IF3 - Chapter 3: Insurance Policies

Is an insurance policy the insurance contract itself?

No. The policy is evidence of the contract, not the contract itself.

What is a policy schedule?

The part of the policy containing variable information specific to the insured and the risk, such as the policy period, premium, sum insured and operative sections.

What is the operative clause?

The section that sets out the actual cover provided and what the insurer promises to do.

What is the difference between general and specific exclusions?

General exclusions apply to the whole policy. Specific exclusions apply only to particular sections or covers

What is a policy condition?

A contractual term that the insured agrees to comply with during the period of cover. Conditions can be express or implied.

What is contribution?

The right of an insurer to call on other insurers covering the same loss to share the cost of the claim.

What is subrogation?

The insurer's right to take over the insured's rights to recover money from a third party responsible for the loss. Think: insurer "stands in the shoes" of the insured.

What is the average condition?

It reduces a property claim proportionately when the property is underinsured.

What is a warranty?

A promise made by the insured relating to facts or performance concerning the risk.

What are the three categories of policy conditions?

• Conditions precedent to the contract

• Conditions subsequent to the contract

• Conditions precedent to liability

What is a representation?

A written or oral statement made during negotiations for the insurance contract

What is an excess?

The first amount of each claim that the insured must pay. It can be compulsory or voluntary.

What is a deductible?

Essentially a very large excess, commonly used in commercial insurance.

What is a franchise?

A fixed amount or period that acts as a threshold. If the claim exceeds it, the claim is paid in full with nothing deducted.