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Chapter 1 Risk and insurance 1/15 Chapter

L Classes of insurance 1

In this section we will outline the main classes of insurance. The intention is to provide an overview of
the main types of policy available. Life, pensions and income protection contracts are not included, as
these products do not form part of the W01 syllabus.

L1 General (non-life) insurance

In this section we outline the main types of general insurance.
L1A Property insurance

Property insurance covers risks to actual property and the types of cover available are briefly mentioned
Property insurance
here. covers risks to actual
property
Fire, special perils and ‘all Issued to cover buildings, contents and stock. Policies tend to be issued either on the
risks’ policies basis of building up cover by adding different perils or, as in the case of all risks
policies, by defining the cover by its exclusions rather than adding more and more
contingencies.
Theft cover For loss of, or damage to, property caused by theft, usually involving forcible entry to or
exit from the premises.
Engineering/breakdown For explosion, breakdown or accidental damage to plant, which is generally grouped
cover under the following headings: boilers and pressure plant, engine plant, electrical plant,
lifting machinery, miscellaneous plant and computers. Many of these items need to be
inspected regularly as a legal requirement and as a result inspection contracts often
accompany these policies.
Glass cover For the destruction of, or damage to, all fixed glass (and may be extended to include any
lettering on the glass), on an ‘all risks’ basis. It may also extend to cover damage to the
contents of the window.
Livestock insurance Covers livestock (horses, cattle etc.) against death through accident or disease, and
against theft and unexplained disappearance. Policies for horses may also be extended Reference copy for CII Face to Face Training
to cover riding tack.
Money insurance Issued on an ‘all risks’ basis, covering all risks of loss or destruction of, or damage to,
money in transit, on the policyholder’s premises during business hours (and for modest
amounts out of a safe outside business hours), in a bank night safe etc. The term
‘money’ is defined widely and cover may also include fixed payments if members of
staff suffer injury or damage to their clothing when a robbery takes place.

L1B Pecuniary insurance

Pecuniary means ‘relating to money’ and pecuniary insurance is the insurance of intangibles, such as
income, revenue or value. Some classifications will include ‘money insurance’ under this heading.
Examples are as follows:

Fidelity guarantee The word ‘fidelity’ implies the ‘faithful or loyal performance of a duty’. The financial
consequences (loss of money or stock) of a lack of fidelity, arising from the dishonesty
or disloyalty of an employee or person holding a position of trust can be insured
against.
Legal expenses insurance Available for individuals, families and businesses, enabling them to meet the cost of
seeking legal advice or pursuing/defending civil actions.
Credit The system of buying or selling goods or services without immediate payment being
made. Credit insurance covers businesses against the risk of non-payment so if their
debtors (buyers) fail to meet their obligations, the seller can recoup their losses.
Business interruption This protects against losses due to an interruption in business occurring immediately
insurance after, and in consequence of, material damage to property. Cover is in respect of the
actual loss of earnings of the business, adjusted for business trends, plus the increased
costs associated with the business recovery.

Political risk insurance This can be taken out by businesses against the risk that revolution or other political
conditions will result in a loss.
Guaranteed Asset This was originally sold to cover the ‘gap’ between the amount paid out by a motor
Protection (GAP) insurance policy and the amount still to be repaid on the finance that was taken out to
buy the vehicle (where that amount was larger). Other types of cover are now also
available.