The purpose of this clause is to ensure that in the event of a claim, insurers are not prejudiced by underinsurance. In effect what the clause is saying, is that if you have an item or property valued at say, R10 000 (Sum At Risk SAR), but you only insure it for R7 000 (Sum Insured SI), you are the insurer for the shortfall (R3 000.00) and must therefore bear a rateable proportion of any loss. You have insured R7 000 with the insurer and R3 000 with yourself.
In the above example, should you suffer a loss of say R2 000.00 the insurer is likely to settle as follows:
Sum Insured(SI) R7 000.00 divided by Sum At Risk (SAR) R10 00.00 this result is then multiplied by the Loss value R 2 000.00 = R1 400.00 You will be your own Insurer, for the balance of R600.
Similar to a Loss Adjuster (see below) but may just do Motor Claims and is not necessarily independent and is not a member of the Institute of Loss Adjusters.
The value of the improvement in insured property when it has been repaired, or replaced after a loss.
A professional full-time independent agent or intermediary.
Certificate of Insurance.
A document issued by an insurer which is used to certify that cover is in force.
Claim Free Group.
The term used in motor insurance to indicate into which of the rating groups a policyholder will fall according to his claims record. Also referred to as no claim bonus (NCB) or no claim discount (NCD)..
A form of insurance whereby more than one insurer carries the risk and where each is individually and proportionally liable to the insured for settlement of a claim.
An insurer who shares with others in co-insurance.
Policy issued by the leading insurer on behalf of all the insurers who share a risk by way of co-insurance.
The payment made to intermediaries by insurers for placing business with them. Also referred to as brokerage..
The part of a country's legislation built up from customs and usages which have been recognized by its courts and thereby given the force of law.
Composite Insurance Company.
An insurer conducting both life and non-life business.
A policy covering a wide variety of perils. Also known as Multi peril.
A loss directly arising from another loss.
An unforeseen occurrence.
Contra Proferentum Rule.
Any ambiguity in contract wordings is construed against the drafter of those wordings.
This clause is similar to the average clause but applies in circumstances where there is more that one policy covering the same loss. Under these circumstances each policy (Insurer) will pay a rateable proportion of the loss in the ratio that their policy's Sum Insured bears to the loss.
Temporary evidence of the granting of insurance.
An amount of money claimed by or awarded to a third party as compensation for injury or loss.
This is your excess or first amount payable. It is the portion you have to pay before Insurers contribute to the loss.
An advance payment made by the insured before the final premium has been calculated.
The extent to which (insured) property has diminished in value due to factors such as wear and tear.
The duty of the parties to a contract of insurance to reveal all material facts to each other before a policy is issued and prior to each renewal.
Documentary evidence of an alteration to an insurance policy.
Ex Gratia Payment.
Payment of a claim which is not covered in terms of the policy wording.
A peril or circumstance specifically excluded from a policy.
Similar to an excess, but if the claim is for an amount higher than the franchise the full amount of the claim is paid.
Insurance which is not long-term business (i.e. life & pensions).
The principle where the parties to a contract undertake to deal with one another honestly and openly in good faith regarding disclose of material facts.
This is the basis upon which your claim is settled. In the event of the insured property being destroyed or lost by an event insured against, the insurers undertake to place you back in the same position you were in financially , immediately before the loss occurred. It is against public policy for a person to benefit from a misfortune as there would be no inducement for the protection of property and deliberate losses would, as a result, proliferate. Unless your policy specifically makes provision for settling claims on what is commonly referred to as the new for old basis claims will be settled on the actual value of the property at the time of the loss, which will include in most circumstances a deduction for age/wear and tear and in some cases obsolescence.
The majority of insurance policies give the Insurers the right to decide whether to repair, replace or reinstate the damaged property or to pay its value in cash.
Indemnity is also affected by the application of average, excesses, limitations and the adequacy of the sums insured.
You are only able to insure property in circumstances where you stand in some legally recognized relation thereto whereby you will benefit by the safety of the property or object or be prejudiced by it's loss.
Examples of persons who have Insurable Interest are :
• Owners of property/goods • Mortgages • Finance Houses • Bailees • Trustees
A risk transfer arrangement whereby the responsibility for meeting losses passes from one party (the insured) to another (the insurer) on payment of a premium.
A document which is evidence of a contract of insurance.
Knock for Knock Agreement.
An agreement between motor insurers whereby following a collision, each pays the cost of repairs to its own policyholder's vehicle, regardless of fault, provided that the vehicles involved are all insured for accidental damage. The innocent party has their excess refunded and claim free group reinstated.
The termination of an insurance contract at renewal either by non-payment of the premium or the insurer refusing to invite renewal.
Letter of Acceptance.
A letter from an insurer to a prospective policyholder indicating that his application for cover has been accepted.
Limit of Liability.
The maximum amount an insurer will pay for any one loss.
An independent, qualified person who assesses the size or value of a loss on behalf of an insurer, usually general assessing and not motor.
The price at which an item can be bought or sold at specific time.
Anything which would affect the judgment of a prudent underwriter in accepting or rejecting or deciding the terms for a risk.
A false description of a material fact.
A false statement of a material fact.
Failing to act in what the law considers to be a reasonable manner.
New For Old.
Insurance where the replacement value of the property which has been lost or damaged is payable without deduction for depreciation. (See also reinstatement value).
The clause in a policy which sets out the circumstances in which the insurers will make claim payments.
A contingency or fortuitous happening which could cause losses.
Written evidence of the terms of an insurance contract.
The money paid by the insured to the insurer for cover as provided in the policy.
Prevention of losses.
You are required to take all reasonable steps to prevent a loss from occurring.
A policy condition the observance of which is essential for the cover to operate.
The direct cause of a loss without the intervention of any other event, which may contribute to the loss. The uninterrupted event that caused the loss.
Reinstatement of Sum Insured.
The restoration of the sum insured after it has been reduced though the payment of a claim, subject to the payment if an additional premium.
Certain sections of your policy will be subject to this condition which determines the basis upon which you will be indemnified in the event of loss or damage. This condition permits your insurer to settle your claim on the basis loosely referred to as new for old . The cost of reinstating the damaged goods must be the cost of replacement on the same site although the actual replacement can take place on another site.
The replaced goods must be identical to the destroyed goods i.e. if the new item is “ more extensive than or superior to” the damaged or lost goods, insurers are entitled to request a contribution from you in respect of the betterment.
The process for continuing a policy for a further period after the first or current period of cover has expired.
The value of property determined by the current purchase price of a similar article.
SASRIA (South African Special Risks Association)
A common exclusion on virtually every policy issued in South Africa . The Sasria exclusion (also known as the SAIA, South Africa Insurance Association exclusion) Excludes damage caused by riot whether politically motivated or not, civil disobedience/rebellion/disorder, labour disturbances, war, rebellion military uprising etc, as well as any act calculated or directed to….influence any or government, provincial, local, or tribal authority…. and act calculated or directed to bring about loss or damage in order to further any political aim…….or to bring about any social or economic change…….or for the purpose of inspiring fear in the public or any section thereof……
The only way to insure against these risks is to effect a coupon policy issued by Sasria and even then not all risks can be insured against e.g. War risks.
Whatever is recovered after an insured item or part of it has been lost or damaged beyond repair.
Short Term Insurance.
Insurance that operates on a yearly basis and which may be terminated by the insurer or the insured.
Extra risks added to a policy to give cover not provided in terms of basic wording, the term usually applies to storm, water, wind and impact damage under a policy covering fire damage.
This is the insurers right, after you have been fully indemnified in respect of an insured loss, to take whatever steps it deems necessary to recover the amount of the loss from the third party responsible therefore. This includes instituting legal action in your name. In terms of the policy condition you are required to render the necessary assistance to the insurer in exercising these rights.
The monetary limit of the insurer's liability under a policy
A person who is not a party to a contract.
Third Party Fire And Theft Insurance (Motor).
Third party insurance plus cover for fire damage to and the theft of the insured's own vehicle.
Another name for an Insurer.
The process of assessing a proposal for insurance to decide on its acceptability and if so, on what terms.
Sums insured must include VAT at the current rate.
A contract that cannot be enforced by either party.
A contract which one party can choose not to enforce.
A condition, which must be complied with literally