

various Universities of the country. Additionally his

contribution in the arena of educating a large

number of Officers aspirants from Insurance PSUs

taking promotional examinations since 2007 is well

acknowledged. A number of books authored by him

on the subjects of insurance and design- insurance

course „Diploma in Insurance‟ for National Institute

of Open Schooling are widely acceptable by the

professionals as reference material. He has also co-

authored a number of books on the subjects like

Fire, Engineering and Marine Insurance. Currently

he is a Director with “Embee Insurance Brokers

Ltd” Chandigarh.

Sanjay Gupta AMIE (Electronics and Communication Engg.), M

Tech Biomedical Engg.( IIT Delhi) is regarded as

one of the leading Insurance Surveyor and Loss

Assessor having wide experience of 26 years. He

was employed as a Project In-Charge with USFDA

after accomplishing his M Tech from IIT Delhi. As

a R&D Engineer with a core team of M/s Elscent


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Inc, Israel for three years his immense contribution

was to design first of Spiral CT Scanner in the

world. In 1996, he left lucrative international career

to start and practice as Insurance Surveyor and Loss

Assessor, and currently, he is widely acknowledged

for his in-depth knowledge of entire spectrum

subjects related to Insurance, in the country. He has

also co-authored a number of books on the subjects

of Fire, Engineering and Marine Insurance.

*****


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Dedicated To Parents


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ix

Acknowledgement

Air Commodore V. K. Seth (Retd.)

For

Editing this book

*****


x

Disclaimer

The Authors and Publisher hereby excludes any

warranty, express or implied, as to the quality,

accuracy, timeliness, completeness, performance,

fitness for a particulars purpose of the Book or any

of its contents, including (but not limited) to any

financial tools contained within the Book. The

Authors and Publishers will not be liable for any

damages (including without limitation, damages for

loss of business projects, or loss of profits) arising

in contract, tort or otherwise from the use of this

book or any of its contents, of from any action taken

(or refrained from being taken) as a result of using

this Book or any such contents.

*****


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Introduction

“The grace of God is like insurance. It will help you

in your time of need without any limit”.

- Shri Sathya Sai Baba

“You do not buy the life insurance because you are

going to die, but because those you love are going to

live”.

- Unknown Author.

Insurance is not a luxury but in fact it is a necessity. It

does not assure you of becoming rich; but not having

it could certainly imply a total absence of any

financial protection against the possible losses and

could make you pauper and poor.

This book is written with the sole objective to

underline the significance of simple but vital

precautions to be taken while insuring your

Property/Life/Health/Liability and then how best to

settle the claims in shortest possible time without

hassles as and when its need arises.

Sometimes after having insurance, you may not get

full financial protection because of improper policy

wordings and terms and conditions. 122 tips are

written are based on the practical experience of the

authors who is either representing the insured or

assessing the loss on behalf of the Insurer.


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The Tips are compiled for each types of insurance

policies which may be immensely useful for specified

respective fields; but those covered under Sections of

Life, Health and Vehicle insurance are universally

applicable to all.

Some of these tips may have financial burden on the

premium and some may be useful by adding or

deleting the terms and conditions of the policy at the

time of claim.

The last moment of buying insurance may be avoided

and discuss the need of the insurance with an expert.

Wish you best buying and enjoying Insurance !!!!

*****


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Content

S. No. Particulars Page

1 Fire Insurance 1

2 Engineering Insurance 33

3 Consequential Loss of Profit 45

4 Marine Insurance 53

5 Liability Insurance 67

6 Misc Insurance (Burglary,

Motor, etc)

73

7 Life Insurance 93

8 Health Insurance 107

9 Insurance Jokes 117

*****


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121+ Tips To Avoid Legal Disputes in

Life General And Health Insurance

1

Fire Insurance ___________________________________________

The Fire Policy does not cover only the loss/damage

of fire but also due to other perils like lightening,

storms, strike, aircraft damage etc. Therefore the fire

policy in India is known as Standard Fire and Special

Perils Policy. Though these risks are covered yet

certain exceptions would always be there. For the

Indian economy to prosper and grow, every business

organization should invariably insure their assets to

protect against possible losses on account of any

mishap as covered under Fire Policy.

*****

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Sudhir Kumar Jain

Sanjay Gupta

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Tip-1.1

Replacement Vs Market Value

under Fire Insurance

Reinstatement Value and Market Value are the only

two methods to settle the claims under fire insurance.

Meaning of these two terminologies is totally

different and thus its distinction needs to be well

understood.

If Reinstatement Value is opted, then in any event of

mishap, the Insurer will settle the claim at the value

of the damaged/lost property for its current

replacement cost. Under Reinstatement Value policy,

the sum insured will be higher which attracts higher

premium as compared to that of Market Value one. It

is advisable to insure the property/assets under

Reinstatement value.

But under the Market value, the claim will be settled

after charging depreciation depending upon the usage

of the assets on the replacement value. Insurer

generally issues the policy on Market value by default

unless someone specifically seeks for the

Reinstatement Value one.

How to calculate the Reinstatement Value of the

property is explained in the following tips.

Tip-1.2

How to calculate the Sum insured of Building

under Fire Insurance for Reinstatement clause

Building is a permanent structure and the cost of its

basic components used therein, would remain

fluctuating over the time on account of inflationary

pressures in the economy and other interventions by


Sudhir Kumar Jain

Sanjay Gupta

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the Governments like implementation of GST Act

etc. It is thus imperative that when preferring the

claim, its value needs to be calculated to currently

prevailing costs of its construction as follows;-

Area of the building (all the floors) X Current value

of cost of construction per (sq feet/metre)

While computing the Current Value of the building,

its height including the plinth, specific materials used

for its construction and that of floors, sanitary

fittings, sewerage pipes, water pipes, immovable

wooden fixtures, electrical wiring in the building are

to be taken into account.

Electrical lights along with their fittings, fans, air

conditioners and temporary structure are excluded

from these calculations as these are separately dealt

under the Heads of Furniture, fixture and fitting. So is

the case of boundary wall and retaining wall.

In the event of unavailability of verifiable current rate

of construction, then the RBI index of steel and

cement needs be applied to calculate the current price

of the building.

Tip-1.3

How to calculate the Sum insured of Plant &

Machinery under Fire Insurance for

Reinstatement clause

The Books of Accounts represent the historical cost

of the assets i.e at the price these were purchased and

with the passage of time, these assets depreciate in

value but whereas the price of assets to be replaced

invariably increases.




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The value of assets to be insured should invariably be

as per the current prevailing price in the market.

However furnishing of this information is an uphill

task for large organizations as to get the quotes for

each and every machine and their accessories at the

time of renewal of fire policy is a tedious work. It is

thus recommended that the RBI Index of respective

industry may be applied to calculate the value of

plant & machinery and including additions/reductions

during the course of the year leading to renewal of the

policy. RBI Index is available at:

www.rbi.org/publication/annualpublication/wholesale

priceindex

Miscellaneous expenses during construction or

acquiring the assets related to know-how of

technology fees /R & D/license/ franchisee etc are

ignored while applying the RBI Index. Basic idea is

not to inflate the total value of the assets unnecessary

resulting in paying higher premium.

The period of insurance must be specifically defined

in the policy. Generally the period of fire insurance

will not exceed by one year. The period can be less

than one year but not more than one year except for

the residential houses which can be insured for the

period exceeding one year also to get extra leverage

of adequate time available to its renewal as and when

due well in time without any risk of a break in which

any unfortunate incident of loss can happen with

irreparable loss.


http://www.rbi.org/publication/annualpublication/wholesalepriceindex

http://www.rbi.org/publication/annualpublication/wholesalepriceindex

Sudhir Kumar Jain

Sanjay Gupta

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Tip-1.4

Compact policy for Office/Hotel/shops

The Compact Policy is specially tailored for multiple

risks cover under one policy to the benefit of specific

industry i.e. Office/Hotel/Shops.

Fire, burglary, flood, earthquake for the building and

contents, sudden breakdown of machinery or damage

to the Electronic Equipment in office, Workmen

compensation, Public and Professional liability,

Money-in-Transit, Fidelity Guarantee etc are all

covered by this policy, with only one exception of

that of boundary wall. Additional premium needs to

be paid for that if required.

Out of all risks covered under this policy, only fire

and burglary ones are compulsory whereas others are

optional. One can choose the limits of Sum Insured

for each section of coverage offered depending on the

insurance needs of the enterprise. It could also

include employer‟s benefit policies such as Group

Personal Accident and Group Health Insurance etc,

all under a Comprehensive package insurance policy.

If more than 4 risks are covered at one time, then

insured is entitled for a discounted premium.

Tip -1.5

Temporary Removal of Stock Clause Vs Floater

Policy under Fire Insurance

Quite often, varied kind of stocks lying at the insured

premises are to be moved out to other locations for

various reasons of business including that for

modifications/fabrications etc; and thus to ensure that

such stocks being moved to different locations remain




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covered against possible risks of untoward

happenings are either covered under “Floater Policy”

or “Temporary Removal of Stock” Clause.

In “Temporary Removal of Stock” Clause, the stock

up to 10% of their insured values can be removed

from the insured premises without disclosing the

addresses of the fabricators etc subject to a payment

of additional premium of 10% of the sum insured.

However in case of the “Floater Stock Policy”, one

needs to specifically mention the addresses of all the

locations where the stocks would be shifted as briefly

illustrated of an example below;-

Example: A person is having two storage points;

and the value of stock is Rs 50 lakhs and the stocks

could be moved to any one of two locations to and

fro, then he can insure the stock under floating

policy by paying an additional premium.

Tip-1.6

Bush Fire Vs Forest Fire

A large numbers of industries are co- located in the

adjoining area of rural India where the wheat /rice

and other cereal crops are grown. After every

harvesting cycle of the crops, cleaning of the

agriculture fields by burning the stubbles is a regular

though highly prohibited practice of land owners

which make these co-located industries are highly

vulnerable to fire risks. These fire risks are not

covered in Fire Policy as default. To cover such risks

against possible losses to the co-located industries,

the “Add on Cover” of “Forest Fire” is to be opted by

paying an additional premium. Buildings in the


Sudhir Kumar Jain

Sanjay Gupta

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course of constructions in the rural areas are also

recommended to opt for similar cover of “Forest

Fire” whose endorsement wording in the policy is as

under:

“In consideration of the payment of premium of

additional premium the insurance under item of the

policy shall extend to include loss of or damage to

the property insured directly caused by burning,

whether accidental or otherwise, of forest /jungles

and cleaning of land by fire”

Tip-1.7

Mid Term cover of RSMD and STFI

Generally mid-term cover for STFI and/or RSMD

perils are not permissible but when granted as per

terms and conditions by paying additional premium

on short period scale, these commence within 15 days

of the receipt of the premium. The policyholder

should ensure that not only to receive the

Endorsement reference; but also to obtain a fresh

policy covering RSMA and STFI, as in case of

possible loss, the Surveyor could deny the settlement

of the claim. Similar is the case when the deletions of

these covers are sought at any time.

Tip-1.8

Principle of Contribution under Fire Insurance

If a person insured his property with two insurance

companies, then in case of fire loss both the insurance

companies would pay the loss value to the owner

proportionately. However Condition Number 11 of

any “Fire Insurance Policy” in this regard is




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important for the claimants to know its significance

because the claims are often rejected by the Insurance

Companies by erroneously interpreting the Principle

of Contribution on which the above Condition is

based, as given below under italic;-

“If at the time of any loss or damage happening to

any property hereby insured there be any other

subsisting insurance or insurances, whether effected

by the insured or by any other person or persons

covering the same property, this Company shall not

be liable to pay or contribute more than its rateable

proportion of such loss or damage”.

It is to understand that the Condition Number 11

would come into play only if only it meets the

conditions of Principle of Contribution as under:

a) Two or more policies of Indemnity should exist

b) The policies must cover a common interest

c) The policies must cover a common peril which is

the cause of loss

d) The policies must cover a common subject matter

e) The policies must be in operation at the time of

loss

To understand the Condition 11, the following

example would illustrate its exact implications;-

A person “X” insured his stock as „Held in Trust”

lying with a jobber for the risk cover of excess of over

Rs 25000/-. The Jobber in turn has also insured the

stock of all the suppliers at his end as “Held in

Trust” for the excess of over rupees Rs 5 lakhs risk

cover. In the eventuality of the stock of “X” getting

damaged due to fire at the premises of the Jobber;

and when “X” filed a claim for the damages, his


Sudhir Kumar Jain

Sanjay Gupta

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Insurer invokes the Condition no. 11 and demanded

the contribution from the Insurer of Jobber who in

turn declinethe demand because his policy is for the

stocks in excess of Rs 5 lakhs value.

Comments:- Insurer at jobber‟s end is correct in

deckling the demand because firstly it is inconsistent

with the Principle of Contribution as no common

subject matter exists and further its risk cover is for

excess of Rs 5 lakhs. And most importantly the

Principle of contribution is applicable only amongst

the Insurers only; and not with the Insured. The

conditions those are beneficial to the Insured can

only be incorporated but not otherwise. And further

the condition 11 cannot overrule the „Principle of

Contribution”. It is thus the Insurer of X who has to

meet the cost of damaged goods fully provided all

valid conditions of Policy are observed.

Tip-1.9

Importance of “Agreed Bank Clause”

under Fire Insurance

All policies in which a Bank has a partial interest

are to be made out in the name of the Bank and

Owner or Mortgagor and the Agreed Bank Clause

incorporated in the policy. The organizations which

borrow funds from the banks or financial

institutions, there is a condition that in their

insurance policies, the detailed information of all

bank/Financial Institution be essentially mentioned.

Insurer includes the clause namely “Agreed Bank

Clause” but the names of the Bank/Financial

Institution if inadvertently are not




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