Explain five characteristics of property insurance. (10 marks)

Explain five characteristics of property insurance.

Characteristics of property insurance include:

1. The value of premium charged is dependent on the degree of risk. Higher premium will be paid for risks of high degree and vice versa.
2. It is a contract of indemnity - the owner of the insured property is compensated for the loss of the property upon occurrence of the risk.
3. It is a short term contract - the insurance contract ends after a specific period of time usually one year and must be renewed for the policy to continue being in force. .
4. The owner of the property insured is the only one to be compensated - it cannot be assigned to a next of kin or to another individual.
5. It has no surrender value - should the insured stop payment of premium before expiry of the contract, he/she is not entitled to any refund from the insurer.
6. There must be an insurable interest in the property to be insured. The insured must be in a position to suffer financial loss in the event of the risk covered happening in order to claim compensation.
7.  There is a maximum limit to the amount of compensation - This can be upto the value of the insured property in case of over insurance and the sum insured in case of under insurance.
8. The risk insured is uncertain - it may or may not occur.

​​Related Business Studies Quiz and Answers on insurance Form 2 Level

Read More