Property insurance An Introduction
In respect of insurance relating to property, there are many products available.
a) Householder insurance is one of the most important insurance policies to buy as home is one of the largest financial investments made because of which it is very important to protect it.
b) Loss of or damage to property and assets may be covered against fire and perils of nature including flood, earthquake etc. Machinery of industries may be insured against breakdown. Goods in transit can be insured under a Marine Cargo insurance cover. Insurance coverage is available for loss or damage to ships and aircrafts as well. The indirect loss caused due to inability to use the property or assets as a result of peril, called consequential loss, can also be insured.
c) A Motor Insurance policy covers damage to the vehicle. Motor insurance covers your vehicle, be it a motorcycle, a car or a lorry, in case of accidents or theft. Further, while driving a vehicle, it is possible that the vehicle hits someone and causes death/ injury or damage to someone’s property. As per the law, the owner of the vehicle is legally liable to pay compensation for any injury or damage to any person’s life or property caused by the use of the vehicle in a public place. As insurance is a contract, where the insurer and the insured are the two parties involved, this liability can be to any other person, or in other words, to any ‘third party’ to the contract. Hence, such liabilities are generally called ‘third-party liabilities’. Driving a motor vehicle without third-party insurance in a public place is a punishable offence in terms of the Motor Vehicles Act, 1988. A motor third party insurance policy is mandatory according to Motor Vehicles Act, 1988.
Property insurance is based on the principle of indemnity. The idea is to bring the insured to the same financial position as he /she was before the event occurred. It safeguards the investment in the property. Where there is no insurance, losses can destroy a project or an industry. Thus, general insurance offers stability to the economy and to the society.
*Courtesy: Insurance Regulatory and Development Authority of India.