Types of Insurance

Life Assurance 

It is known as 'Life assurance' but not 'life insurance' because the event that is insured against, i.e. death of the insured will definitely happen sometime in his lifetime. The only question is the timing. In the other branches of insurance, there is no certainty that the event insured against will ever take place. Normally, the aim of insurance is to compensate the insured for the loss or damage on the occurrence of the insured event. In life assurance, the insured person themselves cannot be compensated. Depending on the type of life policies, the insured or his nominees (usually, his dependents) will receive a sum of money, either as a lump sum, or as a regular sum of payments, called annuities, on maturity of the policy or on the death of the insured whichever comes first. The aim is savings for one's retirement or some special occasion as well as providing insurance for one's dependents. There are two main branches:

a)     Ordinary — deals only with the policy holder or spouse

b)     Industrial — deals with the lower income wage earner

The chief types of life assurance policies are as follows:

a)   Whole life policies — lump sum payable at death or at some agreed age. Premium is lower compared to that for endowment policies because it is paid over a longer period.

b)     Endowment policies — agreed sum payable at the end of a number of years on maturity of the policy, or at death, whichever is sooner. They can be with or without profits. This kind of policy is quite expensive as it allows a person to save and have life cover. The insured can agree to pay a fixed monthly premium for a fixed period or yearly sum for a fixed period in the future. In return, he will receive an agreed lump sum on the maturity of the policy. If he dies before the maturity date (the agreed date of payment of the lump sum to the insured), his nominees will receive the lump sum agreed upon without having to make any more payments of premium. In return for a higher premium, some insurance companies offer a 'with-profit' assurance. This means that the insurance company adds bonuses to the sum the person is insured for each year.

c)     Family income policies — paid on the death of the insured in a series of regular repayments terminating with a final sum at the end of a period for the widow or dependents.

d)     Mortgage security policies — unpaid mortgage taken care of upon the death of the legal mortgager. This relieves the surviving dependents of the debt.

e)     Group life policies — taken out by small employers for employees in place of a pension scheme. They can also be taken out by members of a cooperative society.

The premium payable will depend on the following factors which will be asked in the proposal form:

a)     The sum assured

b)     The type of policy

c)     The age of the insured:

d)     The sex of the insured

e)     The occupation of the insured

f)      The health of the insured

g)     The family medical history

 Accident Insurance

Accident/Special casualty insurance provides insurance cover not provided for under fire, life, marine and motor. There are many types of special casualty insurance:

                                                               

(a)    Insurance of liability

(i)    employers' liability for accidents at work owing to employer's negligence;

(ii)   professional indemnity taken by lawyers, doctors, architects and engineers to cover against claims due to professional negligence, errors and omissions in the exercise of their professions;

(iii) public liability sometimes knows as third party cover taken by shops, factories or contractors to cover against claims made by members of the public as a result of accident or damage to their property or injury to their persons arising from negligence of the insured and their employees; and

(iv)  personal liability taken by individuals to cover against any claims by a third party who suffers loss to property or personal injuries caused by the negligence of the insured, such as accident due to a polished floor, or a loose tile or a pet animal.

(b)   Insurance of property: This includes 'all risk' policies, on machinery and personal effects taken by businessmen or individuals to cover against all risks except those specifically excluded in the policy. This includes insurance of herds and flocks against disease and burglary insurance.

(c)   Personal accident insurance: This is taken out by the individual to cover against total or partial disablement or death. Employers can also take out a group personal accident policy on their employees.

(d)   Workmen's Compensation insurance: In some countries, this type of insurance is compulsory under the law for employers to insure their employees under this insurance.

(e)   Cash in transit insurance: This covers against loss due to robbery of cash in transit.

(f)    Goods in transit insurance: This covers against loss when goods in transit (that is being transported from one place to another place) are damaged or stolen.

(g)   Plate glass insurance: This covers against loss when (toughened) plate glass used in the windows of shops and the doors of many commercial buildings are damaged due to accidents or vandalism.

(h)   Holiday insurance: This covers for:

(i)    cost of hospitalization and medical bills, up to a certain agreed sum, should the insured falls ill while on holiday abroad;

(ii)   loss of luggage or money while abroad;

(iii) cancellation charges should the insured falls ill and is unable to take the holiday already booked or paid for; and

(iv)  cancellation of the holiday as a result of strike, bad weather or transport breakdown, or additional expenses having to be borne by the insured as a result of these happening.

(i)    Insurance of interest: Includes fidelity guarantee and commercial fidelity guarantee taken out by firms such as banks to cover against embezzlement by their employees, such as cashiers and others employed in positions of trust. It indemnifies the employers against losses resulting from dishonesty of their employees.

(j)    Sickness insurance: This includes hospitalization and surgical insurance taken by the individual to cover up to a certain maximum limit of hospital charges in the event of his or members of his immediate family being hospitalized. 

Motor Insurance

Comprehensive motor policy covers against bodily and property damage to third parties, own property damage and loss of vehicle due to theft or fire. Third party motor policy covers against bodily and property damage to third parties. A third party motor insurance cover can be extended to include cover against fire and theft for extra premium. A motor insurance policy may be extended to include cover against passenger liability. It will indemnify the passengers of the vehicle against loss or damage of property or personal injuries in the event of a motor accident. This extension has to be taken by owners of public transport like taxi and bus companies. Under Singaporean law, it is compulsory for every vehicle to be covered by either comprehensive or third party policy. The premium payable will depend on the following factors which will be asked in the proposal form.

1. The type of motor cover
2. The type of car and the engine capacity of the vehicle
3. The sum insured
4. The age of the driver
5. The cost of repairs
6. The driver's record
7. The driver's recent claims record
8. The driver's occupation

The insurance company and the insured person are the first and second 'parties respectively; and anyone else is a third party. This includes, for example pedestrians, cyclists and the drivers or passengers in the other vehicles.

Fire Insurance

Fire Insurance consists of insurance cover for domestic and business premises and their contents. The premium charged depends on various factors based on the information obtained from the proposer in the proposal form. Amongst the factors are:

1. The value of the building
2. The source of energy for lighting
3. The inflammability of its contents
4. The record of the insured
5. The presence of fire fighting facilities
6. The type of materials used in the construction of the building itself 
7. The type of buildings adjacent to the dwelling for which insurance is sought

Usually, fire insurance offices also provide 'consequential loss insurance' which ensures the firm of adequate compensation for loss of profits while re-building is going on. This covers loss of revenue whereas the ordinary fire policy covers capital loss. Extensions of fire insurance include boiler and machinery insurance which gives comprehensive cover against explosion of boiler and machinery. Flood policy, is also another extension of fire insurance.

Marine Insurance

 

Marine insurance consists of insurance cover for both ships and goods against perils at sea. It also covers for freight and ship-owners liability. These perils include fire, theft, piracy, jettison, capture, and seizure, detention by governments, bad weather, foundering and collision.

Aviation Insurance 

Aviation insurance cover is available for loss of or damage to aircraft, personal accident to passengers, third party risks (public liability) in respect to both person and property and for cargo sent by air. Staffs who fly regularly are covered against accident by group insurance schemes. Aviation insurance is handled by a large number of Lloyd’s syndicates, the aviation departments of some of the composite companies and by a few specialist companies in the UK.

Nuclear Insurance

Nuclear insurance is now available in some 25 countries like Switzerland, Japan, Belgium, Denmark, Germany, France, Italy, Netherlands, Egypt and Philippines. It covers against damage to property and consequential loss of operation as well as third party liability, consequent to outbreaks of fire and other calamities in nuclear installations like nuclear reactors fuel storage areas, fuel re-processing, enrichment and fabrication plants. The third party liability cover for nuclear risks is particularly complicated and financially exhausting since the full extent of the damage and thus the total compensation to be indemnified by the insurer will not be known immediately but may be manifested years later. Moreover, the area affected may be very extensive. Nuclear insurance is handled by insurance companies which have organized themselves into ' nuclear insurance pools'.

Reference:
Betsy, L., & Tan, S.K. (1999). Insurance., Modern certificate guide: Elements of Commerce (pp. 223-228). Singapore: Oxford University Press.