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Lesson 11 - Miscellaneous Insurance - III

Introduction of the Host
Mr.Harikumar is a freelance journalist with rich experience gained from working with leading periodicals and dotcoms. His association with leading financial portals has contributed greatly to his ability to deal with classroom sessions in the financial sector, especially investments. Currently, he is a columnist with some of the well known publishing companies. Some of his published works on mutual funds and insurance have got wide acclaim.

MISCELLANEOUS INSURANCE - III

PROPERTY INSURANCE

Property Insurance is a contract of indemnity having the property of subrogation.

In order to mean that the loss is concerned with property, it is necessary that a criminal offence falling within the ambit of the policy has been committed. It is to be noted especially here that articles of higher value which come under the scope of any other policies are not covered under property insurance. Also there is a presupposition that the assured is liable to file proof of loss showing that the property insured has been taken away permanently with no likelihood of replacement.

While taking insurance, the person having insurable interest should furnish a description of the property and the insured is supposed to furnish a description of the property as well as take all precautionary measures to protect the property from possible damages. Like any other policy, the loss has to be notified at once.

STOCK EXCHANGE/STOCK BROKERS INDEMNITY POLICY

This policy is specially crafted to cater to the need of the stock exchanges and stock brokers in India.

The scope of this policy is as follows.

1. To cover the legal liability to the insured arising out of the transactions entered into, according to the rules and regulations of the stock exchange.

2. To cover the loss of securities or cash held by the insured.

3. To cover the loss caused by fraud, forgery, or dishonesty on the part of the employees.

But the policy does not cover the following.

1. Speculative transactions of stocks and securities.

2. The activities of partners, Directors and their employees who are intimate to the company and who know the material transactions of the concern.

3. Loss due to delay or Loss of Profit or Consequential Loss.

The indemnity policy is subject to the condition that the books and accounts of the insured would be audited once in every year by their statutory auditors.

Other conditions applicable to the plan are:  

1. All members of the stock exchange should take the policy for a minimum indemnity period as prescribed by the respective stock exchange.

2. The maximum amount of indemnity for a member per stock exchange would be Rs.1 lakh.

Premium

The premium is 1.25% of the amount of policy. But if there were no internal audit, 20% of the premium also would be loaded. It is the usual practice that a per capita premium of Rs.100 is charged on all employees.

If there is a continuous cover for the policy during subsequent years and if the loss pertaining to the previous year is detected only during the current year of the policy, the insurance company is liable to pay the loss as ascertained.

FIDELITY INSURANCE

Fidelity Insurance is intended to indemnify the employers for the amount insured against any financial loss sustained as a result of forgery, fraudulent conversion of money, embezzlement, etc. committed by the employees during the course of their duties.  This type of insurance otherwise called  Fidelity Guarantee Insurance is taken as a precautionary measure to guard against new employees who are given the position of trust. Even though there is no stipulated amount of guarantee, it is in vogue that the amount should not exceed four to five years of the remuneration of the employees.

WORKMEN'S COMPENSATION INSURANCE

The liability under this plan shall be based on the following.

a. The employee has to furnish proof of good character and integrity in the earlier services.

b. The accounting methods and business policies of the employers are found satisfactory.

c. The employees' financial status should be assessed properly, including their pecuniary obligations and debts. d. The amount of guarantee should match with the kind of job that is assigned to the employee.

The salary, commission or any other amount lying with the employer at the time of occurrence of loss should be retained until the claim is made. However, the statutory funds like Provident Fund (PF) do not come within the meaning of this.

The indemnity period starts at the commencement of the policy and stands good during the continuing service of the employee and identified within 12 months of the expiration of the policy and in case of death, retirement or dismissal, within 12 months of the cessation of the service.

The policy does not cover any loss arising out of India, misstatement of facts, change in circumstance or condition, and more than one claim in respect of one employee.

Unlike any other policy, two proposal forms are necessary under this scheme - one to be signed by the employer and one by the employee.

The rate of premium is fixed depending on the type of goods and services undertaken by the employees during the course of their employment.  If the number of the insured employees goes beyond 6, a discount is normally afforded on the premium.

SHOPKEEPERS' INSURANCE

The policy is meant to provide a cover to small shopkeepers' assets by bringing the normal contingencies under one umbrella, which are otherwise covered separately.

Shopkeepers' Insurance has the following coverage

Section I         Building of Class I Construction and its contents
Section II        Burglary and House Breaking
Section III       Money
Section IV      Pedal Cycle
Section V       Plate Glass
Section VI      Fire, Accident, or Theft
Section VII     Baggage
Section VIII    Personal Accident
Section IX      Fidelity Guarantee
Section X       Public Liability
Section XI      Loss of Profit or Consequential Loss

Under this policy too, special discount rates on premium are available if four or more of the above mentioned sections are covered.

The multi Sectional discount rates are as under

1.  Section I is compulsory

2.  Where there are 4 and up to 6 sections covered, discount rate is 15% 

3.  Where more than 6 sections are covered, discount is fixed at 20%

SUMMARY