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Custom Types of Insurance
Liability insurance is insurance where the policy holder is insured against claims for losses or damages on another party. The insurance policy caters for actions and omissions as result of negligence which damages property of other parties, the parties themselves or goes against their legal rights. The transport industry is the one which led to the introduction of Liability insurance. Even though at first it was for the Automobile industry only it has expanded to a doctor which caters for the malpractices of the medical fraternity, marine, product and casualty liabilities. Marine liability protects the owners and those operating the ships and boats while product caters for the manufacturing companies who manufacture consumer goods.
Any insurance policy that protects either a person or any form of business from a risk that may make him to be sued or held legally responsible due to negligence, injury or failure in following ones practice in the case of those I professions like accountants, doctors or Teachers. This insurance policy caters for the legal costs which the insured will be asked to pay if found guilty of the offence charged. Therefore it is important to note that damages caused intentionally or contractual liabilities cannot be covered in this policy.
Those who own manufacturing industries may take this liability insurance to cover them against injuries which may occur to their employees in the course of performing their duties in the firm. On the other hand a firm which produces products and sell them to consumers may take a cover against a faulty product that damages the one who buys the product or any third party involved. In the same case a medical practioner may take a cover against injury caused to a patient as a result of wrong diagnosis or wrong treatment.
It is important to note that this is the most common type of insurance policy for it is slightly cheaper compared to other policies. This is so because other policies cover for more than one party while liability insurance covers for one party. The owner of the policy and his property are uncovered hence not protected. It only protects you from being held liable for damages caused to other parties and their properties.
Based from the above explanations Liability insurance can be divided into four main categories. Namely; General, "Directors & Officers", Employer and Professional liabilities. Employer Liability is also known as Workers compensation. This policy is compulsory for any company, even though from the view of things it seems that it protects the employee the truth is that it protects the employer when the employee sues him for injury or sickness that is work-related
Professionals liability protects the professionals of any given area who do not have general liability is disbursing their duties as professionals. Being in a certain profession means you are highly regarded in society and thus have a big liability towards the customers he/she is serving. This clearly means that he will be covered in many areas hence it is a little bit complex than the general insurance.
According to Murphy, K. General insurance policy maybe compared to car insurance policy but unlike the car one it covers for companies against the third parties. These third parties maybe people living within the environment of the company who may decide to sue the company for noise or even air pollution. If at all the company will be held legally liable for committing these pollutions the court may require them to compensate their neighbors thus the insurance will cater for the costs. It should be clear that the company must have just been negligent but did not commit the claim intentional. If the insurance company proves beyond reasonable doubt that the company for example dumped their waste in the neighborhood which later causes healthy risks to the people in the environments the insurance may not pay the claim causing the company to pay the costs on their own (pgs18-23)
D& O liability as its commonly known is a cover against the directors and officers working in a firm. It covers against their omissions while on duty in their capacity as directors or officers of the company but not the entire firm. The company as a whole cannot be hold responsible for omissions committed by their directors in their individual capacity hence need for the cover.A director may utter certain statements, take certain actions and or fail to take certain action as required which cannot be blamed on the entire company. Thus the need for this policy to cover for such like negligence on the part of the top management.
Home owner insurance is also known as hazard insurance. This policy insurance mainly covers for those with private homes. This policy combines different types of personal insurance like protection against damages to ones home, the property in the home, and loss against the home not being able to provide everything it is required to provide leading to increased living expenses. It also covers against loss of personal belongings of the owner of the home. It may also cover against accidents which may occur in the home or in the hands of the person who owns the home. One of the requirements of this policy is that one of the policy holders must reside in the home insured.
It is considered as a double insurance for its policy caters for both property and liability, with a premium that is indivisible hence payment of a single premium to all risks. Standard forms are often used to distribute the coverage in many different groups providing just a percentage of the coverage to the main one. Mainly the amount of the policy insurance for home owners on the cost of replacing the house and other property to be insured that are attached to the insurance. The policy should be explained in details naming the things that will be compensated inclusive of those which will not be compensated incase of the occurrence of the various events. It is important to note that natural calamities that may destroy your home can never be insured for no one has control over them. However there can be an exemption in special cases like flood but they should be clearly stated in the policy contract especially if the special case applied for relate to inflation or the cost index. Home owner insurance is always a term contract which operates for a fixed period of time. The premium charged always depends on the risk level hence the lower the possibility of damage the lower the premium and vice versa. For example if a house is within the vicinity of a fire station then it means the insurance firm will charge a lower premium for they are assured of the fact that in case of a fire breakage the chances that the fire will be stopped is 90% hence less damages to both the house and the property inside. Even though Home insurance mainly is based on a fixed period, in some cases it provides for perpetual insurance. This insurance has no fixed period hence its permanency.
In most cases when one takes a mortgage loan they are required by the bank giving the mortgage that they buy the homeowners insurance in order to qualify for the mortgage. This is mainly so for the bank to protect itself incase of damage to the home, hence the insurance cover acts like a guarantor. In such cases anyone with any interest in the insurance should be listed on the contract policy. However if the value of the land is higher than that of the house a home owner insurance is not a condition any more.
The different types of policies in homeowners insurance include the Basic form home owner which provides coverage on a home against 11 claims which must be fully listed down. They include coverage against fire or storm and lightning, hailstorms, vandalism, theft, destruction from auto motors or aircraft, destruction as a result of rioting or civil war, coverage against broken glasses, smoke, eruption of volcanoes and the personal coverage. Floods and earthquakes are excluded.
However the Broad Form policy provides coverage for 17 perils which must all be listed in the policy contract. This is inclusive of the 11 perils in the basic policy. The special form policy is most common used by those families which are single. It is very comprehensive as it covers for all risks excluding risk against flooding and earthquake. It is important to put in mind that so long it is not excluded specifically it will included thus can be covered.Renter,s insurance provides cover for the tenants living in a rented home. The tenants fill in the tenants form and their property is covered against damages.
This excludes the home and insures the belongings of tenants against all perils. Premier policy is the same as the special policy inclusive of some more things. For example the contents of the policy are open thus so long as the cause of the risk is not excluded on special terms it will be covered for that cause. The condominium policy used to cover the condominium owners. Lastly the policy for older houses is used to cover owners of old houses whose replacement cost will probably exceed the market value of the property.
Life insurance is an agreement between the owner of the policy and the insurer where the insurer accepts to pay a specified sum assured to the holder of the policy incase of the death of the insured or him being affected by a terminal disease that will probably lead to death. In return the insured agrees to pay specified premiums either in lump sums or specified intervals. In some countries the policy includes catering for funeral expenses and bills though they should be specifically included in the policy. The amount of the premium to be paid is determined by the comfort ability experienced by the policy holder. Under this policy the specific exclusions are named in the policy contract to avoid confusion. This includes suicide, war, fraud and death as a result of commotion or rioting. The Life insurances are divided into two: Protection and investment policies. Protection contracts benefit the policy owner as a result of a specified event resulting in him being paid a lump sum figure at the end of the period. On the other hand Investment policies are used to grow capital through regular premiums. (Murphy, 2010 pgs 47).
It is important to know the difference between the policy owner and the insured. As the Policy holder may be the same as the insured in some cases it is different for example if Kevin takes a policy for his son Michael he is thee insured but not the owner. The insured will guarantee the policy but he is not the beneficiary. The owner of the policy receives all the benefits upon the demise of the insured. Thus the owner of the policy is not party to the insurance contract.
Incase the insured passes on the insurer requires proof for the death before payment of the claim. They need a death certificate and a completed insurer's form that is fully signed. If the death is not convincing the insurer may investigate the causes of the death before payment. The payment maybe in annuity or lump sum. Murphy, K (2010) pgs34-45
While dealing with lire insurance it is important to note the difference between Assurance and insurance. Insurance refers to providing cover against an occurrence of an event which may either occur or fail to occur. E.g. fire and theft. On the other hand Assurance provides for a cover towards something that must occur.
There are different types of Life Insurance. These include temporary and permanent. Term insurance provides for coverage on life assurance for a specified period and premium. It doesn't accumulate monetary value thus the premium is used to purchase the protection incase only death occurs. In term assurance three factors must be put into considerations .i.e. term, premium and face amount.
According to Nancy pgs57 & 78, Life insurance remains in operation till the maturity period of the policy unless the policy holder fails to pay the premium when it falls due. The insurer cannot cancel the policy unless there are cases of fraud. Incase of the cancellation it should be within the stipulated frame time. The four types of permanent include the whole, limited, Endowment and Universal. Whole-life gives a level premium, and cash value tabulated in the policy and guaranteed by the company. It has a guaranteed death benefit, cash value, fixed and annual premiums with death and expenses charges not affecting the cash value in the policy. It is clear to understand that the death only benefits the beneficiary named in the policy. It is very inflexible and the return rate is not competitive with other savings. Also the premiums are a little bit higher.
Universal Life insurance is newer in the insurance industry and it is used to give permanent insurance policy that is more flexible in terms of the premium and gives hope for growth of the cash value. In Universal the premiums increase the cash value unlike the cost of insurance which reduces. It tries to address the disadvantages of whole-life. Nancy, C. (2006) pgs34
Murphy explains that Limited-pay is similar to permanent insurance where all the premiums are paid for a specified period of time. At the end no further premiums are required. While Endowments are policies whose cash value in the policy cannot exceed the face amount or the benefit as a result of death after a certain age limit? The age at which the policy takes effect is called the Endowment age.(pgs78-89).