Chapter 6 -_insurance_products

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GENERAL INSURANCE
PB502/Insurance Products/Haniza

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Short term contract
– Contracts renewable by mutual consent
– Premium charged may vary
– Notification to insurer (UGF)
– Contracts of indemnity
Claims do not terminate a contract
Risk does not increase with time
Application of insurance principles

General Insurance :
The Characteristics
Contract of
Indemnity
Short
Term
Contract
Payment of
Claim does
not
Terminates
a Contract
Risk does
not
increase
with time
Non
life
risk
Application
of
principles
PB502/Insurance Products/Haniza 3

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 Compulsory insurance
 Regulated by the Road Transport Act 1987
 Part IV : every motorist must insure any liability which he may incur
in respect of the death or bodily injury to a third party
caused by or arising out of the use of motor vehicles, with an
authorised motor insurer
 Types of vehicle:
– Private cars
– Commercial vehicles
– motorcycles

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Types of cover
Comprehensive
Third Party
Fire
Theft
Third
Party
Act Only
Motor
Insurance

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 Act only
– Provides minimum form of indemnity
– Legal liability for death of or bodily injury to any third parties
(excluding passengers)
– Expenses reasonably incurred for hospital treatment for injured
persons (RM40 outpatient and RM400 inpatient treatment)
 Third party
– Legal liability for death of or bodily injury to any third parties
(excluding passengers)
– Expenses reasonably incurred for hospital treatment for injured
persons (RM40 outpatient and RM400 inpatient treatment)
– Legal liability to third party property loss

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 Third party, fire and theft
– Legal liability for death of or bodily injury to any
third parties (excluding passengers)
– Expenses reasonably incurred for hospital
treatment for injured persons (RM40 outpatient
and RM400 inpatient treatment)
– Legal liability to third party property loss
– Loss/damage to the insured vehicle as a result of
fire or theft

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 Comprehensive
– Third party cover
– Loss/damage to insured vehicle and its
accessories and spare parts due to :
 Accidental collision
 Fire, external explosion, lightning, burglary,
housebreaking, theft
 Malicious act
 Whilst in transit by road, rail, direct sea route, by impact
damage caused by falling objects provided no
convulsion of nature

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 Consequential loss, depreciation, wear and tear,
mechanical breakdowns, failures of breakages
 Damage to tyres unless the vehicle is damaged at the
same time
 loss., damage, liability occurring outside the geographical
area
 The vehicle is used other than in accordance with the
limitation as to use
 Vehicle is being driven by person other that specified in
the policy
 Flood, typhoon
 Volcanic eruption
 Riot, strike
 Nuclear risk PB502/Insurance Products/Haniza

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 Covers loss of or damage to property caused
by fire and other specified perils
 Main types are fire policy, houseowner’s
policy, householder’s policy, consequential
loss policy

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Risk and perils covered
RISK COVERED
 Loss/damage to buildings, contents
PERILS COVERED
- caused by :
- fire,
- lightning,
- explosion of gas used for
illuminating and domestic purposes only

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 Special perils
– Riot, strike
– Earthquake, volcanic eruption
– Explosions
– Lalang fire
– Storms, tempest
– Aircraft damage
– Impact damage by road vehicle, horses and cattles
– Bursting or overflowing of water tanks, pipes
– Subsidence or landslip
– Spontaneous combustion
– Flood
– Electrical installation

 Loss of rent
 Other losses
– Removal of debris
– Architect’s and surveyor’s fees
– Sprinkler leakage
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Fire policy : The Extensions

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– Loss/damage caused by (directly or indirectly):
 earthquake, volcanic eruption, convulsion nature
 Typhoon, hurricane
 War risks
 Nuclear risk
– Loss/damage caused proximately by :
 Burning of property by order of public authority
 Subterranean fire
 Explosion other than explosion of gas used for illuminating; burning of forest, clearing
of land by fire
– Loss/damage to the following specified property :
 Goods held in trust
 Unset precious stone
 Curiosity or work of art exceeding RM500
 Manuscripts, plans, models, moulds
 Securities, business books, computer system records
 Coal against loss by its own spontaneous combustion
 Explosives
 Loss by theft during or after fire
 Loss/damage to property caused by own fermentation, natural heating
}

Liability Insurance
Workmen’s
Compensation
Employer’s
Liability
Public
Liability
Professional
Indemnity
Products
Liability

Workmen’s Compensation
• Employer’s liability for
injury sustained or
illness contracted by an
employee out of and in
the course of
employment
• WC Ordinance 1952
Basic
Cover

Employer’s Liability
• Employer’s liability for occupational injury
sustained or disease contracted by any of
his employee,
• legal costs incurred by insured with prior
consent of the insurer
Basic
cover
• Insured’s liability to employees of
contractors
• Contractual liability
• Injury sustained outside geographical
area covered by policy
• Liability under WC Ordinance
• War risk
• Nuclear risk
Exclusions

Public Liability
• Business firm’s legal liability to pay
compensation for death or injury to third
parties, inclusive of legal costs incurred by
firm with prior consent of insurer
• Caused by firms/employees negligence,
defects in its premises
Basic
Cover
•Liability insured under WC, ELI, SOCSO
•Loss/damage to insured’s property or property
under his charge or control
•Loss/damage to property associated with steam
boiler, boiler vessel or apparatus
•Liability of injury/damage caused by passenger
lift or escalator owned or in possession of
insured, mechanically propelled vehicle licensed
for road use
•Professional liability
•Contractual liability
•Nuclear risks
•War and warlike risks
•Sonic boom
Exclusions

Professional Indemnity
• Covers professional’s liability arising out of
professional negligence committed by his
predecessors or employees
• Legal costs with insurer’s prior consent
Basic
Cover
• Libel or slander
• Dishonesty, fraud, criminal or
malicious act or omission by the
insured or predecessors or employees
• Contamination by radioactivity
• Any liability entitled to be indemnified
under any other policies
Exclusions

Products Liability
• Manufacturer’s or seller’s liability for
death or bodily injury or damage to
property caused by defects in goods
supplied or sold
• Electrical appliances, machinery,
pharmaceutical products, cosmetics, toys
Basic
Cover
• Injury to employees
• Contractual liability
• Liability arising in respect of wrong
formula or specification of products
• Loss/damage to products supplied
Exclusions

Theft Insurance
Types
of
Policy
Burglary
Insurance
All Risks
Insurance
Goods in
Transit
Insurance
Money
Insurance

Burglary Insurance
• Loss/damage to contents in a business
premises, following theft involving
entry and exit by forcible & violent
means
• Damage to insured building and
contents consequent upon such theft
Basic
Cover
• Loss/damage by fire however caused
• Damage to stained or plate glass or
decoration
• Loss/damage occasioned by person
lawfully in the premises
• Loss/damage to deeds, bonds, bills of
exchange, computer system, models or
designs
• Riot, war, confiscation
• Loss occasioned by forces of nature
• Nuclear risks
Exclusions

All Risks Insurance
• Covers valuables such as jewellery,
watches, cameras, paintings
• Covers all risks (fire, theft, accidental
causes)
Basic
Cover
• Loss/damage consequent upon riot,
earthquake
• War risks
• Loss/damage arising from wear & tear,
depreciation, moth, vermin
• Scratching and breakage of lenses,
glasses, mechanical or electrical
breakdown
• Loss/damage arising from confiscation or
detention by customs
• Nuclear risks
Exclusions

Money Insurance
• Loss of money against all risks whilst in
transit, on the insured’s premises, in locked
safe or strongroom, in the private
residence, other specified situations
• Limit of any one loss
• Money includes cash, bank and currency
notes, cheques, postal & moner orders,
revenue stamps
Basic
Cover
• Loss arising from dishonesty of employee
• Confiscation, nationalization, wilful
destruction by order of government
• Shortages due to error and omissions
• Outside the territorial limits
• Safe or strongroom with the use of key
• Nuclear risks
• Depreciation in value
• Riot, war risks
Exclusions

Goods in Transit Insurance
• Covers all risks for loss/damage to goods
by fire, accident, theft
• Whilst being loaded on, carried by or
unloaded from motor vehicles
Basic
Cover
• Radioactive contamination
• War, riot
• Earthquake, subterranean fire
• Moth, vermin
• Delay, loss of market
• Deterioration
• Theft involving insured’s employee
• Goods accompanying commercial travelers
• Property not covered – explosives, acids,
money, jewellery
Exclusions

Insurance Products
Life Assurance

Life Assurance :
The Characteristics
Long
Term
Contract
Life
risk
Aleatory
Contract
Payment
of Claim
Terminates
a Contract
Uberrima
Fides
Risk
increases
with time

The Policies
Term
Insurance
Endowment
Annuities Whole-life

Term Assurance
•Earliest & simplest form of life assurance contract
•Known as temporary insurance
•Sum insured payable only upon death within the
stipulated term of the policy
•Enables provision of maximum life cover at a
minimum cost
•Term periods vary from 1 to 25 years or up to 55 or
60 years old
•Non-participating policy
•Convertibility features
Level term
insurance
• Sum assured decreases in amount at
periodical intervals
• Generally issued as mortgage policies for
mortgage protection
• Cost of premium is lower due to the
progressive reduction of the sum assured
Decreasing
term
insurance

The uses of term assurance
Afford protection against contingencies at the lowest possible
cost
Suitable for persons with small incomes for the present, with
family obligations, but with good prospects for the
development of a successful career
Also suitable for persons who placed substantial resources in
the material assets of a new business where premature
death of the key person would result in serious loss to the
invested capital

Endowment
• Provide payment of face value upon
death as well as upon maturity
Characteristics
• Incentive to save in a systematic manner
• Convenient and easy means of providing
for old age
• Means of hedging against untimely death
• Means of accumulating a fund for specific
purposes
Uses

Whole-life assurance
•Life protection is provided for the whole duration
of life with sum assured + any accrued bonuses
payable upon insured’s death
•Issued with or without participating
•Payment of premiums continue until a claim arises
Ordinary life
•Sum assured is payable only upon death
•Premiums are payable only for a limited number
of years
•Policy becomes paid-up for its full amount
•Insured pays premium during his working lifetime
•Is not suitable for low income group as premium
is higher
•Large savings or investment element
Limited
payment
whole-life
• Is a modified whole-life policy and premium is payable
throughout life
• Issued as a non-participating policy
• Is a combination of whole-life and endowment contract
where the policyholder is offered an option of withdrawing
a guaranteed cash bonus = 15% of the face amount of the
policy
•Premium is higher, savings element is greater
•Not suitable for those who need the greatest protection
Whole-life
endowment

Annuities
•A periodic payment made during a fixed period of time
or for the duration of survival of designated life
•Insurer agrees to pay a stipulated sum periodically
throughout life
•Protect risk – the outliving of one’s income
Annuity
contracts
•Single Life Immediate Annuity
•Guaranteed Immediate Annuity
•Deferred Annuity
•Joint Life Annuity
•Last Survivor Annuity
•Reversionary Annuity
•Annuity Certain
Policies
•Single Premium
•Provide benefits as an income for life
•Mainly bought by older people to convert capital into
an income for life
Characteristics

Chapter 6 -_insurance_products

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