All or nothing – The Hindu

One can fill a book on misconceptions about insurance. Much of this can be attributed to insurance companies expecting everything to be covered, middlemen leaving more unsaid than said and, you and I, the consumers, not doing our own due diligence by asking questions. and reading the fine print.

There have been worldwide movements to simplify the language of the law as it affects the common man.

The Plain English movement, or the Plain Language movement, emphasizes that contractual language should be simple and understandable by those it binds. It started as a response to the fact that the language in which the laws of the land are written is not simple and clear enough for the common man it is meant to protect. When it comes to business, this move has the biggest impact on insurance.

Let’s go back to some more intentional and unintended promises of the insurance industry as seen through technical terms.

We have seen in a previous installment of the cover note that implied total loss means a partial loss which is payable as if it were a total loss because the cost of salvage and repair would be unsustainable. Like a sunken car for example. This was a case where the term sounded negative when it really meant something not so terrible to the insured.

Loss of profit coverage

Here is a sad riddle. For businesses, there is a sophisticated and very valuable insurance called loss of profit insurance. Also called indirect damage insurance, it is additional to the ordinary fire insurance for plant and machinery and covers loss of profit due to interruption of production due to fire.

The production, sales and profits of the factory are taken into account for the issuance of this policy and the loss of profits is given periodically as a claim until the factory is again operational and the production can to resume.

So, if a fire destroys the factory, the fire policy will pay for rebuilding and replacing or repairing the machinery and the loss of profit policy will compensate for lost revenue for the affected period.

However, if the factory is partially destroyed and some of the production lines can operate even with reduced production, you cannot claim under the consequential loss policy. Talk about an all or nothing case.

The “all or nothing” also applies to event insurance. Whether it’s mega events like IPL matches or Grand Slam tennis events, or a wedding in your family, some underlying concepts are the same.

The first is that it is the actual monetary loss as in input costs that is covered. Thus, the material costs that go into the preparation of the event such as the place, the decor, the professionals, etc. are taken into account. The collected ticket money can also be refunded with the insurance claim, but the profits and their loss are not covered. In personal events, the emotional trauma or social fallout from the annulment of a marriage is not covered.

And, anyway, coverage of a cricket match, for example, stops as soon as the first ball is played!

All or nothing

So it’s still all or nothing. As for personal events, remember that this is wedding insurance, not wedding insurance. A quarrel between the spouses is not covered remotely!

Here’s another googlely that bowl insurers. In property insurance, say for a building or goods in transit, the average clause applies. This stipulates that if, at the time of the damage, the value of the property is less than its real value, then the claim will also be proportionally less.

Logical, but very annoying when you are at the reception. Or rather, the non-receptive end.

Let’s end this episode of Cover Note on a positive note. A double indemnification clause means…. exactly what is said!

A life insurance policy with an insured sum of ₹1 lakh will pay out ₹2 lakh in case of accidental death. In most cases, the extra premium is miniscule.

Watch for these hidden gems in the fine print and reap the benefits of being a thorough insurance buyer.

(The author is a business journalist specializing in insurance and corporate history)

Comments are closed.