This document provides an overview of various types of personal property and liability insurance policies. It discusses householder's insurance which provides comprehensive coverage for homeowner risks. It also covers motor vehicle insurance, including third-party liability insurance and comprehensive motor insurance. Other liability insurances discussed include directors' and officers' liability insurance, professional indemnity/liability insurance, products liability insurance, general liability insurance, public liability insurance, and workmen's compensation insurance.

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Chapter 15

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Personal Property and Liability Insurance
Apart from risks to life and health, a person is also exposed to risks that may cause damage to his/
her property. These risks can be covered by opting for Personal Property insurance.
Let us look at some of the major property insurance types in more detail.
Householder’s Insurance
A comprehensive householder’s insurance policy covers most of the risks faced by any household. It
protects against natural calamities like flood and earthquake and also man-made disasters like theft and
burglary.
Instead of opting for separate policies for the building and for the contents of the house, the householder
can take up one package policy.
What does it cover?
The householder’s Insurance Policy broadly covers two things – building structure and contents inside the
home.
The Householder’s Insurance Policy comprises of ten sections which includes the insured’s building,
fixtures and fittings, contents inside the house, jewellery and valuables, television sets and VCRs,
bicycles, accompanied baggage as well as personal accident and public liability benefits.
The contents of the home are safeguarded against fire, burglary, accidental breakage or mechanical or
electrical breakage.
Motor Vehicle Insurance
Motor insurance is compulsory in India. It is essential for all motor vehicle owners since it protects them
from legal liabilities that might arise during their vehicle operation.
There are two types of policies available for motor vehicles – third-party liability insurance and
comprehensive insurance policy.
Third-party liability insurance
This covers the insured’s liability to third parties. The owner is protected in the event of death or injury
caused by the vehicle to:
pedestrians, occupants of other vehicles except those within your vehicle
other vehicle’s driver
passengers with whom your vehicle is for hire
The premiums are dependent on the cubic capacity of the car. This cover does not extend to fire and
theft accidents, for which one needs to pay additional premiums.
No vehicle can be used without this insurance cover and use of the vehicle without this insurance cover
is a penal offence.

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Comprehensive motor insurance
The comprehensive motor insurance takes care of additional losses and liabilities along with those
covered in third-party liability insurance.
There are two sections under this policy.
Section I protects the motor vehicle owners from the risks of:
Fire, Explosion, Self-Ignition and Lightning
Riot, Strike, and Malicious act of Terrorism
Transit by road, rail, inland waterway, air, lift or elevator
Earthquake
Accidental External Means
Landslide
Categories of vehicles:
The following categories of vehicles are covered under motor insurance policy:
Private cars: This category includes cars, station wagons, motor vehicles used for social, domestic,
business or professional purposes (excluding those used for the carriage of goods other than samples)
Motor Cycles: This includes motorcycles with or without sidecars, pedal cycles, mechanically assisted
pedal cycles and motor scooters with or without sidecars.
Commercial Vehicles: All vehicles excluding private cars, motor cycles and vehicles running on rails
come under this category.
Determining the value of the vehicle
The value of the vehicle is calculated on the basis of the current showroom price of the vehicle multiplied
by the depreciation rate that is set by the Tariff Advisory Committee at the commencement of each
policy period. This is called IDV (Insured’s Declared Value).
How is premium calculated?
The premium in a Motor Insurance Policy is regulated by the India Motor Tariffs as specified by the Tariff
Advisory Council. It is governed by the following factors:
Type of Vehicle
Age of the vehicle
City of registration
Use of the vehicle
Bonus / Malus System
In case of an accident occurring in a year for which the insured makes a claim, in the very next year the
insurance company increases the premium by way of charging a malus i.e an extra percentage. On the
other hand, when there is no claim lodged during the year, the insurance company grants a discount in
the premium by way of bonus.
No Claim Bonus (NCB) clause is applicable to holders of comprehensive insurance policy. The minimum
bonus is 20 percent and the maximum is 65 percent.

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Other liability insurance
Even if the personal property of an individual is protected through insurance, financial insecurity can
arise if the person commits a legal wrong against a third party and is directed to pay damages or fines to
compensate the aggrieved party. The liability arising from such a situation is covered through liability
insurance.
Let us look at some of the major types of liability insurances in more detail.
Directors’ and Officers’ Liability
Directors’ and Officers’ Liability Insurance policy is specifically tailored for directors and others holding
key positions in an organization. It is meant for those who are in the decision making process. Directors
and officers are bound by duty towards the company, its shareholders, employees, creditors, customers,
competitors, members of the public, government, and other regulatory bodies. The Directors’ and Officers’
Liability Insurance policy covers any financial liabilities imposed upon them.
They might become liable to pay damages arising out of:
Misleading statements
Errors and inaccuracy in financial statement and annual accounts
Lack of judgment and good faith
Unfair allotment of shares
Mis-statement in prospectus
Unauthorized loans or investments
Unfair dismissal of an employee
Unwarranted dividend payment, salaries, or compensation
Failure to obtain competitive bids
Using inside information
Misrepresentation in acquisition agreement for the purchase of another company
Exclusions
The policy does not pay for:
Prior and pending litigation and claims submitted under previous policies
Bodily injury, sickness, disease, emotional distress, death, damage, or destruction of tangible property
including loss
Criminal wrongs
Deliberate, dishonest, or fraudulent acts
Pollution and/ or contamination
Professional Indemnity Policy / Professional liability Insurance
This policy is meant for professionals like doctors to cover liability falling on them due to mistakes and
omissions committed by them while rendering professional service. Though doctors are supposed to be
immaculate in their profession, they are human beings and are prone to errors. As a result, they are
exposed to the risk of claims from clients who have suffered loss due to negligence.

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Who can take cover?
Doctors and registered medical practitioners such as physicians, surgeons, cardiologists,
gynecologists, pediatricians, pathologists etc.
Medical establishments such as hospitals and nursing homes
Engineers and interior decorators
Lawyers and counsels
Chartered accountants, financial accountants, management consultants etc.
What does it cover?
Professional Indemnity Policy covers the claims arising out of:
Bodily injury or death caused by mistakes, negligence, and miscalculation
Legal liability including defense costs incurred while investigation, court cases, and compensation
Exclusion:
The policy only covers civil liability claims. It does not cover:
Any liability arising out of or in connection with any criminal act or act committed in violation of any
law
Acts committed under the influence of drugs
Weight reduction
Plastic surgery
HIV Aids
Radioactivity
Blood Banks
Non-compliance with statutory provisions
Products liability insurance
Safety of a product is of prime importance to the manufacturer and seller. Faulty and defective products
can be harmful to the consumer resulting in death or bodily injury. In such cases, the manufacturer or
seller has to pay huge compensation.
Product liability insurance protects the companies exposed to the above risk by financially assisting
policyholders in such situations.
What does it cover?
The Policy broadly covers the legal liability of the insured, where the insured has to pay damages to the
third party as a consequence of:
Accidental death
Bodily injury or disease
Loss or damage to property
Exclusions
The policy does not cover any liability for:
Product recall
Product guarantee

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Pure financial loss such as loss of goodwill or loss of market
The cost incurred for repairing or reconditioning or modifying the defective part of the product
Deliberate non-compliance with any statutory provision
Fines, penalties, punitive or exemplary damages
General Liability Insurance
This kind of insurance is the main coverage in order to protect the business from injury claims, property
damages and advertising claims. It is also known as Commercial General Liability insurance.
Public liability Insurance
What does it cover?
The policy covers the insured against the legal liability arising out of accidents during the currency of the
policy. Accidents can be caused due to handling of hazardous substances as mentioned in the Public
Liability Insurance Act ,1991.
Exclusions
The policy does not cover liability or costs, which arise out of the following factors:
Earthquake, volcanic eruption, flood, storm, hurricane, tornado, or similar weather conditions
Deliberate or willful non-compliance of statutory warnings
Fines, penalties, and damages
War, invasion, hostilities
Loss of goodwill in the market
Ionizing radiation or contamination by radioactivity from any nuclear fuel or from any nuclear waste
from the combustion of nuclear fuel
Workmen’s compensation insurance
The Workmen’s Compensation Act, 1923, aims to provide workmen and/or their dependents some
relief in case of accidents arising out of and in the course of employment and causing either death or
disablement of workmen.
This insurance policy is essential for all employers who engage “workmen” as defined by the Workmen’s
Compensation Act to cover their liability towards them under statutory and Common Law.
What does it cover?
It covers the employer against any legal liability arising out of accident or fatal injury sustained by his
‘workmen’ during work.
Medical, surgical, and hospitalization expenses including transportation costs are also covered, on
extra payment of premium.
Exclusions
The insurance policy does not pay any claims arising from:
Any injury that does not result in a fatality or disability for 3 days subsequent to the accident
Any injury caused due to:
War or nuclear perils

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Influence of drinks or drugs
Willful removal or disregard of any safety device
Any compensation for diseases mentioned in Part ‘C’ of Workmen’s Compensation Act,1923
Liability towards employees of the contractors of the insured
Occupational diseases unless cover is extended on payment of extra premium
Exercise
Ravi had joined Numark recently as the Director-Marketing. He was given a car and a driver by this
company. The company had taken insurance, which will give compensation for other vehicles’ driver and
pedestrians in case of any untoward accident involving the company car. It is mandatory for all vehicles
to take this policy. The HR manager asked that instead of taking only this cover; why not take a more
complete one. It would also cover the car in case of any loss due to theft of the car. What are the two
types of insurance that is being talked about?
Solution : The two types of insurance are third party insurance, comprehensive motor insurance.
Ravi will be the spokesperson of the company. He is the key person, who works as a representative of the
company. It is important that the company takes a (Directors and Officers Liability) insurance policy.
Does it cover dishonest, deliberate or fraudulent acts?
Solution : The insurance policy does not cover dishonest, deliberate or fraudulent act.
Numark is a pharmaceutical company. They manufacture generic drugs for diabetes and hypertension.
There are reputed players in the market and well known for quality products. However, they had started
their distribution in South East Asian countries and wanted to expand business. There is one insurance
policy that is definitely recommended. What do you think it is?
Solution : Products liability insurance is recommended.
Numark also runs a chain of clinics across the rural areas. The brothers in partnership thought that this
would be a good way to give back to the community. They started this business about 10 years back and
it has been very successful in treating a lot of patients who would otherwise find it difficult to access
bigger cities where all the facilities are already available.More than it being a business proposition, it
started out being a part of the corporate social responsibility.Since it was managed well, this new associate
venture grew in size and geography.The philosophy was to help all the poor and needy free of cost.The
hospital became well known for its treatment and quality of service. Many people started queing up to get
treated who were not necessarily poor but came from the middle class backgrounds. This low revenue
earning model, an associate of the main business was doing contributing up to 7% profits of the company.
The company hires a lot of doctors, who have just completed their education and want to train under
diverse conditions. The company want their costs to be optimized, yet give quality care. To hire young
doctors who are yet gaining a wider range of experience was one of their ways of doing it. The management
decided that it made legal sense to take up another policy. What policy to do think that would be?
Solution : Numark should take up Professional Indemnity Policy.

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Chapter Review