Main Types of Policy & Definitions

 

BONDS (SURETY BONDS)/CONSTRUCTION BONDS
A surety bond involves three parties, a surety, a principal (often a contractor) and an obligee (often a project owner). The surety guarantees under seal that the principal will carry out his obligations or alternatively compensate the obligee for losses due to the contractor’s breach. In the construction industry this is known as a performance bond. The surety has recourse against his principal (the obligor). A retention bond is required when the developer releases the amount retained for defects before the contractor has completed the defects. A pre-payment bond guarantees any advance payment for the contractor’s mobilisation. Bid bonds guarantee that the contractor’s bid or tender is made in good faith and he is capable of entering into the contract. If the contractor fails to proceed, the surety pays for the project owner’s costs in scrutinising another tender. Payment bonds guarantee payment for project labour and materials.

BREAKDOWN INSURANCE
Boilers, pressure vessels, cranes, lifts and other lifting equipment, engines, electrical equipment may be insured against breakdown under the engineering policy. Breakdown generally means the breaking or burning of any part of the plant while it is running that causes a sudden stoppage that necessitates repair before resuming work although there may be specific definitions for particular forms of plant. Basic breakdown cover relates to self-damage, but cover is usually extended to damage to surrounding property, public liability, fragmentation, consequential loss, hired-in plant damage and deterioration of stock.

BUSINESS INTERRUPTION INSURANCE
Covers loss of gross profit following reduced turnover resulting from, and occurring after, insured property damage. The gross profit indemnity enables the business to pay its standing charges, including payroll, and recover its net profit during the indemnity period, the period selected as being the time needed to restore normal trading levels. Specified working expenses are not at risk and are therefore deducted from turnover before arriving at the gross profit, the item to be insured. The policy also covers increased cost of working, e.g. renting alternative premises, subject to the cost not exceeding the amount of loss thereby avoided. Additional increased cost of working can be insured. The policy may extend to interruptions caused by damage at the premises to customers or suppliers, or resulting from loss of attractions, murder, suicide, food poisoning or infectious/contagious diseases.

COMPUTER INSURANCE
Covers ‘all risks’, theft and breakdown included, on computer and ancillary equipment. Chips and standard software are included automatically. Other key features: ‘new for old’ settlements; cover in UK premises and in transit; negotiable excesses; loss of data; Data Protection Act liability; and consequential loss following an insured breakdown or loss. Liability insurance may be included. Exclusions are minimal but special precautions have to be taken when computer equipment is left in an unattended vehicle. Policies may apply to personal computers, laptops and main-frame systems.

CONTRACT WORKS or CONTRACTORS’ ALL RISKS INSURANCE (ANNUAL OR SINGLE PROJECT)
Covers temporary and permanent works executed in the performance of contracts, and materials for incorporation therein, plus own and hired plant, and tools and equipment while on sites or in transit. Cover is arranged for house extensions through to multi-storey office blocks. Premiums are based on annual turnover with a maximum value of any one contract. Various extensions are available (e.g. continuing hire charges following plant damage). Key exclusions relate to existing structures and defective design. Cover may have to accord with standard term contracts (e.g. Joint Contract Tribunal).

CREDIT INSURANCE
This covers businesses against losses due to ‘insolvency’ or ‘protracted default’ (failure to pay within 90 days of due date) of customers to whom credit has been granted. It is effectively bad debts insurance. Policies usually cover between 75 per cent and 90 per cent of the risk. The main policies: ‘whole turnover (UK)’, ‘whole turnover (export)’ ‘specific account(s)’, ‘catastrophe’, i.e. cover that is triggered once an aggregate bad debts figure has been exceeded.

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE
Indemnifies directors and officers for loss arising from claims against them by reason of a wrongful act related to their duties. The indemnity is on annual aggregate limit basis inclusive of legal costs and expenses incurred in responding to any allegation against directors and officers. Defence costs related to certain criminal or regulatory charges are also covered. The policy does not cover fines, penalties or punitive damages or, unless extended, liability as pension trustees. The insurer indemnifies the company where it has reimbursed a director or officer in relation to an insured event. The policy is claims-made, carries an excess and may be extended to cover employment practices liability.

EMPLOYERS’ LIABILITY INSURANCE

Insurance by employers in respect of their liability to employees for injury or disease arising out of and in the course of their employment. With some exemptions this insurance is compulsory in Great Britain, and can only be provided by an authorised insurer.

 

EMPLOYMENT PRACTICES LIABILITY INSURANCE
Protects employers, directors and officers, and employees against the financial consequences of employment-related actions and disputes. The main exposures are unfair or wrongful dismissal, discrimination, and working time issues but there are others. The policy picks up certain liabilities not covered under directors’ and officers’ liability insurance. Cover is world-wide with increased deductibles for the US and Canada. Limits of indemnity on a cost inclusive basis vary from £15m to £30m on an aggregate basis and/or one claim basis.

ENGINEERING STATUTORY INSPECTION SERVICE
These inspections are normally by engineer surveyors employed by insurance companies. There are detailed statutory requirements that call for periodic inspections of boilers and pressure vessels, lifts, cranes and other lifting plant, etc. The service is usually provided in conjunction with insurance on the items being inspected.

GOODS IN TRANSIT INSURANCE
Covers goods in transit by land (or by land and sea). Cover is either on (a) the goods protecting the owner’s interest; or (b) the liability when a road haulier carries customers’ goods. The goods owner insures ‘all risks’ cover up to an amount per specified vehicle or per consignment when using other transport modes. The haulier can insure on a specified vehicle basis or, on a declaration basis, by estimating annual haulage charges with a selected limit of indemnity. Cover, within the territorial limits, applies during loading, carriage, unloading or temporary garaging of vehicles or trailers. Insurance may include loss/damage to sheets, ropes, clearing up, repackaging and re-sorting following an accident.

HOME BUILDINGS AND CONTENTS

When it comes to household insurance, there are two kinds of policy.

• Buildings insurance covers the structure of the home itself, as well as the fixtures and fittings
• Contents insurance covers the contents you would take if you moved.

In addition to covering against risks like fire, subsidence, theft, flood and storm, both kinds of policy have a liability section - this provides for claims which you may become legally liable to pay in respect of damage to a person or property that are not a member of your household that you incur as owner of your home.

You don't have to insure your contents and home with the same company - the insurance market is extremely competitive, so it's always worth shopping around. However, using the same company may speed up any claims you make if you suffer damage to both your home and its contents, in addition to obtaining a small premium reduction.

 

LATENT DEFECTS INSURANCE
Single premium ten-year (or longer) latent defects insurance indemnifying the owner against physical damage to the premises caused by an inherent defect in the design, materials, or construction of the structure. Cover includes remedial work when an inherent defect threatens the stability of the building. Subsidence, heave and landslip are covered if accompanied by damage to the structure. Insurers paying claims may acquire subrogation rights against any contractor or professional otherwise liable for the defect. The policy is assignable by the insured to new owners.

MATERIAL DAMAGE INSURANCE
The insurance of tangible property as distinct from the insurance of persons (life and limb), rights, pecuniary interests, and liability. Fire, theft, motor, cargo and hull policies are all policies that are entirely or partly of a material damage nature where the subject matter of insurance takes the form of tangible property. The property can usually be insured against named perils or on an ‘all risks’ or accidental damage basis.

MONEY INSURANCE
An insurer’s definition of money includes cash, bank notes, cheques, postal orders, postage stamps, national savings certificates and holidays with pay stamps, luncheon vouchers and VAT purchase invoices. Cover is ‘all risks’ subject to specific limits depending on the circumstances of the loss, e.g. from a locked safe or a directors home. Insurers normally cover personal assault and theft by employees, primarily a fidelity guarantee risk, is covered only if discovered within 14 days.

MOTOR INSURANCE
If you are a driver or owner of a car, motorbike, lorry or any other type of motor vehicle, you must be insured by law.
The world of motor insurance is a complex one. There are literally hundreds of different policies to choose from, and it's not always easy to know how to go about finding the right one for you - and at a cost that won't break the bank!
Here we aim to explain some of the ins and outs of motor insurance, and the advantages of obtaining impartial and expert advice. Also, what you should do if you're involved in an accident.

Third Party, Fire and Theft
The minimum insurance cover you can buy is called 'third party only'. This covers you if you injure someone else or damage their property. However, very few companies will sell you this cover on its own.
The next step up includes 'fire and theft', and this provides protection against loss and damage if your vehicle is burnt or stolen. However it will not protect you against damage to your vehicle if you're involved in an accident, or if it is vandalised.

Comprehensive Insurance
Comprehensive insurance covers damage to your vehicle from a wide range of causes, including accidents and fire and theft. Other benefits sometimes include limited cover for items stolen from your vehicle, medical expenses and personal accident protection.
The word 'comprehensive' can be misleading however, as these policies always include limitations and exclusions.

Uninsured Loss Recovery (ULR)
This provides the policyholder with cover for legal expense costs to pay for a solicitor to pursue a guilty third party in order to recover your uninsured losses - policy excess, hire car charge, any other out of pocket expenses caused by the third party negligence - as well as costs to pursue a personal injury claim. ULR often provides cover for free 24 hr legal advice of a personal nature.
It is especially useful for Third Party Fire & Theft policyholders and will attempt to recover not only the losses mentioned above, but also their vehicle damage costs (from a negligent third party.)

Motorist's Legal Protection
This is cover to meet the cost of defending court actions arising from incidents on the road. It includes a free 24 hour expert advisory service.

PERSONAL ACCIDENT AND SICKNESS INSURANCE

Insurance for fixed benefits in the event of death or loss of limbs or sight by accident and/or disablement by accident or sickness. Accident and sickness may be insured together or separately.

 

PRIVATE MEDICAL INSURANCE
Insurance that enables the insured to gain access to medical treatment, with benefits including: a private en-suite room in hospital; surgeon’s and other specialists’ fees; out-patient treatment, including physiotherapy; day care treatment, including diagnostic and surgical procedures. An integral part of a typical travel insurance

PRODUCT LIABILITY INSURANCE
Insures legal liability for damages, claimants’ costs and own costs for accidental injury or damage caused by ‘products’ supplied by the insured. The policy is ‘losses-occurring’ with an annual aggregate limit of indemnity. Cover is worldwide in respect of products supplied from the UK. The efficacy risk is not covered but is included under a financial loss extension. The insurer is not liable to replace defective products or for product recall.

PROFESSIONAL INDEMNITY INSURANCE

This policy protects a professional man against his legal liability towards third parties for injury, loss, or damage, arising from his own professional negligence or that of his employees.

PUBLIC LIABILITY INSURANCE
Covers the insured in respect of legal liability for third party injury and property damage arising from the business. Insured’s own costs are covered. The policy has a number of extensions (e.g. motor contingent liability, data protection) and excludes risks (e.g. employers’ liability, covered under other policies) normally covered under other policies.

TRAVEL INSURANCE

Holidays should be a time to enjoy yourself and relax, to escape from the stresses and strains of daily routine. Which is why the simple precaution of buying adequate travel insurance is a worthwhile investment. If you need medical help on holiday, are involved in an accident, lose anything or have to cancel your holiday at the last minute, the appropriate cover saves you the worry and expense you'd otherwise face.

 

Cancellation
It's vital that you're covered in case you have to cancel your holiday. The policy will cover a range of reasons for doing this. These should include the following:

• Illness or death in your family or of a business partner
• Jury service
• Serious fire, flood or storm damage to your home or business premises
• A request from the police not to go away following a burglary at your home or office

You should be able to reclaim any holiday costs you cannot recover, apart from the cost of insurance. Make sure the policy covers both yourself and your travel companions.

Medical Expenses
It's vital you are covered for medical expenses, as hospital and doctors' bills can be enormous, especially in North America.

Most policies require you to pay a small excess towards the cost of treatment and medicines, but will also pay benefits - up to a set limit - if you have to stay in hospital.

If you travel within the EU you should get form E111 from a Post office. This will entitle you to reciprocal health service care in the countries you visit. However, few EU countries pay for the full cost of treatment, and you're likely to be treated in a private clinic or hospital, so it's important to have your own insurance. Remember to keep all doctors', hospital and chemists' bills to support any claim you make.

Your policy should also cover you for any extra accommodation or travel expenses you incur as a result of illness, or if you have to go home early because of the illness or death of a close relative or business partner.

Personal Accident Cover
Personal accident cover will pay out if you are killed or permanently disabled on holiday - for example, if you lose a limb or your eyesight.

A few simple precautions will help to keep you safe - follow them, and you'll reduce your risk considerably.

• Keep away from dangerous areas, especially at night
• Don't spend too long in the sun - wear a hat and use plenty of sun block
• Don't go swimming after a large meal or drinking alcohol
• Check the local conditions before swimming in the sea - tides and currents can be extremely    deceptive
• If you're planning any long distance walking, always inform someone of your plans, and your    expected arrival times
• If you're driving your own car, always have a servicing before you go

Personal Liability
Most travel policies will insure you against personal liability. This means that if you injure someone or damage their property, you will be covered if they decide to sue you.

Legal Expenses
Some policies will pay your legal costs if you decide to sue a third party for damages as a result of personal injury or death.

Personal Belongings
Your insurance should cover your personal belongings and cash against loss or damage. However, insurance companies expect you to look after your possessions at all times - you may have problems trying to claim for a camera you left on the beach which was stolen when you went for a quick dip.

Most policies impose a limit to the cover on any one item. So it might be worth adding 'all risks' cover to your household contents insurance and valuables like jewellery or cameras.

Some policies pay a set amount for the loss of a passport. This should cover any extra travel and accommodation expenses you incur to get it replaced.

If you lose or have something stolen, report the incident to the local police within 24 hours, and get written conformation that you have done this.

Delays and Missed Departure
Most policies will compensate you if your luggage is delayed for more than twelve hours on your outward journey. This will enable you to buy replacement items, but don't forget to keep the receipts for everything you buy.

You may also receive a lump sum if your departure is delayed or if you miss your flight for a valid reason. This should cover any travel expenses you incur in reaching your final destination.

Annual Cover
If you're lucky enough to take several holidays a year, or if you travel frequently on business, you should consider annual travel insurance.

This type of insurance is based on a yearly fee regardless of the number of the number of trips you make, and can be a lot cheaper than taking out separate cover every time you travel.

Extended Stays
A number of insurance companies offer policies that cater for people who take long-stay winter holidays and round-the-world trips.

However, before you go, check your household contents insurance. Some policies stipulate that homes should not be left empty for more than 30 days without informing the insurer.

Hazardous Pursuits
More and more holidays offer the opportunity to enjoy a range of action pursuits. Bungee jumping, scuba diving, parascending and motorcycling are typical of the sort of activity you might be offered, so talk to your broker, who will be happy to arrange an extension to your cover.

Winter Sports
You'll need a specialist policy if you're going on a winter sports holiday. This will probably cost twice as much as normal holiday cover, due to the greater risk of claims for medical expenses, personal accident, piste closure and ski equipment.

It's vital that you have adequate cover for medical expenses - it can cost hundreds of pounds simply to stretcher an injured skier off the slopes. Personal liability insurance is essential in case you injure someone else.

If you plan to go 'off-piste' check that your policy allows you to. You might also need specialist cover if you go ski-jumping or bobsleighing.

Permanent or Recurring Illness
If you suffer from a permanent or recurring illness, you must tell your insurer. Some companies cater specifically for people in this situation, but they may request a letter from your doctor saying that you are fit to travel. You won't get cover if you have been advised against travelling, are within the last two months of pregnancy, or are travelling to obtain medical treatment abroad.

Motoring Abroad
If you're planning to take your car abroad, you must have adequate insurance before you leave the country.

UK motor insurance provides the minimum cover required by the EU and certain other countries. However, this will not be enough if you have an accident. Nor will it cover you for theft, fire or damage to your vehicle, and it may not cover your legal liabilities to other people.

So make sure you have the same level of cover that you have in the UK. Check your policy carefully, as some insurers provide free continental cover for a limited period each year.

Green Card
Under European law, it is no longer compulsory to have a Green Card, which shows that your policy meets the minimum legal requirements of the countries in the scheme. However, a Green Card can still save time and problems if you need to provide evidence of your insurance. It is also advisable to have a Euro Accident Claim.

 

 

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