We know the importance of insurance in our life. An insurance is a contract through which an insurance company promises to indemnify and insured against specified perils on payment of a small consideration called Premium.
An insurance gives financial security to us against unfortunate perils ,whether it is injury, damage to property or death of the insured. This COVID-19 periods teaches us the value of being insured.
The insurance is of two types Life Insurance & Non-Life Insurance. The insurance policies securing life of persons are of fixed benefit and non-insurance policies are generally of indemnity basis.
The insurance companies classify different types of insurance covers offered to policyholders in many way. Broad Classification of such insurance cover is as follows;
1. INSURANCE OF PROPERTY: – this relates to assets covered based on either market reinstatements/ new replacement value or any other valuation basis. All types of property can be insured hitch have fundamental financial value and the basis of valuation can vary based n requirements of the insured.
2. INSURANCE OF EARNINGS /PROFITS; this type of insurance is also called Loss of Profit or Business Interruption Insurance of Consequential Loss Insurance. In this insurance the loss of profit of a business due to fire causalities will be covered. Since due to fire the earning capacity of business decreases and hence there will be loss of profit during re-instatement period.
3. INSURANCE OF LIABILITY; this insurance generally come into picture from the law of tort and may arise owing to insured’s negligence , causing personal injury and damage to the property of others. Liability is also may be without fault “ No fault” liabilities. Some of the examples are medical negligence, negligence of employees while dealing with third parties, negligence on handling hazardous materials etc.
4. INSURANCE OF PERSONS: this type of insurance generally covers the life of person and hence these policies are of fixed benefits policies and not indemnity based policies.
There are lot of insurance polices in the market by various insurers on many subject matters ensuring perils. We are going to discuss some important facts related to “ALL RISK INSURANCE” Policies.
Though the terminology, “ All Risks” is catchy and used by the insurers from a marketing angle, it may confuse the buyer of insurance into thinking that there are no exclusions. The distinguishing characteristic of “ All Risks” policies is a comprehensive set of exclusions which need to be elaborate as otherwise the insurer will be faced with a loss which was not intended to be covered. There may be different set of exclusions for each set of policy depending upon risk covered.
“All risks” refers to a type of insurance coverage that automatically covers any risk that the contract does not explicitly omit. For example, if an “all risk” homeowner’s policy does not expressly exclude flood coverage, then the house will be covered in the event of flood damage.
This type of policy is found only in the property-casualty market.
1. All risks is a comprehensive insurance policy offered in the property-casualty market.
2. All risks and named perils are two types of insurance commonly offered to homeowners and business owners.
3. Insurance that allows for all risks means the policyholder can seek compensation for any events that the contract hasn’t directly ruled out as being covered.
4. Policyholders can usually pay more to have a rider or floater added to the contract that would cover a specific event that was ruled out.
5. All risks insurance differs from named perils insurance, in which the policyholder can only seek compensation for events that are specified in the policy.
IT MEANS THAT ALL RISKS COVERAGE — property insurance covering loss arising from any fortuitous cause except those that are specifically excluded. This is in contrast to named perils coverage, which applies only to loss arising out of causes that are listed as covered. Although many industry practitioners continue to use the term “all risks” to describe this approach to defining covered causes of loss in a property insurance policy, it is no longer used in insurance policies because of concern that the word “all” suggests coverage that is broader than it actually is. Because of this concern, some industry practitioners have begun to use the term “open perils” or “special perils” instead of “all risks.”
THE FOLLOWING EXTENSIONS ARE AVAILABLE UNDER THE PROPERTY ALL RISKS INSURANCE POLICY:
i) Loss of profits business interruption;
ii) Loss of rent;
iii) Third party legal liability including the landlord’s liability towards tenants and the tenants liability towards the landlords;
iv) Strikes, riots & civil commotions;
v) Malicious damage;
vi) Accidental damage to plate glass fixed to the building;
vii) Expenses incurred on removing debris following the loss or damage of the insured property;
viii) Fire brigade charges and extinguishing expenses;
ix) Architects, surveyors, legal and consulting engineeing fees;
x) All risks unless specifically mentioned in the exclusion list in the insurance policy.
PLEASE NOTE THAT
1. An all-risk property insurance policy means that the policy will cover everything, except the perils which are clearly listed under the exclusion head. It means, that if something does not specifically exclude from the all-risk property insurance policy, the insurer would cover it.
2. Often known as a comprehensive insurance policy, an all-risk property insurance policy offers you coverage in the event of those losses or damages which arise due to perils that you do not anticipate, i.e., those perils which do not fall under the named peril list. When you file a claim, the property insurance company evaluates whether losses or damages are a result of events. It comes under exclusion head or not. If they are not, the insurer will offer the coverage.
3. Some of the coverages which are available under the all-risk property insurance policy are burglary, fire, machinery breakdown, explosion, business interruption due to loss of fire, business interruption due to the breakdown of machinery, etc.
4. Here, as the insurance coverage is extensive, the all-risk property insurance policy is costlier than the named perils insurance policy.
THOUGH THE ALL-RISK PROPERTY INSURANCE OFFERS COMPREHENSIVE COVER; THERE ARE CERTAIN EVENTS THAT DO NOT COVER UNDER THE POLICY, LIKE –
1. Deprecation or wear & tear;
2. Mechanical or electrical breakdown /derangement of any article unless caused by accidental external means. This means if the proximate cause of loss is a “breakdown”, the same is excluded. However ,if the subject matter accidentally falls and in the process suffers a breakdown , the same is covered. This exclusion is applicable to traditional items like radio, watches etc.
3. War and nuclear perils;( it cannot be deleted in any case ,these are absolute exclusions and even not deleted on payment of Addison all premium).
4. Loss or damages which happen during dyeing, cleaning, repairing, or restoring ,repairing or renovation or detraction arising from wear and tear ,moth vermin, insects or mildew or any operating cause. The intention being that the cause of the loss should be direct accidental physical loss;
5. Break-rage, cracking or Scratching of crockery, glass, cameras, lenses, musical instruments and similar articles of brittle or fragile nature, unless caused by fire or accident to the mans of conveyance. Since such fragile items are prone to loses due to regular usage.
SAMPLE EXCLUSIONS IN ALL RISK INSURANCE POLICY:
This Policy does not cover the following unless specially mentioned in the Schedule and expressly insured by the Policy:-
1. The amount of the Excess specified in the Schedule ascertained after the application of all other terms and conditions of this Policy including any condition of average (under-insurance).
2. Damage caused by any process of cleaning, dyeing or bleaching, restoring, repairing or renovation or deterioration arising from wear and tear, moth, vermin, insects or mildew or any other gradually operating cause.
3. Breakage, cracking or scratching of crockery, glass, cameras, binoculars, lenses, sculptures, curious, pictures, musical instruments, sports gear and similar articles of brittle or fragile nature, unless caused by fire or accident to the means of conveyance.
4. Overwinding, denting or internal damage of watches and clocks.
5. Loss or damage to money, securities, manuscripts, deeds, bonds, bills of exchange, promissory notes, stock or share certificates, stamps, travel tickets, travellers’ cheques, business books or documents.
6. Theft from any car except car of fully enclosed saloon type having at the time all the doors, windows and other openings securely locked and properly fastened.
7. Any loss or damage arising through delay, detention or confiscation by Customs or other authorities.
8. Loss or damage which either in origin or extent or directly or indirectly proximately or remotely, occasioned by or contributed to by, arising out of or in connection with war, invasion, act of foreign enemy, hostilities or warlike operations (whether war be declared or not), mutiny, civil commotion, insurrection, rebellion, revolution, conspiracy, military naval or usurped power, martial law or state of siege or any of the events or causes which determine the proclamation or maintenance of martial law or state of siege.
Any loss or damage happening during the existence of abnormal conditions (whether physical or otherwise), directly or indirectly, proximately or remotely, occasioned by or contributed to by or arising out of or in connection with any of the said occurrences shall be deemed to be loss or damage which is not covered by this insurance, except to the extent that the Insured shall prove that such loss or damage happened independently of the existence of such abnormal conditions. In any action, suit or other proceedings, where the Company alleges that by reason of the provisions of this condition any loss or damage is not covered by this insurance, the burden of proving the contrary shall be upon the Insured.
9. i) Any loss, destruction or damage to any property whatsoever or any loss or expense whatsoever, resulting or arising therefrom or any consequential loss and any legal liability of whatsoever nature, directly or indirectly, caused by or contributed to by, or arising from ionising radiation or contamination by radioactivity from any source whatsoever.
ii) Any loss, destruction, damage or legal liability directly or indirectly caused by or contributed to by or arising from Nuclear Weapons Material.
10. i) Loss or destruction of or damage to any property whatsoever (including a computer) or any loss or expense whatsoever resulting or arising therefrom;
ii) Any legal liability of whatsoever nature;
iii) Any consequential loss directly or indirectly caused by or contributed to by or consisting of or arising from the incapacity or failure of any computer
iv) to treat any date before, during or after the year 2000 as the correct date or true calendar date, or correctly or appropriately to recognize manipulate interpret process store receive or to respond to any data or information, or to carry out any command or instruction, in regard to or in connection with any such date or
v) to capture save retain or correctly to process any data as a result of the operation of any command which has been programmed into any computer, being a command which causes the loss of data or the inability to capture save retain or correctly to process such data in regard to or in connection with any such date.
A computer includes any computer, data processing equipment, microchip, integrated circuit or similar device or any computer software tools operating system or any computer hardware or peripherals and the information or data stored in or on any of the above, whether the property of the Insured or not.
11. Loss damage or consequential loss directly or indirectly caused by, consisting of, or arising from:
a) any functioning or malfunctioning of the internet or similar facility, or of any intranet or private network or similar facility,
b) any corruption, destruction, distortion, erasure or other loss or damage to data, software, or and kind of programming or instruction set.
c) loss of use or functionality whether partial or entire of data, coding, program, software, any computer or computer system or other device dependent upon any microchip or embedded logic, and any ensuing liability or failure of the Insured to conduct business.
12. Consequential loss or legal liability of any kind.
13. Loss or damage due to or contributed to by the Insured having caused or suffered anything to be done whereby the risks hereby insured against were unnecessarily increased.
14. Terrorism Damage Exclusion Warranty:
This Policy excludes loss, damage, cost or expense of whatsoever nature directly or indirectly caused by, resulting from or in connection with any act of terrorism regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
For the purpose of this exclusion, an act of terrorism means an act or series of acts, including but not limited to the use of force or violence and/or the threat thereof, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organisation(s) or government(s), or unlawful associations, recognized under Unlawful Activities (Prevention) Amendment Act, 2008 or any other related and applicable national or state legislation formulated to combat unlawful and terrorist activities in the nation for the time being in force, committed for political, religious, ideological or similar purposes including the intention to influence any government and/or to put the public or any section of the public in fear for such purposes.
This exclusion also includes loss, damage, cost or expense of whatsoever nature directly or indirectly caused by, resulting from or in connection with any action taken in controlling, preventing, suppressing or in any way relating to the above.
NOTE: the exclusion list is not exhaustive , an insurer may add additional exclusions on the basis of estimation of risks.
PLEAE NOTE THAT :
1. An all-risk property insurance policy comes with a compulsory deductible. It means at the time of claim; the insurer will not settle the entire claim amount, and the policyholder would have to pay a certain portion. It is called the compulsory deductible. A policyholder can voluntarily opt for a higher voluntary deductible and get lower premium rates. As the policyholder agrees to share the portion of the claim, the insurer rewards him/her with easy premium rates.
2. In the case of an all-risk property insurance policy, the insurer computes the sum insured as per the market value of the property. Further, it is feasible to extend the policy to cover electrical and mechanical breakdown events by paying the extra premium.
3. If a loss or damage happens, it is necessary for the policyholder to inform the insurance company immediately. Also, the policyholder should take all the steps to curtail the damages and recover the missing property. It is necessary to inform the police if the loss is due to theft, burglary, or willful damage.
4. It is essential to carefully read the all-risk property insurance policy to understand the fine print so that you can easily comprehend what is not included in the policy.
5. In “All Risks” insurance policy, it is not necessary to mentioned a list of perils to be covered. Since as named of the policy ,it covers all perils unless listed in exclusion clause of policy document.
6. The loss must be fortuitous , in other words it must have happened accidentally , in an unforeseen manner. The burden of proof then shifts to the insurer to prove that loss was caused by an excluded perils.
7. An “ All Risks” cover is open -ended in the sense that the covered perils are not specifically listed. Hence insurers may exclude certain specific perils in addition to the standard exclusions , if they do not intend to cover such perils based on risk factors.
8. Some excluded perils like mechanical/electrical/electronic breakdown, riot, strike, malicious and terrorism perils may be held covered on payment of extra premium and special conditions. Such perils are termed as “ BUY BACK” covers.
9. Please note that there are som “ Absolute Exclusions” ,such as war and nuclear risks and allied perils cannot be covered even after payment of additional premium.
CONCLUSION; it is utmost important to consider exclusion clause of “ All Risks” insurance policy, since it comes with condition that all risks are covered except the risks covered in the exclusion clause. There are some perils /risks which can be added or excluded from Exclusion List of payment of additional premium. But remember that there are some absolute exclusions such as war, nuclear and allied risks ,which cannot be covered even after payment of additional premium.
DISCLAIMER: the article presented here is only for sharing information and knowledge with the readers. The views expressed are personal and should ot be taken as professional advice. In case of necessity do consult with insurance professionals.