Understanding Property and Liability Loss

• Loss describes the loss of, or damage to property

Own Damage Losses

• Refers to losses Mr. Jones may suffer due to damage to his property
• They can have a number of causes, referred to as perils.
• Examples of perils are fire, flood, hail, accident, and theft.
• If Mr. Jones decides to buy insurance, he will have a limited choice of causes insured.
• Certain causes (perils) such as gradual operation causes, rust, disasters, and war aren't insured.

Vehicle Write Off / Total Loss

• A damaged vehicle that can't be repaired or would cost more to repair than its pre-damage value is a write-off.
• The vehicle will not be repaired, and the client will receive a cash settlement.
• A "total loss" describes this situation
• Theft is considered to be a total loss but is not a write-off.

Liability Losses / Other Parties

• A third party is someone not party to an insurance contract.
• The responsibility of one person to another, which is enforceable by law.
• All have the right to have their things undamaged
• By damaging something, the offender breaches a legal duty.
• If Mr. Jones damages a third party's property, he breaches said legal duty.
• The consequence is that Mr. Jones has to make good on damage resulting from his actions or inaction.
• Public liability party insurance is another name
• Indemnity is provided to the insured for legal liability arising from accidental damage to others' property or injury to others.
• Pet Policies: Compensation and cost arising from accidental pet injury or damage.
• Compensation as the result loss of or damage to property/Death or bodily injury to any person.
• Liability insurance provides a Limit of Liability.
• The maximum amount that an insurer will pay for one loss in terms of a Liability policy

Sentimental Losses

• Insurance deals with losses that can be expressed in financial terms with a monetary value.
• It's impossible to attach an objective financial value to an inconvenience suffered or to the sentimental value attached to an article.
• Mr. Jones cannot be insured against these.
• Not recognized as an insurable interest

Consequential Loss

• In insurance, a pure financial distress suffered as a result of an insured event.
• Consequential loss is a loss directly arising from another loss.
• Example: A client wants to claim for loss of income after an accident.
• Another example: Client misses an important business deal after an accident, the client won't be able to claim loss income.

Uninsured Losses

• Any loss not covered by the insurance policy.
• War, nuclear acts, terrorism, riots and strikes. SASRIA (South African Special Risks Insurance Association) covers damages caused by these events.

Road Accident Fund (RAF)

• The RAF provides cover to all road users within South Africa.
• Premiums are collected through fuel levies.
• Third parties injured or killed in vehicle incidents on South African roads are compensated through the RAF.
• Those injured in a vehicle or as a pedestrian will have cover.

Indemnity

• Indemnity is when the insurer places the insured in the same financial position after a loss as immediately prior.
• If the client has appropriate cover, the insurer indemnifies (pays) for the insured loss based on the sum insured.
• There are four ways to indemnify a client: Pay for an item, replace the item, repair the item, or reinstatement.
• Reimbursement is the main type of indemnity on pet policies
• Reimbursement describes repaying someone who spent or lost money, after they supply proof of costs

Agreed Values vs. Indemnity

• Most life insurance provides a set payment when the insured event happens, without regard to actual loss or how proceeds are spent.
• Some life insurers sell disability and health insurance coverage based on indemnity.
• Non-life insurance pays an amount reflecting the actual loss, even if the policy sum insured is higher.
• For instance, if a car is destroyed, the insurer usually pays a claim reflecting the car's value at the time of destruction.

Buildings Insurance

• Buildings Insurance generally covers the structure of a house or buildings against many perils
• Forcible Entry or Exit: Cover is often restricted to signs of force into or out of premises or vehicle.
• Visible means of entry is easily verified
• The insurance company may not pay claims if there isn't visible signs of forcible entry or exit because clients may leave doors or windows open.

Replacement Cost

• Replacement cost is the value of property based on the current purchase price of a similar item.
• If an item is damaged and can be economically repaired, the insurer will arrange or authorize repair or replace if with similar quality through supplier, or paying the cost of repair
• Or insurer will replace the item with a new one of similar quality, or pay for the replacement cost of a new item of similar quality.

Average

• A policy provision that reduces claim payment when under-insurance is discovered.
• Underinsurance is when property is insured for less than the cost to replace it with a new item
• It's important that the client insures the correct value.
• The sum insured is when the schedule less than the cost of replacing contents as new, only part of the loss/damage is paid.
• Average is only for home contents and building insurance.

Average Calculation

• The following calculation is used when under-insurance is discovered:
• CLAIM AMOUNT X INSURED AMOUNT ÷ BY NEW REPLACEMENT VALUE
• Claim Amount(R50,000) x Insured amount (R200,000) ÷ by new replacement value (R350,000) = claim payment (R28,571.43)

Portable Possessions Insurance (All Risk)

• Portable Possessions (All Risks) policy covers loss of or damage to personal belongings in a person's possession, property likely taken outside the home.
• If an item is specified and the loss happens outside the home, it will be covered under the All-Risks policy.
• No territorial limits
• Examples include cameras, clothing, jewelry, laptops, and cellphones.

Loss Ratio

• The loss ratio is the difference between the ratios of premiums paid to an insurance company and the claims settled.
• Used to measure financial performance by dividing claims paid by premiums received.

Claim

• A claim is a formal application made by the insured for payment (indemnity) after a loss
• When a client submits one, it may be accepted or rejected (repudiated) if the client breached the contract.
• A loss is either loss of, or damage to property.

Legality and Rights

• Arbitration: alternative dispute resolution done privately by agreement.
• Subrogation: when one party takes the legal rights of another against a third party.
• If the insurer has covered claims, they will take legal action and the insured can no longer take legal action against the third party.

Assessor and Loss Adjuster

• An Assessor is appointed by an insurer to investigate and report on the circumstances of a loss, and to recommend the handling of a claim.
• A loss adjuster is a qualified person who assesses the size or value of loss on behalf of an insurer.

Claims Adjuster

• Claims adjuster reviews claims and determines whether the claims should be paid and reimbursement amount.
• Pet insurance adjuster is similar to motor and homeowners' insurance
• The adjusted is hired as a representative of the insurance provider to determined the extent of the insurers liability

Determining Item Values

• Quantify
• Give items a value
• Can be done by evaluating repairs, repair costs and labour
• Proof of Quantum
• Show the value claimed
• Policyholder must prove the 'quantum' with invoices or valuation certificates.
• Valuations
• List of property with values for each item forms the basis of insurance
• Diamond ring or antique furniture.
• Items may need valuation certificates to prove wealth.

Proximate Cause

• Describes the direct/dominant/specific cause that is covered by a short-term policy.
• It can be easily defined as the direct cause of a loss, uninterrupted by another event.
• Requires establishing the uninterrupted chain of events that caused the loss/insured peril under the policy

Excess

• Excess is the first amount payable for a claim, fixed amount percentage, or part of of a percentage.
• Reasons for charging an excess are to shift some the risk from insurer to holder.
• Is the uninsured portion by the policyholder
• One vehicle policies the pole holder can reduce the premium whe an excess is increased
• Only select an excess level that can't be afforded if there is a claim.

Beneficiary

• A person or entity that receives a benefit from an insurance policy.
• This can be the insured, the insured estate, or any other person nominated by the policyholder.

Executor

• The executor is the person named in a will that agreed to carry out terms or instructions of the will.
• A will expresses a persons wishes to how their property should be distributed after death.

Contribution

• The contribution principle governs relationships between insurance companies.
• States what happens when a person buys insurance from multiple companies to cover the same event, and that event occurs.

Abandonment and Salvage

• Abandonment is giving damaged property when a total loss has been paid.
• Salvage is whatever can be recovered from paid out claims, and becomes the property of the insurer.

Franchise

• Franchise is the amount of a loss that is at or below
• No claim is payable by the insurer.
• The claim is in excess
• If the value is below R5000, there is no cover. If the claim is R5000 or more, the claim is in full (less applicable expenses

Ombudsman

• A mediator, resolving issues between the insured and insurer.
• The client would lodge a complaint and then approach the Ombudsman office for mediation.
• The cost would be the insurer's account

Cancellations

• A cancellation happens when the client (any time) or insurer (30 days written notice) terminates the cover.
• Cancellation clause allows one party to cancel after notification to the other

Explore the different types of losses related to property and liability, including insured and uninsured events. Learn about the purpose of liability insurance and the concept of 'Limit of Liability'. Discover what is generally covered and not covered by insurers.