Chapter 7 IF1

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What is the definition of "indemnity"?
“To put the Insured as close as possible to the same financial position after a loss as they were immediately before the incident”
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Identify two types of insurance that are benefit policies i.e. not policies of indemnity.
Life, Personal accident
2 of 19
Identify four ways a property insurer can indemnify an insured
Cash, Repair, Replace , Reinstate
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What are the two ways indemnity is measured on a Marine policy?
Valued policy as agreed, Unvalued policy as per formula in Marine Insurance Act (1906)
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What would "indemnity' be on property policy covering buildings?
Replacement cost less wear and tear
5 of 19
On what basis are most buildings insured under a property policy?
Reinstatement basis (new for old)
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If a building is insured on a reinstatement basis what condition of average usually applies?
85% condition of average
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If average applies and there is a claim for £10,000 and the sum insured is £90,000 and the value of the item insured is £100,000 how much do insurers pay for the loss?
£9,000 = £10,000 x £90,000/£100,000
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If a building is insured on a reinstatement basis, the 85% condition of average applies and there is a claim for £10,000 and the sum insured is £90,000 and actual reinstatement value of the item insured is £100,000 what do insurers pay for the loss
£10,000 as the sum insured £90,000 exceeded 85% of the actual reinstatement value so average does not apply
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If a building is insured on a reinstatement basis and the 85% condition of average applies and there is a claim for £10,000 and the sum insured is £80,000 and actual reinstatement value of the item insured is £100,000 how much do insurers pay
£8,000 = £10,000 x £80,000/£100,000, Average does apply as the sum insured £80,000 is less than 85% of the actual reinstatement value
10 of 19
What is the typical valuation of indemnity for manufacturer's stock under a property policy
Cost of raw materials plus labour costs incurred to date
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What is the typical valuation of indemnity for wholesaler's stock under a property policy
Cost of replacing stock including transport costs
12 of 19
The inflation protection where the insured declares the cost of reinstating the building at the inception date but the sum insured is the declared figure + a specified percentage to cover inflation during the policy period and reinstatement period is
Day one
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Is property insurance on a Day 1 basis subject to 85% average?
No average will apply if the declared value is less than the actual reinstatement value of the building at the inception date of the policy
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What is the typical measure of indemnity on a household policy?
New for old
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What is the typical measure of indemnity for farming stock?
Market price
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What is an agreed value policy
One where the value of the subject matter of the insurance is agreed at the start of the contract and the sum insured is fixed accordingly. This value will be reviewed at each renewal.
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What is a first loss policy
Limits the sum insured to an amount that the insured feels is the maximum potential loss where this is not the full value of the subject-matter of the insurance.
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What is the average condition
A formula used to calculate a claim payment when the sum insured is less than the full value of the subject matter of the insurance. The formula is sum insured divided by the value of goods at risk mulitplied by the loss
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Other cards in this set

Card 2

Front

Identify two types of insurance that are benefit policies i.e. not policies of indemnity.

Back

Life, Personal accident

Card 3

Front

Identify four ways a property insurer can indemnify an insured

Back

Preview of the front of card 3

Card 4

Front

What are the two ways indemnity is measured on a Marine policy?

Back

Preview of the front of card 4

Card 5

Front

What would "indemnity' be on property policy covering buildings?

Back

Preview of the front of card 5
View more cards

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