Fire Insurance is a property insurance and it covers the material damage of the property insured. Insurers will compensate or indemnify the Insured for the repair costs or reinstatement costs if this is insured on a Reinstatement value basis (subject to the adequacy of the Sum Insured) of the property that has sustained damage by an insured peril.
It is therefore important for all owners of houses, shops, factories, machinery, stock etc to be covered by fire insurance, which is the simplest form of coverage offered to property owners.
A standard Fire policy covers loss and / or damage by:
i)Fire
ii)Lightning
iii)Explosion (due to domestic boiler or of gas for domestic purpose)
iv)Damage by water or other extinguishing agents used to put out the fire
v)Damage resulting from gaining access to a fire
vi)Smoke damage caused by fire
Principal Exclusions
Perils as specified (these perils can be granted subject to payment of additional premium):
A.Loss by theft during or after the occurrence of a fire
B.Arson by the Insured
C.Collapse of buildings
D.Subterranean Fire
E.War & Civil Commotion
F.Radioactive contamination
G.All forms of indirect (consequential) loss are excluded.
However, rental can be included if specifically insured.
Additional Cover
Subject to the Insured’s agreement and payment of additional premium, the basic policy can be extended to cover the following special perils: -
Additional Premium
Aircraft Damage 0.005%
Earthquake & Volcanic Eruption 0.010%
Storm, Tempest 0.015%
Flood 0.086%
Explosion
-Industrial without boilers 0.006%
-Industrial with boilers 0.008%
-Non-industrial without boilers 0.005%
-Non-industrial with boilers 0.008%
Impact Damage
- Excluding insured’s own vehicle 0.004%
- Including insured’s own vehicle 0.004%
Bursting & overflowing of water tanks: -
-Building exceeding 5 stories (including Mezzanine)0.006%
-Others 0.005%
Electrical Installation Clause B 0.056%
Bush or Lallang Fire 0.005%
Subsidence & Land Slip 0.081%
Spontaneous Combustion – By fire only 0.081%
Spontaneous Combustion – Full cover 0.0161%
Riot, Strike & Malicious Damage: -
-Residential Properties 0.010%
-Other than Residential Properties 0.014%
-Damage by Falling Trees or Branches and 0.010%
-Full Theft – Householder Policies only 0.250%
Sprinkler Leakage
-Buildings 0.005%
-Contents 0.025%
Spray Painting
-Subject to Spray Painting - 25% loading Warranty 24
-Without Spray Painting - 50% loading Warranty 24
-Smoke Damage 10% of Basic Fire
Sum Insured
Building and / or plant and machinery
Indemnity under a standard Fire Policy is on the market value at the time of the fire. It is also permissible to insure on reinstatement value basis whereby, the proposer must declare the reconstruction value or replacement value of the building and/or machinery.
Wednesday, 9 December 2015
Motor Insurance
The coverage available under a Motor insurance policy includes:
Act cover
The ‘Act’cover is the minimum cover required by the Road Traffic Ordinance. It covers death or injury to third party arising from the negligence of the insured in a motor accident. The amount covered under this policy is unlimited. This policy does not cover damages to third party property, damage to or loss of the driver’s vehicle or injuries suffered by the owner.
For example, Shanti crashed into a stationary car parked near her house, hurt herself and damaged the other car. The Act cover will pay for the injuries suffered by the injured person in the parked car. It will not cover the damages to the other car or the damages to her own car and her injuries.
Third party cover
The Third-party cover provides wider cover than the Act cover. It provides coverage for a blending of protection granted by an Act cover and in addition indemnity for liability for damages to property belonging to third parties.
Quoting the above case, if Shanti had bought a Third-party cover instead of an Act cover, it would have covered the cost of the other party’s damages to the vehicle.
Third party, fire and theft cover
This type of Third-party cover is a combination of Act cover, third party cover, and in addition, it indemnifies the insured against theft of his or her vehicle and damages by fire.
If Shanti’s car was stolen three months after the accident, this policy would cover her losses while the former two will not.
Comprehensive
This is the widest form of cover under motor insurance and is highly recommended. Acar is a major asset of the client and losses sustained in an accident would be substantial even if the loss is not total. The Comprehensive cover would confer a much greater cover to the client.
This plan is a combination of the Act and Third party coverage plus any physical damage to the insured vehicle and its spare parts following accidental collision and other perils as more specifically covered in the policy.. It is also possible to increase the policy’s degree of comprehensiveness by adding other coverage such as windscreen cover and P.A. cover, etc.
With this policy, Shanti would have been able to claim the losses on the repairs made to her damaged car.
Classes of Motor Insurance
The 3 classes of motor insurance under the Motor tariff are:
a)Private motor car
b)Motorcycle
c)Commercial vehicle
Each of the above classes has its own motor insurance policy and is rated separately under its own section of the Motor Tariff.
Sum Assured
The risk amount to the insured of a motor vehicle is reflected in the sum insured. The sum insured of the vehicle is the client’s estimation of the value of the vehicle and its accessories. The value should be reflective of the market value at the time the insurance is bought. Depreciation of the vehicle must be taken into consideration and the value should be reviewed every renewal date. Over insurance will obviously waste the client’s money, while under insurance will subject the claim to the average clause.
Rating
In accordance with the ICAGIB (Inter-Company Agreement General Insurance Business) ruling, premiums charged must be those stated in the Motor Tariff. This would mean the rates, unless loaded, on each class of vehicle will be the same for all insurers.
Private Motor Car
Comprehensive premium is calculated based upon:
-sum insured
-the cubic capacity of the car
To arrive at the third party premium it is necessary to know the cubic capacity of the car and reference is then made to the premium chargeable on the third party columns as shown in the Tariff.
Commercial Vehicle
As there is a wide category of vehicles falling under this class, the exact type of vehicle must be known. Comprehensive premium is calculated based on:
-sum insured
-tonnage
-business permit e.g. A to C to obtain the comprehensive premium
For third party cover, the sum insured need not be known and the same procedure applies as in private car third party insurance.
Motorcycle
The comprehensive premium is calculated based on:
-the cubic capacity of the vehicle
-the sum insured
-whether for single or all riders or commercial usage
To arrive at the third party premium the sum insured need not be known and the premium calculation
is obtained from the third party column of the tariff.
Minimum Premium
The minimum premium per policy (whether annual or short period) is RM50.00 for (private cars and commercial vehicles cars) and RM20.00 for (motor cycles) after deducting No Claim Discount but before allowing commission /brokerage.
No Claim Discount
Written evidence of entitlement or confirmation from previous insurer must be obtained before allowing the No Claim Discount.
No Claim Discount should only be allowed on the basic premium (including the premium charged for any loading imposed). All extra benefits extension shall not be permitted a No Claim Discount.
Under no circumstances can any staff make special arrangement to issue NCD vide credit note with agents. All NCD should be for the benefit of the policyholder and not credited to agents’ account. When requested to issue NCD letters, these letters must be issued in duplicate to the insured and the insurance company will return one duly signed copy of the letter to the policyholder.
Likewise, the new policyholder should obtain NCD letters in duplicate and sign and return one copy of the letter to the previous insurer. This is to allow the industry to check that no forged NCD letters are treated as valid. There have been instances that NCD letters submitted by policyholders are “fakes”.
Extensions to Basic Cover
i.Windscreen cover may be granted at inception of cover but if the cover is requested during the currency of the Policy, a survey must be conducted before cover can be granted. Additional premium at 15% of windscreen value.
ii.Passengers liability cover can be granted on request by payment of an additional premium of 25% of the premium charged for the third party cover. For cars with seating capacity in excess of 4 passengers, an amount of RM10.00 per passenger after the 4th passenger would be charged
iii.Medical expenses (Section III) and personal accident (Section IV) cover are excluded. However they can be granted on request by payment of additional premium of RM20.00 per person
iv.Strike, riot, civil commotion cover can be granted with additional premium of 0.30% of the sum insured.
Act cover
The ‘Act’cover is the minimum cover required by the Road Traffic Ordinance. It covers death or injury to third party arising from the negligence of the insured in a motor accident. The amount covered under this policy is unlimited. This policy does not cover damages to third party property, damage to or loss of the driver’s vehicle or injuries suffered by the owner.
For example, Shanti crashed into a stationary car parked near her house, hurt herself and damaged the other car. The Act cover will pay for the injuries suffered by the injured person in the parked car. It will not cover the damages to the other car or the damages to her own car and her injuries.
Third party cover
The Third-party cover provides wider cover than the Act cover. It provides coverage for a blending of protection granted by an Act cover and in addition indemnity for liability for damages to property belonging to third parties.
Quoting the above case, if Shanti had bought a Third-party cover instead of an Act cover, it would have covered the cost of the other party’s damages to the vehicle.
Third party, fire and theft cover
This type of Third-party cover is a combination of Act cover, third party cover, and in addition, it indemnifies the insured against theft of his or her vehicle and damages by fire.
If Shanti’s car was stolen three months after the accident, this policy would cover her losses while the former two will not.
Comprehensive
This is the widest form of cover under motor insurance and is highly recommended. Acar is a major asset of the client and losses sustained in an accident would be substantial even if the loss is not total. The Comprehensive cover would confer a much greater cover to the client.
This plan is a combination of the Act and Third party coverage plus any physical damage to the insured vehicle and its spare parts following accidental collision and other perils as more specifically covered in the policy.. It is also possible to increase the policy’s degree of comprehensiveness by adding other coverage such as windscreen cover and P.A. cover, etc.
With this policy, Shanti would have been able to claim the losses on the repairs made to her damaged car.
Classes of Motor Insurance
The 3 classes of motor insurance under the Motor tariff are:
a)Private motor car
b)Motorcycle
c)Commercial vehicle
Each of the above classes has its own motor insurance policy and is rated separately under its own section of the Motor Tariff.
Sum Assured
The risk amount to the insured of a motor vehicle is reflected in the sum insured. The sum insured of the vehicle is the client’s estimation of the value of the vehicle and its accessories. The value should be reflective of the market value at the time the insurance is bought. Depreciation of the vehicle must be taken into consideration and the value should be reviewed every renewal date. Over insurance will obviously waste the client’s money, while under insurance will subject the claim to the average clause.
Rating
In accordance with the ICAGIB (Inter-Company Agreement General Insurance Business) ruling, premiums charged must be those stated in the Motor Tariff. This would mean the rates, unless loaded, on each class of vehicle will be the same for all insurers.
Private Motor Car
Comprehensive premium is calculated based upon:
-sum insured
-the cubic capacity of the car
To arrive at the third party premium it is necessary to know the cubic capacity of the car and reference is then made to the premium chargeable on the third party columns as shown in the Tariff.
Commercial Vehicle
As there is a wide category of vehicles falling under this class, the exact type of vehicle must be known. Comprehensive premium is calculated based on:
-sum insured
-tonnage
-business permit e.g. A to C to obtain the comprehensive premium
For third party cover, the sum insured need not be known and the same procedure applies as in private car third party insurance.
Motorcycle
The comprehensive premium is calculated based on:
-the cubic capacity of the vehicle
-the sum insured
-whether for single or all riders or commercial usage
To arrive at the third party premium the sum insured need not be known and the premium calculation
is obtained from the third party column of the tariff.
Minimum Premium
The minimum premium per policy (whether annual or short period) is RM50.00 for (private cars and commercial vehicles cars) and RM20.00 for (motor cycles) after deducting No Claim Discount but before allowing commission /brokerage.
No Claim Discount
Written evidence of entitlement or confirmation from previous insurer must be obtained before allowing the No Claim Discount.
No Claim Discount should only be allowed on the basic premium (including the premium charged for any loading imposed). All extra benefits extension shall not be permitted a No Claim Discount.
Under no circumstances can any staff make special arrangement to issue NCD vide credit note with agents. All NCD should be for the benefit of the policyholder and not credited to agents’ account. When requested to issue NCD letters, these letters must be issued in duplicate to the insured and the insurance company will return one duly signed copy of the letter to the policyholder.
Likewise, the new policyholder should obtain NCD letters in duplicate and sign and return one copy of the letter to the previous insurer. This is to allow the industry to check that no forged NCD letters are treated as valid. There have been instances that NCD letters submitted by policyholders are “fakes”.
Extensions to Basic Cover
i.Windscreen cover may be granted at inception of cover but if the cover is requested during the currency of the Policy, a survey must be conducted before cover can be granted. Additional premium at 15% of windscreen value.
ii.Passengers liability cover can be granted on request by payment of an additional premium of 25% of the premium charged for the third party cover. For cars with seating capacity in excess of 4 passengers, an amount of RM10.00 per passenger after the 4th passenger would be charged
iii.Medical expenses (Section III) and personal accident (Section IV) cover are excluded. However they can be granted on request by payment of additional premium of RM20.00 per person
iv.Strike, riot, civil commotion cover can be granted with additional premium of 0.30% of the sum insured.
Wednesday, 2 December 2015
General Insurance Products in Insurance Planning
General insurance policies are based on the principle of indemnity. This principle enunciates that a person who has suffered a loss must be placed in the same position as he was before the loss (after being duly compensated), provided that the sum insured is adequate. What this simply means is that individuals cannot profit from a general insurance policy. The insured is only entitled to recover to the extent of his actual loss. For example, if a house is partially destroyed by fire, it is not possible for the owner to insist on rebuilding the entire premises, or even enhancing the premises, just because the owner has a fire policy. Indemnity dictates that the premises will be repaired and the owner compensated to the extent that the premises is reconstructed to approximately the same condition it was in before the fire occurred.
Arising from this basic concept of indemnity are the two subsidiary principles of contribution and subrogation.
An insured is entitled to effect more than one policy on the same risk ( subject to the terms of the insurance policy ). However in the case of policies of indemnity, an insured who has effected two or more policies cannot recover more than the amount of his loss and often enough, only one insurer is called upon to indemnify him. Where this is the case, the insurer who has paid for the insured’s loss is entitled to call upon the other insurer or insurers, as the case may be, to contribute towards the amount which has been paid to the insured in respect of his loss. Each insurer bears a rateable share of the loss.
The right of contribution, ensures that the insured is not unjustly enriched by effecting several policies of insurance on the same risk.
The right, which is given to an insurer who has settled the claim of the insured under the terms of an indemnity policy, to step into the shoes of the insured and claim his rights against the third party who has caused the loss to the insured is called subrogation. Thus, from the foregoing an insurer cannot exercise his right of subrogation under a policy of indemnity unless the insurer has already indemnified the insured. Once indemnified, the insured has a duty to assist the insurer in the exercise of the right of subrogation and must ensure that he does not prejudice the insurer’s position to claim from the third party.
The principle of subrogation has no application in non-indemnity polices such as life insurance policies.
All properties are directly or indirectly exposed to risks of being destroyed or damaged. Generally, these properties are accumulated by the owner over a period of years in line with the wealth accumulation plan. Any damage or loss of such property can have a direct or indirect impact on the individual’s financial circumstances – especially when there is no provision made for loss transfer.
In the respect, we need to familiarize with two types of losses that properties can experience:
Arising from this basic concept of indemnity are the two subsidiary principles of contribution and subrogation.
Contribution
An insured is entitled to effect more than one policy on the same risk ( subject to the terms of the insurance policy ). However in the case of policies of indemnity, an insured who has effected two or more policies cannot recover more than the amount of his loss and often enough, only one insurer is called upon to indemnify him. Where this is the case, the insurer who has paid for the insured’s loss is entitled to call upon the other insurer or insurers, as the case may be, to contribute towards the amount which has been paid to the insured in respect of his loss. Each insurer bears a rateable share of the loss.
The right of contribution, ensures that the insured is not unjustly enriched by effecting several policies of insurance on the same risk.
Subrogation
The principle of subrogation has no application in non-indemnity polices such as life insurance policies.
Property Risk Exposures
Identifying the Risks: Expenses and Losses
In the respect, we need to familiarize with two types of losses that properties can experience:
- A direct loss is a financial loss that results from the physical damage, destruction or theft of the property. An example of a direct loss is a house destroyed by fire, or a valuable item that is stolen.
- An indirect or consequential loss is a financial loss that results indirectly from the event of a direct loss of the property. The consequential loss in the case of a house been destroyed by fire is the cost of rental that is paid for a place of stay while the original property is being repaired for habitation.
Tuesday, 28 July 2015
Life Insurance VS Life Unexpectancy - The Wisdom of Financial Planning
Stop saying Insurance is a scam!
Insurance is designed to mitigate the impact of RISK! Even Big Banks insure themselves, let alone average folks.
Do not try to measure RISK, using your calculator, if it is doable, then it is definitely not RISK.
Insurance can not change the way you lead your life, but can definitely prevent the quality of your life being changed.
Often the importance of Umbrella (Insurance) is realize on Rainy days, when you do not have one.
It is just like after your "Toilet business", and you are stranded in the cubicle without Toilet paper (Insurance).
Ain't it too late to ask for help?
Wisdom is the ability to plan ahead of life.
The function of Life Insurance is to provide financial security against Life Unexpectancy. Traditional Whole Life policy provide such benefits. As we progress, Insurance companies designed different policies, to cater to every individual needs.
Today, Insurance has evolved beyond their basic functions. Other than just financial protection, it is also a tax free wealth with compound benefits, which can also serve as your retirement nest.
Most would think, having Insurance is a shield against RISK, and is exactly the same, if I were to save with the banks, should there be any emergency, I will have easy access to the money.
The truth is, Not the same.
Let's say a Bypass surgery, cost $50,000 for a stem and $100,000 for 2. Supposedly, you save $3,000 with the bank each year, how long would it take for you to save up to $100,000? 30 years!
In the event, you need this sum of money within the next 10 years. Would your bank pay you interests of $100,000?
However with the same premium of $3,000, you would have successfully transfer your $100,000 obligation to Insurance and be assure of the pay out.
Most have the misconception that, if they remain healthy during their lifetime, the premiums would be forfeited. Which is absolutely not the case, after 30 years, in addition to the principal, you will be enjoying the compounded interests.
2 Distinctive differences:
So if you save with the bank, you need 30 years to accumulate $100,000, whereas Insurance would pay the lump sum immediately, in the event of any mishap.
What if you remain healthy after 30 years? Fret not, you still get back what you pay, together with accrued bonuses.
Some say, I am very healthy, "it" would never happen to me. IF really happens, I am sure the bills would be affordable.
I ask, if a person has so much money, that he would never be able to finish in his lifetime, is it true that medical issues are insignificant?
World's richest man, Bill Gates say:" Medical Insurance is the lowest costs policy, yet the most efficient tool to manage healthcare." Falling sick does not just affect your lifestyle, it also affect the quality of your life.
If you deposit $500K with the bank, should the bills cost you $500K, your account would be wiped out instantly. What kind of impact do you think, it would have on both you and your family?
Alternatively, you could deposit $400K with the bank, $100K with insurance to create a $1 million Sum Assured. This is how the sums would work out to be, you get the million compensation, $500K to pay for the medical bills, the balance of $500K plus the $400K in your bank account, you have a decent $900K, to take care of your lifestyle.
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