Property Insurance - Black Book Project

Property Insurance 2017
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CHAPTER 1
INTRODUCTION TO PROPERTY INSURANCE
1.1. PROPERTY INSURANCE-MEANING
Insurance of property means insurance of buildings, machinery, stocks etc
against Fire and Allied Perils, Burglary Risks and so on. Goods in transit via
Sea, Air, Railways, Roads and Courier can be insured under Marine Cargo
Insurance. Hulls of ship and boats can be insured under Marine Hull Insurance.
Further, there are specialized policies available such as Aviation Insurance
Policy for insurance of planes and helicopters. Thus Property Insurance is a
very vast category of General Insurance and the type of cover that you need
depends upon the type of property you are seeking to cover.
1.2. INTRODUCTION TO TERM “PROPERTY”
Property insurance deals with property in two broad categories, real property
and personal property. However, property insurancedoes not protect property.
It protects property owners and other parties that meet two qualifications. First,
they must have an insurable interest in the property at the time of the loss, and
second, their interest must be insured under a contract of insurance. The amount
any insured party may be entitled to recover from property insurance proceeds
depends not only on the extent of that party's insurable interest but also on the
method used to determine the value of the property as well as any financial loss
resulting from the fact that the property cannot be used. For example, a driver
may need to rent a car while his or her own car is being repaired following an
accident. Likewise, a family may incur expenses to live in a hotel while its

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house is being repaired, and a business may suffer a loss of income if the place
of business has been damaged or destroyed. Property insurance covers only
losses that result from a covered cause, also known as a covered peril. When
damage to property by a covered peril occurs, the insurance contract specifies
certain duties that the insured party and the insurer must meet. The amount
payable under a property insurance policy depends on various provisions in the
insurance contract, especially limits, deductibles, and insurance-to-value
provisions.
1.3. TYPES OF PROPERTY
All property falls into one of two categories:
 Real property
 Personal property
Real property, a term closely related to the more familiar term real estate, is
defined as land and anything that is growing on it, or affixed to it, and the
bundle of rights inherent in the ownership. It includes such items as crops,
mineral rights, air rights, buildings, items that are permanently attached to
buildings, fences, in-ground swimming pools, driveways, and retaining walls.
The antonym of real property is not imaginary property, but rather personal
property. In the context of financial planning, "personal" often means "non
business." The term "personal property," however, has nothing to do with
individuals and families. Personal property is owned and used by individuals,
families, and businesses.
Personal property is defined to include anything that is subject to ownership
other than real property. This includes such items as clothes, furniture, dishes,
artwork, musical instruments, money, securities, airline tickets, office

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equipment, business inventory, vehicles, and boats. It also includes intangible
property, such as copyrights and patents. Rather than use these broad legal
categories, insurance policies often use more specific terms, such as building,
structure, private passenger auto, or trailer. Insurable Interests and Insured
Parties Property insurance policies pay only when policy owners or other
insured parties have an insurable interest in the property that has suffered a loss.
Two or more persons who jointly own property are likely to be listed as policy
owners and entitled to the policy's protection. In any case, the insurer will not
reimburse an insured party for more than that party has lost. Coverage applies to
the extent of each insured party's insurable interest in the property at the time of
the loss, subject to policy limits and any other relevant provisions. Lenders have
an insurable interest in specific property pledged as collateral for a loan.
Therefore, a mortgagee, who has lent money to the purchaser of a home or
another building, has an insurable interest in the building, and a bank has an
insurable interest in an auto pledged as security for an auto loan. The interest of
a mortgagee named in the policy's declarations can be protected by a property
insurance policy's mortgage clause, and a lender's interest in personal property
can be protected by a loss payable clause. In either case, the lender's insurable
interest in the property is equal to the unpaid balance on the loan.
1.4. INSURABLE INTEREST AND INSURED PARTIES
Property insurance policies pay only when policy owners or other insured
parties have an insurable interest in the property that has suffered a loss. Two or
more persons who jointly own property are likely to be listed as policy owners
and entitled to the policy's protection. In any case, the insurer will not reimburse
an insured party for more than that party has lost. Coverage applies to the extent
of each insured party's insurable interest in the property at the time of the loss,

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subject to policy limits and any other relevant provisions. Lenders have an
insurable interest in specific property pledged as collateral for a loan. Therefore,
a mortgagee, who has lent money to the purchaser of a home or another
building, has an insurable interest in the building, and a bank has an insurable
interest in an auto pledged as security for an auto loan. The interest of a
mortgagee named in the policy's declarations can be protected by a property
insurance policy's mortgage clause, and a lender's interest in personal property
can be protected by a loss payable clause. In either case, the lender's insurable
interest in the property is equal to the unpaid balance on the loan.

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CHAPTER 2
TYPES OF PROPERTY INSURANCE
Insurance of property means insurance of buildings, machinery, stocks etc
against Fire and Allied Perils, Burglary Risks and so on. Goods in transit via
Sea, Air, Railways, Roads and Courier can be insured under Marine Cargo
Insurance. Hulls of ship and boats can be insured under Marine Hull Insurance.
Further, there are specialized policies available such as Aviation Insurance
Policy for insurance of planes and helicopters. Thus Property Insurance is a
very vast category of General Insurance and the type of cover that you need
depends upon the type of property you are seeking to cover.
2.1. PACKAGE OR UMBRELLA POLICY
There are package or umbrella covers available which give, under a single
document, a combination of covers. For instance there are covers such as
Householders Policy, Shopkeepers Policy, Office Package policy etc that, under
one policy, seek to cover various physical assets including buildings, contents
etc. Such policies, apart from seeking to cover property may also include certain
personal lines or liability covers. Make sure you understand the complete details
of cover and exclusions contained in the policy you are considering. Package or
Umbrella covers could have common terms and conditions for all sections as
also specific terms for specific sections of the policy.

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2.2. FIRE INSURANCE
The most popular property insurance is the standard fire insurance policy. The
fire insurance policy offers protection against any unforeseen loss or damage
to/destruction of property due to fire or other perils covered under the policy.
The different types of property that could be covered under a fire insurance
policy are dwellings, offices, shops, hospitals, places of worship etc and their
contents; industrial/manufacturing risks and contents such as machinery, plants,
equipment and accessories; goods including raw material, material in process,
semi finished goods, finished goods, packing materials etc in factories, godowns
and in the open; utilities located outside industrial/manufacturing risks; storage
risks outside the compound of industrial risks; tank farms/gas holders located
outside the compound of industrial risks etc.
What a Fire Policy covers???
Thought it is called ‘Fire Insurance’, apart from the risk of fire, it also offers
cover against lightning, explosion/implosion, aircraft damage, riot, strike and
malicious damage, storm, cyclone, typhoon, hurricane, flood and inundation,
impact damage, subsidence and landslide including rockslide, bursting and/or
overflowing of water tanks, apparatus and pipes, missile testing operations,
accidental leakage from automatic sprinkler installations, bush fire etc.
What a Fire Policy excludes???
A fire insurance policy usually does not cover a certain amount known as
“excess” under the policy. Loss or damage caused by war and warlike
operations, nuclear perils, pollution or contamination, electrical/mechanical
breakdown, burglary and housebreaking are excluded. Certain perils like

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earthquake, spontaneous combustion etc can be covered on payment of
additional premium.
Fire insurance policies are issued for one year except for dwellings, where a
policy may be issued for long term (with a minimum period of three years).
2.3. BURGLARY INSURANCE
A Burglary Insurance policy may be offered for a business enterprise or for a
house. The policy covers property contained in the premises including
stocks/goods owned or held in trust if specifically covered. It also covers cash,
valuables, securities kept in a locked safe or cash box in locked steel cupboard
if you specifically request for it.
Apart from offering cover for the contents in the premises, a Burglary Insurance
policy covers damage to your house or premises caused by burglars during
burglary or attempts at burglary. The Policy pays actual loss/damage to your
insured property caused by burglary/house breaking subject to the limit of Sum
Insured. If Sum Insured is not adequate, Policy pays only proportionate loss.
Hence, you must ensure that you value the property covered correctly to ensure
that there is no underinsurance.
A Burglary Insurance Policy can generally be extended to cover Riot, Strike,
Malicious Damage and Theft.
What is not covered in a Burglary Insurance Policy???
Generally, the Policy will not pay for loss/damage to goods held in
trust/commission unless specifically covered, jewellery, curios, title deeds,
business books unless specifically insured; any amount that is recoverable
under Fire/Plate glass insurance policy; loss from a safe using a key or
duplicate key, unless it is obtained by violence or threat; Due to shop lifting,
acts involving you/your family members/ your employees; due to War perils,

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Riot & Strike ( covered by payment of additional premium), Acts of God,
Nuclear perils
2.4. ALL RISK INSURANCE
All Risks Insurance generally offers cover for jewellery and/or portable
equipment etc. This cover is generally offered selectively. The design of the
policy may vary from company to company. It is important to note that an All
Risks policy is not free from exclusions. So, the term “All Risks” doesn’t mean
that anything and everything is covered.
What is generally excluded in All Risks Insurance???
Lookout for the exclusions—generally actions of moth, vermin, mildew, wear
and tear or repairs, dyeing or bleaching or any gradually operating cause, Mere
breaking/ scratching or cracking of fragile items unless caused by accident to
the means of conveyance and Any mechanical or electrical
breakdown/derangement except due to accidental external means, Over
winding, denting or internal damage to watches or clocks Thefts from cars
except fully closed saloons Consequential losses, any legal liability, War
perils, nuclear risks, any government/ local authority action and Any loss due
to insured's action which has contributed to increase in risk are excluded from
the scope of the policy.
On payment of additional premium mechanical and/ or electrical/ electronic
breakdown extension may be offered.

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2.5. MARINE CARGO INSURANCE
Marine Cargo Insurance covers transits by Water, Air, Road or Rail,
Registered Post Parcel, Courier or a combination of two or more of these.
Who can take a Marine Cargo Insurance Policy???
Buyers, Sellers, Import/Export merchants, Buying Agents, Contractors and
Banks, etc.
Marine Cargo Policies cover the interest in the cargo and also extend to cover
the interests of any third party who has acquired interest upon transfer of
ownership, as determined by the Terms of Sale.
How Marine Cargo Insurance helps?
Cargo can be damaged on exposure to a wide variety of risks, including an
accident of the vehicle carrying the cargo, damage due to jolts, jerks etc. Decide
whether you want to take a Basic Cover or a wider cover. Read and understand
the terms and conditions of the policy. Check whether there are any
‘Deductibles’. .
What is generally excluded?
Loss or damage due to Inherent Vice , Delay, Insufficiency of packing, loss or
damage due to financial default or insolvency of the ship owner etc.
What are the other types of property insurance available?
Some of the other property insurances available are engineering insurance
policies like the Electronic Equipment Insurance, Machinery Breakdown
insurance etc.

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2.6. COVERED PERILS
A peril is a cause of loss. Many different perils can cause a loss to real and
personal property. However, few if any, property insurance policies cover losses
from every peril that could occur. Insurance policies take two distinct
approaches in describing the causes of loss covered under a given policy:
 named perils, also known as "specified perils"
 open perils, also referred to as "special form" or "all risks"
2.6.1. Named-Perils Coverage:
Named-perils coverage (also referred to as specified-perils coverage) list the
covered perils. If a peril is not listed, losses that result from that peril are not
covered by that policy.
Some policies are designed for very specific types of losses and cover few
perils. As one might expect, a flood insurance policy, for example, covers only
flood-related losses. On the other hand, named-perils policies can be extremely
broad. An example is the personal property coverage under
homeowners3(HO-3) policy. The HO-3policy contains a list of many covered
perils for household property, ranging from fire to theft to volcanic eruption.
A mere listing of the covered perils in a named-perils policy can be somewhat
misleading because the precise meaning of the terms is often established by
either legal precedent or specific policy language. For example, the term fire is
not usually defined in insurance policies because its meaning has long been
established by the courts. A fire consists of a rapid oxidation or combustion that
causes a flame or glow. Therefore, an item scorched because it was too close to
the heating element on an electric range would not be covered under the peril of
fire. In addition, courts have determined that the peril of fire covers only hostile
fires, which are those that are outside normal confines. For example, a fire in a

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fireplace is a friendly rather than a hostile fire. As a result, damage to an item
accidentally thrown into a fireplace would not be covered under a named-perils
policy covering fire. Note that a fire that spreads beyond the fireplace has turned
from a friendly fire into a hostile fire.
An interesting—and false—urban legend has been in circulation for the past 40
years about the man who submitted a fire insurance claim on the cigars he had
smoked. Various versions of this story call it arson and give several differing
reasons why the claim was not covered, but we think the best reason of all lies
in the fact that the cigars were not burned by a hostile fire.
Unlike the peril of fire, the meanings of most covered perils are clarified to
varying degrees in insurance policies. For example, the peril of volcanic
eruption in the previously mentioned HO-3 policy is defined to cover volcanic
eruptions other than those arising from earthquakes, land shock waves, or
tremors.
2.6.2. Open-Perils Coverage:
Open-perils coverage (sometimes called all-risks coverage) covers all causes of
loss to covered property unless a given type of loss is specifically excluded. The
dwelling building coverage under the HO-3 policy is an example of a typical
open-perils policy in that some potentially significant losses are not covered.
The policy has exclusions for earth movement and water damage that eliminate
coverage for earthquakes and floods. In most cases, such perils can be insured
for an extra premium under an HO-3 policy or a separate policy. The policy also
contains exclusions for perils that are generally uninsurable, such as war and
nuclear accidents. Other perils are modified by policy language. For example,
although vandalism and malicious mischief to the building are generally
covered, this peril is not covered if a building has been vacant for more than 60

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days preceding a loss. Similarly, smoke is not a covered peril if it arises from
agricultural smudging or industrial operations.

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CHAPTER 3
PROPERTY VALUATION
3.1. PROPERTY VALUATION
Property insurance policies invariably include valuation provisions that specify
the approach to use to determine the value of covered property. That approach
should be used when determining how much insurance to purchase and it will
be used when determining how much the insurer will pay in the event of a
property loss.
Traditionally, most property insurance policies provided coverage on an actual
cash value basis. Replacement cost valuation, the other dominant approach, is
increasingly common, especially for insurance on houses and other buildings.
Other variations include coverage on the basis of agreed value, often used with
antiques and collectibles; the stated amount approach; and the valued policy
laws found in some states.
3.1.1. Actual Cash Value
The concept of actual cash value is based on the principle of indemnity, which
means that an insured should not profit from a loss but should be put into
approximately the same financial position that existed before a loss. Policies
written on an actual cash value basis (such as auto physical damage and
personal property under many homeowners policies) state that losses will be
settled at actual cash value at the time of loss but not in an amount greater than
the amount required to repair or replace the property.
AAIS home owners policies define actual cash value as “the cost to repair or
replace property using material of like kind and quality, to the extent

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practical, less a deduction for depreciation, however caused.” However, most
property insurance policies do not include a specific definition of actual cash
value. As a result, there are varying court interpretations, statutes, and
regulations concerning its precise meaning. Generally, it is defined as
replacement cost minus physical depreciation. As an illustration, assume a 10-
year-old refrigerator is destroyed in a fire. It cost $900 when new, but a similar
new model now sells for $1,200. The $1,200 amount is the replacement cost.
However, according to the principle of indemnity, the insured is not entitled to a
new refrigerator, because the one that was destroyed was several years old. The
issue then becomes the amount of the deduction for physical depreciation.
Insurance companies tend to have depreciation schedules for various items, and
refrigerators typically last about 15 years. Therefore, the insurer would probably
assume the refrigerator was two-thirds depreciated and offer the insured one-
third of $1,200, or $400.
In some cases, market value is used to establish the insurable value of property.
The fair market value of property is the amount for which a knowledgeable
seller, under noun usual pressure, would sell the property and a knowledgeable
buyer, under no unusual pressure, would purchase it. The actual cash value of
an auto is usually considered to be its fair market value. It is relatively easy to
establish the actual cash value of any auto, because there is an active market for
autos, and the price at which comparable used cars have recently sold is readily
available.
3.1.2. Replacement Cost
When property is valued on a replacement cost basis (as the dwelling building is
in most homeowners policies), no deduction is made for depreciation. In the
past, it was argued that this method of settlement violated the principle of
indemnity because the insured was put into a better position after the loss. In

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many cases, however, there is no way to put the insured into exactly the same
position that existed before the loss. For example, if a windstorm blows the
shingles off a roof, the insured clearly needs new shingles. However, if the old
shingles had already served a portion of their life expectancy, an actual cash
value settlement would require the insured to use additional resources to fully
repair the roof. Such a result, obviously, would leave the insured feeling less
than fully indemnified. To alleviate this situation, replacement cost coverage is
commonly written on homes and commercial buildings. Replacement cost
coverage is also increasingly common with both commercial and residential
personal property. If the refrigerator in the previous example had been insured
on a replacement cost basis rather than an actual cash value basis, the insurer
would pay the $1,200 cost of a similar new model, even though the customer
had originally purchased the refrigerator for only $900. Replacement cost is
based on replacement with materials or items of like kind and quality as that
lost. For example, if a kitchen were destroyed, the value of the loss would be
determined by characteristics of the old kitchen. The insurance company would
pay the cost to replace an old laminated counter top with a new counter top of
something similar. The insured would have to assume the extra cost if he or she
wanted a new granite counter top. Similarly, the insurance company would not
pay to replace standard low-cost kitchen cabinets with expensive custom-made
cabinets.
3.1.3. Agreed Value
With some types of property, it is extremely hard to determine values after an
item has been totally destroyed or lost through theft. Examples include fine art
and antiques. To avoid this dilemma, the insurer and the insured may agree
upon a value at the time a policy is written. In the event of a total loss to the
property, the insurer pays the agreed value. The insurance company will
probably want detailed appraisals before issuing a policy with an agreed value.

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3.1.4. Stated Amount
The stated amount approach is often used in insurance policies on antique autos
or other unusual vehicles. The policy lists a stated value for the item. At the
time of the loss, the insurer will pay the stated amount, the actual cash value, or
the cost to repair or replace the property—whichever is least. In many cases, the
insurer therefore pays less than the stated value.
3.1.5. Valued Policy Laws
A few states have valued policy laws that can apply to certain types of property
losses and/or certain perils. As a rule, this type of law applies to real property
only. Under such a law, the full amount of insurance coverage is paid if a total
loss occurs. For example, $500,000 is paid for a total loss to a building insured
for $500,000 even if the actual cash value or replacement cost of the building is
lower. Valued policy laws were introduced to prevent agents and insurance
companies from benefiting from premiums and commissions that are too high
because a building is insured for an amount greater than what the insurer will
pay in the event of a loss. The burden is on the insurance company to either
prevent over insurance or to be bound by the amount of coverage it has sold if a
loss occurs.
Today, underinsurance is more often a problem than over insurance. Insurers
and their agents face the challenge, especially during inflationary periods, of
adequately increasing insurance limits at every renewal in order to keep policy
limits in line with insurable property values so that the insurer is able to pay for
a major property loss. Adequate insurance to value benefits to policy owners,
and it enables insurers to collect premiums consistent with the values they
insure, which, in turn, helps avoid a need for rate increases.

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3.2. SETTLEMENT OF CLAIMS
Settling property insurance claims is usually somewhat more complicated than
settling life insurance claims. Property insurance policies therefore need to spell
out the post-loss duties of both the insured and the insurer in some detail. Most
of these duties are fairly obvious.
Duties of the Insured
A typical property insurance policy requires, for example, that the insured must
promptly tell the insurer there has been a property loss, and the insured must
cooperate with the insurer in showing that a covered loss occurred within the
policy period. If property coverage is on a named-perils basis, the insured also
needs to establish that the loss was caused by one of the named perils.
The insured also needs to cooperate with the insurer in establishing the value of
covered property that has been lost or damaged. It is much easier to do this
when an insured has maintained receipts of major purchases and has a current
inventory of personal property supplemented by photographs or videotapes. Of
course, the insured should keep this information at a separate location so that
the information itself is not among the property that is destroyed.
Duties of the Insurer
The insurance company has a duty to pay losses fairly and promptly once the
coverage and the value of the property loss have been established. The
insurance policy and/or state law might specify that losses are payable within a
stated period, such as 60 days.
The insurer will usually settle property insurance claims by paying the policy
owner unless some other person with an insurable interest is also covered by the
policy. A mortgage holder or a lender named as a loss payee is also entitled to
be paid to the extent of the lender's interest in the property.

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Insurers typically settle property insurance claims by issuing a check or draft to
the policy owner and/or other insured parties. However, many policies give the
insurer the right to repair or replace the damaged property rather than making a
monetary settlement. Thus, for example, an insurer might have a glass shop
replace a broken windshield on a car rather than giving the policy owner cash
and having the policy owner deal with a repair shop. Auto insurers often do this
because they have arrangements with glass shops to provide prompt quality
service at a discount that enhances policy owner service and helps keep
premiums down.

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CHAPTER 4
THE CONCEPT OF PROPERTY INSURANCE FROM
BUSINESS PERSPECTIVE
4.1. ROLE OF PROPERTY INSURANCE
Insurers are in the unique position of having encyclopedic information about the
many different ways business property could be damaged or destroyed, from
fire and flooding to embezzlement. Property is also vulnerable as a result of a
variety of other events such as electrical surges, accidental activation of a
chemical sprinkler system or a computer virus.
Because insurers know so much about what can go wrong, they can provide
business with the insurance coverage a particular type of enterprise requires.
Without appropriate insurance, property losses can easily cause the entire
enterprise to fail.
The purpose of property insurance for the small business is to provide critical
financial assistance in the event of a loss, so that the enterprise can continue to
operate with as little disruption as possible.
Property insurance alone is seldom enough. However, on average, businesses
that devote resources to risk reduction and risk control have fewer insurance
claims. Firms with a good record on claims generally have more insurers
competing for their business, so that they are able to find coverage more easily
and often at a lower price than companies that have more losses.

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4.2. PROPERTY INSURANCE POLICIES
Insurers offer small businessowners a huge variety of property insurance
policies. There are policies that cover only a single peril, or cause of loss, such
as a fire insurance policy, a crime policy or an electronic equipment policy. The
particulars of the policies vary from insurer to insurer.
And there are policies that include several different coverages in a single
“package.” The majority of small business owners find it more convenient and
economical to purchase a package policy, which provides protection against
many types of loss in a single policy. Insurers may create their own insurance
policies. Many rely in part on a package policy format from ISO. This policy is
generally referred to in the insurance industry as the Businessowners
Policy (BOP). The BOP is revised periodically.
4.3. PROPERTY COVERAGE IN THE BOP
The BOP covers any buildings the business owns and much of the property
needed to run the business.
Specifically, the policy covers:
 Buildingsas named in the policy"Declarations". Structures are covered
as well as permanently installed fixtures, machinery and equipment;
outdoor fixtures; items you use to maintain or service the building, such
as appliances; and additions under construction. Business can choose to
insure their buildings at their "actual cash value"—what they are worth—
or their "replacement cost"—what it would cost to replace them with new
construction. To keep up with the increasing cost of rebuilding, the
policy’s limit of insurance for covered buildings will automatically rise

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by a set percentage each year. The business should discuss with their
agent whether to purchase the standard building coverage or replacement
cost coverage.
 Buildingcontents, although there are a few exceptions. The policy covers
most property on or near the business premises that is used in the
business. This would include such things as machinery, computers, raw
materials or inventory. The businesses also have coverage for any leased
property, which you are contractually obligated to insure.
 Property of others that is under the care, custody and control of
business to the extent they are legally liable for that property. This
coverage is particularly important to a business, such as a computer repair
shop, that earns revenue from servicing the property of others.
4.4. A BUSINESS THAT LEASES OR RENTS ITS PREMISES
If the business rents or leases its premises, its lease should describe business
obligations with respect to insurance. If a business is the sole tenant, it may be
responsible for insuring the building. It may be responsible for continuing to
pay rent even if the building is destroyed.
For those who rent, the BOP provides coverage for tenant’s improvements and
betterments. These are fixtures, alterations, installations or additions that the
businesses have put into the space.

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4.5. COVERED CAUSES OF LOSS
Insurance contracts always describe in some way the perils being insured
against. One type of BOP names the covered causes of loss. Another uses what
insurers may call the “special form,” which states that all causes of loss are
covered except those that are excluded by name. Because the special form
provides broader coverage, premiums for this type of BOP may be higher.
In the BOP format that names covered causes of loss, those included are fire,
lightning, most explosions, windstorm or hail, smoke from accidental fire,
aircraft or vehicles (not including those owned or operated by the business
itself), riot or civil commotion, vandalism, automatic sprinkler leakage, sinkhole
collapse, building collapse, volcanic action and certain types of damage from
water or other liquids.
4.6. CAUSES OF LOSS THAT AREN’T COVERED
A number of events that can cause property loss are not covered by the basic
BOP. Some, such as employee dishonesty or breakdown of a steam boiler, are
excluded from the basic BOP, but the businesses can add coverage to it by
payment of an additional premium. Some events, such as wear and tear, aren’t
covered because they don’t meet the basic criteria for insurance of being
accidental and unpredictable. Coverage for other events, such as flood and
earthquake, are not needed by all businesses. Separate policies are available.
Nuclear reaction and war are considered to be uninsurable, since insurers cannot
predict with any degree of accuracy the frequency of such events or amount of
damage likely to occur.
The following are some of the other events that can cause damage that are
usually excluded from the basic BOP: power failure (except when it causes

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loss or damage to computers and electronic data); failure of computer hardware
or software; robbery and burglary; most instances of pollution; and changes in
humidity or temperature. Also excluded is coverage for missing property where
there is no physical evidence to show what happened to the property, such as
with a shortage discovered after taking inventory.
4.7. PROPERTY THAT ISN’T COVERED
The basic BOP excludes some types of property from its coverage. For many of
these items, such as money and securities or outdoor signs, insurance is
available as an addition to the BOP for an additional premium. For items such
as motor vehicles or boats, however, you will need to purchase a separate
policy. Excluded property usually includes:
 Any vehicles subject to motor vehicle registration, including aircraft,
autos and trucks
 Bullion, money or securities
 Land, water, growing crops, lawns, trees, shrubs or plants
 Outdoor fences and signs not attached to the building
Businesses should discuss with their agent what property is and isn’t covered by
their policy, as well as whether they may need to purchase additional coverage
for some types of property excluded from the basic BOP coverage. Since most
businesses, for example, own or use vehicles, they should consider business
automobile insurance.

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4.8. COVERAGE FOR POLLUTION
Coverage for pollution is limited to cleaning up pollution that was caused by a
covered cause of loss occurring during the policy period. For example, if
vandals opened drums of a toxic chemical and poured it on the ground, the
insurer would cover the cost of the cleanup, up to the policy limit, since
vandalism is a covered cause of loss. On the other hand, if the toxic chemical
slowly leaked into the ground because the drum was defective and had a tiny
hole in it, you would not have coverage under the BOP. A defect in the drum is
not a covered cause of loss under the property policy. (For help with cleanup
costs in this hypothetical situation, the business might find compensation from
the liability insurance of the drum manufacturer or seller of the chemical.)
4.9. BUSINESS INCOME AND EXTRA EXPENSE COVERAGE
If a businessowner’s main business premises are destroyed along with much of
the property the business used to operate, this loss, though devastating, may be
only just one part of the total. The businessowner should consider purchasing
Business Income and Extra Expense Insurance (also known as Business
Interruption Insurance).
Every day the business is unable to operate is a day of lost income for
businessowner. If the property damage or loss prevents business from providing
products or services to their customers or clients, the employees working there
may go elsewhere and many of them may never return. If the businessowner
wants to keep its employees, he must continue to pay their wages, even when
the business is generating much less than normal income. It is little wonder that
many businesses that lack insurance to cover the potential ongoing economic
effects of a serious destructive event are unable to survive. A survey by the

25
National Association of Insurance Commissioners found that only 35 percent of
small businesses, defined as firms with fewer than 100 employees, have
business interruption insurance.
Prudent businesses have disaster recovery plans that include insurance to cover
lost income and extra expenses that can result from getting back on track after a
covered loss.
Because coverage for lost income and extra expenses is so important to
continued business survival, it is part of the standard BOP. The policy covers
actual loss of net business income that would have been earned had it not been
necessary to suspend operations due to a covered cause of loss. The policy also
covers continuing normal operating expenses such as utility payments and
payroll.
The insurer will pay, as well, extra expenses that you incur to avoid or minimize
the suspension of operations. Such extra expenses often include costs to
relocate, and to equip and to operate replacement premises, as well as expenses
to repair or to replace property and to restore lost information on damaged
valuable papers and records.
Generally, these coverages are triggered only when the business have a direct
loss from a covered cause of loss. If the cause of loss is an earthquake, there
will be no coverage under the BOP. If the business must be closed due to
someone else’s loss, there is no coverage. For example, if you are a
businessowner and your business could be an accounting firm located on the
third floor of a large building. If there is a fire on the ground floor of the
building, which does no damage in your office but causes the building to be
shut down for repairs for a month, your BOP would not provide coverage for

26
lost business income and extra expenses, since you did not have a direct loss
yourself.
4.10. SEASONAL VARIATIONS IN VALUE
Some business experience seasonal variations in the value of inventory, raw
materials and other items. For example, a complete loss at the height of the
summer if you sell ice cream or during the winter holiday season if you have a
retail operation may be several times larger than during the rest of the year. To
protect against a loss in the busy season, the BOP provides for an automatic 25
percent increase in your policy limit for business personal property. The
seasonal escalator applies only if the businessowners have insured their business
personal property to at least 100 percent of their average monthly values during
either the 12 months preceding the loss or the period of time the businessowner
have been in business as of the date of the loss, whichever is less.
4.11. OTHER LOSSES AND EXPENSES COVERED BY THE BOP
The BOP includes numerous other coverages to protect the businesses from a
variety of accidental events that could wreck havoc on their financial well
being. These include:
1. Actions of Civil Authorities:
Sometimes physical damage to property other than their own leads the police or
other civil authorities to prevent businessowner from having access to his/her
own premises. If the loss at the other property is due to a cause covered by
businessowner’s policy, then the insurer will pay for his/her actual loss of
business income and any necessary extra expense caused by the action of civil
authorities. By way of example, assume you own a hair salon. An explosion has

27
significantly damaged other businesses near you, although your own premises
suffered no physical damage. The police close off the whole block for a week,
preventing your business from operating from that location. Your insurer will
cover your lost income and extra expense caused by this action.
2. Bogus Money Orders and Counterfeit Money:
If a business makes the good faith mistake of accepting bogus money orders or
counterfeit money, the insurer will pay up to $1,000 to cover the loss.
3. Contingent Business Interruption:
This coverage, which may also be called “Business Income from Dependent
Properties” or "Contingent Business Income," applies when a businessowner is
dependent on another operation and the other operation is unable to conduct its
usual business because it has been damaged by a cause of loss that is covered by
his/her policy. Should he/she suffer a loss due to such damage at the premises of
a business he/she depend on (“dependent property”), the insurer will pay for the
actual loss of business income sustain by businessowner. For example, you’ve
designed a new type of folding beach chair and you have many orders to ship it
in time for the summer selling season. Your chairs are manufactured at the
Contract Furniture Factory (CFF). Due to damage from a fire, CFF is unable to
make your chairs. Should neither you nor CFF have a backup manufacturer who
can fulfil the contract, you will lose income from the orders you cannot ship.
Your insurer will pay for the net income loss you suffer as a result. If, however,
damage at CFF is due to an earthquake and you don’t have earthquake
insurance this coverage will not apply since the damage at the dependent
property was not due to a covered cause of loss.

28
4. Computer Operations Interruption:
Should computer operations be interrupted due to a covered cause of loss,
businessowner’s insurer will pay up to $10,000 for business income lost and
some extra expenses incurred as a result of the computer problem. In addition to
other causes of loss, this coverage applies to a loss caused by a computer virus,
harmful code or other harmful instructions entered into the businessowner’s
computer system or a network to which it is connected. There is no coverage,
however, for loss or damage caused by the actions of any employee, including
temporary or leased employees, or by anyone the businessowner hire to work on
his/her computer system.
5. Debris Removal:
When a building is destroyed or damaged by fire, wind or other peril, debris is
left that must be removed before reconstruction can occur. The business policy,
within certain conditions, covers the cost of removing debris left behind as a
result of a covered cause of loss. There is an extra $10,000 of coverage for
debris removal should the limit of insurance be reached before debris removal
has been factored in.
6. Electronic Data Loss:
In the event electronic data is destroyed or damaged as the result of a covered
cause of loss, the insurer will pay the cost to replace or restore it. Causes of loss
that apply to this coverage include a computer virus, harmful code or other
harmful instructions entered into the computer system of the business. The
coverage applies as well to cyber extortionists who threaten to bring the
computer system down with a code or virus if the businessowner don’t meet
their demands. There is no coverage, however, for loss or damage caused by the

29
actions of any employee, including temporary or leased employees or by anyone
the businessowner hire to work on your computer system. (Negligent work by
third parties should be covered by their liability insurance.)
7. Expense to Preserve the Value of Property:
To preserve the value of property, it may be necessary for businessowner to
moves it from the insured premises to another location. For example, if a major
storm is predicted and your building has no basement, you may want to move
some of your high-value inventory to a safer location. The property policy
covers such property while it is being transported and for up to 10 days after it
is moved to the alternative location.
8. Fire Extinguisher Systems Recharge Expense:
If the business fire extinguishing system is discharged (other than during
installation or testing), the insurer will pay to have it recharged or replaced,
whichever costs is less.
9. Forgery or Alteration:
The insurer will pay up to $2,500 (unless you buy a higher limit) for losses
resulting directly from forgery or alteration of any check, draft, promissory note
or similar promise of payment in money that businessowner or his agent issued
or that someone impersonating businessowner or their agent issued.
10.Fungi, Rot and Bacteria:
The insurer typically limits the situations in which it will pay for loss or
damage caused by fungi, wet or dry rot, or bacteria. Usually, the insurer will
pay up to $15,000 only when the underlying cause of the damage is a specified

30
cause of loss other than fire or lightning that occurs during the policy period and
only if the businessowner used all reasonable means to save and preserve the
property from further damage at the time of and after that occurrence.
11.Window Glass Breakage Expense:
Where glass has been broken, the insurer will pay expenses to put up temporary
boards if repair or replacement of damaged glass is delayed.
4.12. ADDITIONAL COVERAGES
The standard Businessowners Policy (BOP) recognizes that some types of
coverage are important for some customers but not for others. It makes
provision for adding coverage through what insurers may refer to as "optional
coverages," coverage extensions and endorsements. These are among the
coverages a businessowner may choose to add to his/her BOP with the payment
of an additional premium:
1. Accounts Receivable:
As part of businessowner’s risk management plan, to the extent feasible, he/she
should keep backup copies of his/her accounts receivable in a separate location.
For some businesses, however, it may be in the nature of the business that
accounts receivable records are vulnerable to property loss. If needed, the
businessowner may extend coverage under their BOP. The accounts receivable
extension obligates the insurer to pay amounts due from his/her customers that
he/her are unable to collect. The limit is up to $10,000 per occurrence for
records located on the premises described in the policy "Declarations" or $5,000
for records located elsewhere.

31
2. Adding Additional Insured
In many situations, a business is required by contract or law to add coverage to
its BOP for other parties who usually have property at risk that is in the care of
the insured. Such parties typically include managers or lessors of a rented or
leased premises and mortgage holders. Businessowners can add coverage to its
BOP with an Endorsement Adding Additional Insured.
3. Computer Fraud and Funds Transfer Fraud:
A business may run the risk that someone will cause an unauthorized transfer of
funds from its bank account, whether through electronic or written instructions.
The Endorsement for Computer Fraud and Funds Transfer Fraud covers this
risk. The insurer pays for the loss of money and securities resulting directly
from a fraudulent instruction instructing a financial institution to transfer, pay,
or deliver money or securities from the business owner’s “transfer account.”
The endorsement defines a “transfer account” as “an account maintained by the
business owner’s at a financial institution from which he/she can initiate the
transfer, payment or delivery of money and securities.”
4. Burglary and Robbery:
If a business has high-value goods that are attractive to criminals, loss control
will go a long way to reducing the threat of theft or burglary. Optional burglary
and robbery coverage, however, may be a wise part of the risk management
plan.
Burglary means taking of property from inside the described premises by a
person unlawfully accessing the premises as evidenced by marks of forcible

32
entry or exit. Robbery means unlawfully taking property from a person who has
the property in his or her care and custody.
The insurer covers the property on the business premises, while it is at a bank or
savings institution, when it is in the custody of any employee or business owner
in his or her living quarters or while it is in transit between any of these places.
Coverage is limited to $2,500 for furs, watches, jewellery, precious metals,
patterns, dies, molds and forms. If additional coverage for such property is
needed, it can be purchased separately.
5. Earthquake and Volcano Coverage:
Businesses may add this endorsement to its BOP to protect your business
property from losses due to these perils. A different method of calculating
deductibles, as a percentage of the coverage rather than as a flat dollar amount,
may apply to this coverage.
6. Electronic Commerce:
If the business relies on e-commerce—that is, business activity conducted over
the Internet—the businessowners may want to add the Endorsement for
Electronic Commerce to their BOP. The insurer covers the businessowners lost
income and extra expenses in the event their ability to conduct e-commerce is
slowed down or stopped due to the causes of loss covered by the BOP. The
endorsement also provides coverage for the cost of reconstructing electronic
data if it is lost due to a covered cause of loss or if it is stolen by someone other
than an employee, volunteer, worker or contractor.

33
7. Employee Dishonesty:
Burglary and robbery insurance does not cover losses caused by employees or
authorized representatives who commit dishonest acts. Employee Dishonesty
Insurance provides this coverage.
Most experts agree that businessowners tend to greatly underestimate their
vulnerability to theft by their own employees. According to the Association of
Certified Fraud Examiners (ACFE), the average business loses 6 percent of its
total annual revenue to employee fraud. The ACFE says smaller companies,
particularly those with fewer than 500 employees, are most susceptible to these
losses. Virtually any business with employees is at risk of losses caused by
employee dishonesty. As with other causes of loss, effective loss control
measures can go a long way toward reducing this loss exposure.
Employee Dishonesty Insurance covers losses caused by temporary or leased
workers as well as employees. Many employee fraud schemes go on for years
before they are detected. If a business adds this coverage to its BOP, its insurer
will pay for a covered loss or damage sustained during the policy period and
discovered no later than one year from the end of the policy period.
8. Food Contamination:
If a businessowner is involved in a food business, there is always some risk that
food he/she will sell could cause food poisoning or transmit a communicable
disease from an employee of its business. This risk can, of course, be reduced
and controlled by following a good risk management plan, but it can never be
totally eliminated.
The Endorsement for Food Contamination provides coverage for most of the
expenses business would incur if food businessowner sold caused food

34
poisoning or disease. Coverage includes the cost of additional advertising to
restore business reputation.
9. Mechanical Breakdown:
This option provides coverage for mechanical or electrical breakdown to a
business boilers, pressure vessels, refrigeration systems, piping, and mechanical
and electrical machines or apparatus that generate, transmit or simply use
mechanical or electrical power. For many businesses that depend on such
equipment, a breakdown means the inability to operate and loss of income. If
you run a saw mill and the saw breaks down, for example, you’re effectively out
of business until the saw is repaired. Mechanical breakdown coverage is a wise
investment to cover this type of risk.
10.Money and Securities:
A businessowner have the option to add coverage for money and securities to
their policy. The insurer covers the property on the business premises, while it
is at a bank or savings institution, when it is in the custody of any employee or
businessowner in his or her living quarters or while it is in transit between any
of these places.
11.More Coverage for Valuable Papers and Records:
The businessowner should keep backup copies of records in a separate location
and valuable papers in a fire proof safe or a bank safety deposit box.
For some businesses, however, it may be in the nature of the business that
certain valuable papers and records are vulnerable to property loss. Should the
businessowner lose valuable papers and records as the result of a covered cause

35
of loss, his/her basic BOP will pay the expense, up to his/her policy limit, to
reconstruct the records.
If needed, the businessowner may also add more coverage to its BOP for the
cost to reconstruct valuable papers and records, including those that exist on
electronic media. The covered property includes documents, manuscripts and
records (including abstracts, books, deeds, drawings, films, maps or mortgages).
It also includes electronic data processing, recording or storage media; data
stored on such media; and programming records used for electronic data
processing or electronically controlled equipment.
12.Newly Acquired or Constructed Property:
If a businessowner’s policy covers buildings, he/she may extend the coverage to
new acquired buildings intended for similar use as the insured building or as a
warehouse. This coverage also applies to new buildings while being constructed
on the premises described in his/her policy. Any newly acquired business
personal property is also covered. This is temporary coverage that provides time
to report the new property to businessowner’s insurer. The coverage expires 30
days after he/she acquire the property or begin construction.
13.Outdoor Property:
Businessowners may extend their policy’s coverage to apply to outdoor items,
including signs, fences, shrubs and plants, and satellite dishes. Debris removal
of these items is included. The most the insurer will pay under this extension is
$2,500 and not more than $500 for any one tree, shrub or plant.

36
14.Outdoor Signs:
For some businessowners, the only outdoor asset not covered by their basic
BOP that they wish to insure is outdoor signs not connected to their building.
The BOP provides an option to add just this coverage.
15.Personal Effects:
Businessowners may extend their coverage to apply to personal effects owned
by officers, managers and anyone who works at the company. There is a $2,500
limit on this coverage. It does not apply to loss or damage by theft.
16.Spoilage Coverage:
If you are in a business that involves supplies, inventory or other materials that
must be maintained under controlled temperature or humidity conditions for
preservation and that are susceptible to loss or damage if the controlled
temperature or humidity conditions change, you will probably want to add the
Endorsement for Spoilage Coverage to your BOP. The covered causes of loss
are mechanical breakdown of your refrigeration or humidity control system and
power outages due to conditions beyond your control. The insurer will cover the
cost of property that is spoiled by these causes.
17.Utility Services—Direct Damage:
Loss of water, communication or power service could be costly to many
businesses. The Endorsement for Utility Services—Direct Damage covers these
losses.

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CHAPTER 5
IMPORTANCE OF PROPERTY INSURANCE
5.1. IMPORTANCE OF PROPERTY INSURANCE TO
HOUSEHOLDER
For most people, buying or building a house is probably the biggest and most
expensive investment they would ever make and it is vital that their investment
is fully protected. All over the world, many secure their property with the aid of
property insurance.
Property insuranceprovidesprotection againstmost risks to property, such as
fire, theft and some weather damage, these includes specialised forms of
insurance such as building insurance, content insurance, fire insurance, flood
insurance and earthquake insurance. It is important to mention that your
property is vulnerable and it can crash down any time owing to some disaster.
So why take the risk? Prevention they say is better than cure. The cost of
property insurance often depends on what it would cost to replace the house and
which additional items to be insured are attached to the policy. The insurance
policy itself is a lengthy contract, and names what will and what will not be paid
in the case of various events.
The property insurance policy is usually a term contract – a contract that is in
effect for a fixed period of time. The payment the insured makes to the insurer
is called the premium. The insured must pay the insurer the premium each term.
Most insurers charge a lower premium if it appears less likely the house will be
damaged or destroyed: for example, if the house is situated next to a fire station
or if the house is equipped with fire sprinklers and fire alarms Building

38
insurance Buildings insurance is designed to cover the full cost of rebuilding or
repairing your property in the event of fire, storm damage, lightning strike,
earthquake, damage caused by burst pipes, vandalism or explosion.
Some building insurance cover provide alternative accommodation if the house
is no longer fit to live in; liability cover if damage to your property affects a
neighbouring property, and help and support with access to approved
tradesmen. Most people are concerned about the amount of money they would
spend on repairing their property once it gets damaged by some natural disaster.
With adequate property insurance in place, you can be free of this worry.
A major benefit of getting your property insured is that it covers the
replacement value. Most people do not care much about the replacement value
and they will lose everything in case of disasters like natural calamities. The
process of getting things back on track will be painstaking in case you have not
insured your property.
Buildings insurance will typically cover you for any damage or destruction to
your property, including the walls, roof, windows and doors, and pipe-work.
It also normally includes your bathroom and kitchen and most built-in interior
fittings. External structures, such as garages, sheds and outbuildings are often
also covered but you may have to specify them separately on your policy.
Boundary walls, fencing and gates, paths and driveways and damage to electric
and water supply pipes may not be covered.
Your property can be broken into at any time and the contents of the house can
be stolen. Property insurance covers portable and immovable components of the
house and you will be provided financial assistance by the insurance company
to replace those lost or damaged. Insuring your property gets you a lot of cover.
You can choose the areas that are to be covered.

39
Getting more coverage will surely increase the premium rates but it will
decrease the premium per coverage. Contents insurance helps cover the
furniture, personal possessions and valuables that you keep in your home. It
does not include damage sustained to the blocks of the building or any
permanent fixtures and fittings in your home.
Contents insurance mostly covers household furniture, furnishings, carpets and
curtains on a new-for-old basis, personal possessions in your home, garage,
shed or other outbuilding, home office equipment, such as computers or laptops,
if you work from home, loss, damage or destruction to portable items and
adornments such as jewellery and watches, cameras, sports and camping
equipment, laptop computers and cash.
5.2. IMPORTANCE OF PROPERTY INSURANCE TO BUSINESS
If you are a commercial property investor you can have the potential to earn a
great long term income over the years, especially if you have a robust tenant
who is commercially successful. However, it is very important to protect your
commercial investment – not just for your buildings and contents but also for
your public liability insurance because people will be coming and going from
the property.
There are many different options out there when it comes to buying commercial
property insurance. Some companies even allow you to buy the building cover
as part of an overall business insurance policy, which will be more convenient
for you and save you money.
If you are a commercial landlord then it is imperative that you have specialist
insurance to protect your investment and rental income.

40
So why is commercial property insurance so important? Here are some of the
reasons why it is essential to have this type of insurance:
 Your property will be protected from fire, flood and other disasters that
can cause damage to the building.
 You can also insure the contents of your building against destruction,
damage, theft or loss. This policy will cover the cost of repair or
replacement if the possessions of your business are damaged.
 It is also important to protect your fixtures and fittings, such as your
kitchen units, shelving, flooring, counters, etc. You can purchase fixtures
and fittings cover for these parts of your business.
 It is crucial to buy commercial insurance, not just for your building but
also for the public liability cover. If many members of the public will be
coming and going from your property, you will need to be covered in the
event of an accident.
Sometimes if you work from home, your home insurance will not cover you for
a home-based business office – which means that you would have to buy two
separate policies. However, sometimes you can find a policy that would cover
both your home and your home business contents.
When you are insuring your commercial property, it really helps to have a good
local commercial property surveyor who is an expert in the type of property you
are buying. They will be very valuable when it comes to helping you understand
a complex landlord and tenant agreement and help you choose the right kind of
insurance for your particular commercial property.

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CHAPTER 6
CASE STUDY
ORIENTAL INSURANCE COMPANY LTD
OVERVIEW
The Oriental Insurance Company Ltd was incorporated at Bombay on 12th
September 1947. The Company was a wholly owned subsidiary of the Oriental
Government Security Life Assurance Company Ltd and was formed to carry out
General Insurance business. The Company was a subsidiary of Life Insurance
Corporation of India from 1956 to 1973 (till the General Insurance Business
was nationalized in the country). In 2003 all shares of our company held by the
General Insurance Corporation of India have been transferred to Central
Government.
The Company is a pioneer in laying down systems for smooth and orderly
conduct of the business. The strength of the company lies in its highly trained
and motivated work force that covers various disciplines and has vast expertise.
Oriental specializes in devising special covers for large projects like power
plants, petrochemical, steel and chemical plants. The company has developed
various types of insurance covers to cater to the needs of both the urban and
rural population of India.

42
OICL PROPERTY INSURANCE POLICIES:
1. SWEET HOME INSURANCE POLICY
Home insurance is an absolute must. There is no other way about it. Thinking
that you can self-insure an asset as humungous as a house, which is your sweat
and blood, is a folly. Coverage against hazards such as fire and damage incurred
due to weather are not the only potential risks. What if someone stumbles and
fall on your property and the injury is too big! You need indemnification even
then. In addition, ensure that you insure for renovation as well as for everything
(and everyone) inside the house too.
Oriental insurance understands that one cannot take too many precautions when
it comes to protecting yourself should something happen to your home. And this
customized policy is aptly named as ‘Sweet Home Insurance’. This scheme is a
minor version of the prevailing Householders´ Package Policy offered by
Oriental and entails three different plans. Each plan consists of five segments
with the first two sections deemed as `first loss basis´.
SweetHome Insurance Policy Sections
First Section (Building):
 Against fire & related hazards.
 Includes cover against earthquake.
 You need not be the owner to pursue coverage for the building.
 Individuals under tenancy can get insurance as per this section.
 Policyholder can chooseINR 4, 6 & 8 lacs under Plan A, B, & C.
Second Section (Items except jewelery againstfire and related hazards and
earthquakeas mentioned above):
 Against fire to protectitems kept and fitted in the building and premises.

43
 You needn’t give out information of all the items too.
 The price of one single article must not go beyond 10 percent of the amount
chosen as per Plan A, B & C.
 The accountability of the firm in this segment is INR 1, 2, and 3 lacs under
Plan A, B & C in that order.
Third Section (Items except jewelleryagainst robberyand break-in):
 The amount assured and the limits of accountability of the insurance firm in
this segment is same as that mentioned in section two.
Fourth Section (Electrical or mechanicalfailureof any deviceused in the
house):
 This is slightly different from the second and third section as you have to give
detailed list of every such insured gadget used in the house, for which you
need to submit a duly filled informational form.
 Oriental will pay up to INR 30,000, INR 50,000 and INR 70,000 for Plan A,
B & C accordingly.
Fifth Section (Personal AccidentCover for insuranceholder and his/ her
partner):
 The plan gives indemnification against accidental demise, loss of limb(s) and
disability (temporary or permanent) on floater basis. But it is only available if
you are aged between 18 and 70.

44
Sections & Amount Simplified:
Section
Price of the property as stated by the sponsor
Plan A Plan B Plan C
I (Optional)
INR 4 lacs Fixed
Premium – INR 240
INR 6 lacs Fixed
Premium – INR 360
INR 8 lacs Fixed
Premium – INR 480
II (On first loss
basis) 100
percent
INR 1 lac Fixed INR 2 lacs Fixed INR 3 lacs Fixed
III (On first loss
basis) 100
percent
1,00,000/- (S.I
.including M.B
.section) Pr.Rs.43/-
2,00,000/-
(S.I.including M.B
3,00,000/- (S.I
.including M.B
IV Electric/
Electronic
devices
Up to INR 30,000 Up to INR 50,000 Up to INR 70,000
V Personal
Accident
INR 2 lacs INR 2 lacs INR 2 lacs
Features & Benefits:
 The insurance holder is given the choice of not buying section 1 (againstfire
and related perils as well as naturaldisasters such as earthquake).
 The remaining segmentsare mandatory. Thoseinsure the house againstfire,
robbery, electrical and electronic devices againstfailure as well as personal
accident of any family member residing in the house.

45
 The most notablelure of the plan is thatthe policyholder need not inform the
companyof any extra details except those items for which coverage is bought.
 Anybody including NRIswho owns a house can buy this policy.
Star Attractions of ‘SweetHome Insurance’ Policy’:
 No small term plan.
 No variation of sum assured.
 No restoration of amountinsured in the event of claim.
 Stamp Dutyto be attached is for INR 20.
2. ELECTRONIC EQUIPMENT INSURANCE POLICY
Brief Description
This policy offers you financial protection in case your electronic equipment
suffers accidental electrical and machinery breakdown requiring repairs and /or
replacement. This policy covers all types of computers including micro-
processors, word-processors, tele-communication instruments, machine for
medical use, films and television studio equipment, electronic score boards etc.
Covered Risks
Under this insurance you are covered against all kinds of accidental, Electrical
and Mechanical breakdowns due to internal causes ,external causes and
operational deficiencies
Major Exclusions
Damage due to any cause for which the manufacture and/ or supplier is
responsible, Defects existing at the time of taking insurance known to the
insured but not known to the Insurers, Loss or damage due to interruption
caused by the failure of electricity service or supply.

46
3. OFFICE UMBRELLA POLICY
Brief Description
The Office Umbrella Policy is a comprehensive insurance policy, specially
designed by 'ORIENTAL' that seeks to provide protection to your Office against
different kinds of risks and perils. By opting for this single policy, the office
owner covers the risks his business is likely to encounter while concentrating on
his business activity. This policy is suitable for large offices owned by big
companies as well as small and medium sized offices like Travel Agencies,
Professionals like Chartered Accountants, Consultants, Architects, Interior
Decorators, Engineers or any other service provider. These offices could be
your CorporateOffices or Zonal Offices or Area Offices or any other operating
offices. In addition the policy has special provisions for covering Medical
Establishments, including Doctor's Clinics.
Covered Risks
Section 1:- Buildings inclusive of: Landlord's Fixture and Fittings, Boundary
Wall and fences belonging to Insured's or for which he is responsible.
Section 2A:-Contents contained in the office. Section 2B:-Tenant's legal
liability.
Section 3:-Money Insurance.
Section 4:-Fixed glass and sanitary fittings.
Section 5:-Fidelity Guarantee.
Section 6:- Electronic Equipment Insurance.

47
Section 7:- Alternate Accomodation.
Section 8:- Personal accident.
Section 9:- Breakdown of office appliances.
Section 10:- Baggage.
Section 11:- Liability Insurance.
Section 12:- Business Interruption.
Major Exclusions
N.A
4. BURGLARY POLICY
Brief Description
This policy is designed to cover business premises only like godown, factory,
office etc.
Highlights of the Policy
There are three types of policies available:-
1. Full Value Insurance: The policy must be affected for the full value of the
property to be insured.
2. First Loss Insurance: In the event of improbability of total loss, proposer
can opt for a percentage of total stocks to be insured.
3. Stock Declaration Policies: These policies are given where large stocks
frequently fluctuate in quantity during the year. The sum insured is fixed at
the maximum value of stocks which the insured anticipates he will hold at

48
any one time. A deposit premium of 100% of the annual premium will be
paid at the beginning of the insurance. Monthly declarations of value are to
be sent to the company and the “deposit” premium will be adjusted at the
end of the policy period based upon the average of the monthly declarations.
Scope
1. Loss or damage to the property insured by theft following upon actual,
forcible and violent entry into the premises.
2. Damage to the premises following upon entry as above or any attempt threat.
3. The indemnity provided is to the extent of the intrinsic value of the property
so lost or damaged, subject to the limit of the sum insured.
Exclusions:
The company shall not be liable in respectof:
1. Gold, watches, jewellery, precious stones, plans, designs, money, business
books etc. unless specifically insured.
2. Loss or damage where any insured or member of the insured’s household or
of his business staff is concerned in the actual theft or damage.
The policy shall cease to attach:
1. If the premises are left uninhabited for 7 or more consecutive days and
nights.
2. In the event of material alterations to the premises whereby the risk is
increased.
3. If the insurable interests has passed from the insured otherwise by will or
operation of law

49
In the event of a claim:
1. The insured should give immediate notice to the police and also to the
company and within 14 days submit to the company his claim in respect of
loss or damage sustained.
2. The insured should also tender to the company all reasonable information,
assistance and proofs in connection with any claim here under.
5. ALL RISK INSURANCE POLICY
Brief Description
This policy offers very comprehensive protection to the insured property against
many perils including any accident or misfortune not expressly excluded.
Covered Risks
Fire, riot and terrorist activity: burglary, housebreaking, larceny ; accidental loss
or damage.
Major Exclusions
Loss or damage arising from moth, insects mildew etc; Breakage of tortoise
shell glass, china etc; over winding or internal damage of watches or clocks. All
loss due to convulsions of nature; War and nuclear risks etc.

50
CHAPTER 7
CONCLUSION
Property insurance is a critical piece of nearly all business ventures and is a
must for most homeowners. More often than not, the cause of a loss that will
determine whether the insurance is tapped to protect the insured, or is
unavailable because of an exclusion. But understanding and applying property
insurance provisions can be a daunting task. The facts of property claims often
are complicated, extensive and require a thorough investigation. Often it is the
discovery of a particular material fact that will determine whether the peril is
covered or excluded. Given the myriad potential causes of loss, and exclusions
that may be in play, it is an absolute must to have a copy of the entire policy.
Applying the known facts to the language of the property policy with
meticulous care, and in light of the governing law, should result in a clear
picture of whether a claim is covered or not. A rush to judgment does no one
any good.

51
CHAPTER 8
REFERENCES
WEBSITES
 www.theamericancollege.edu
 www.iii.in
 www.irda.in
 www.orientalinsurance.org.in
 www.policyholder.gov.in

Property Insurance - Black Book Project

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