CHAPTER FIVE

5. CLASSIFICATION OF INSURANCE
5.1. Life insurance
5.2. Health insurance
5.3. Property insurance
5.4. Liability insurance
5.1 LIFE INSURANCE

MEANING OF PREMATURE DEATH

Premature death is defined as the death of family head with outstanding unfulfilled financial
obligation, such as dependents to support, children to educate and a mortgage to pay off. Premature
death can cause serious financial problems for the surviving family members because their share of
diseased breadwinner‟s earnings is lost forever.
Life insurance is one of the most common forms of insurance. It has gained greater acceptance all
over the world. Following the liberalization of the economy of the country in 1993, private insurance
companies have emerged in Ethiopia. This has encouraged and motivated the society to use life
insurance policies.
The main purpose of life insurance is financial protection of the dependents of the insured and saving
for an old age, to cover personal loan and tuition fees for educational expense.
Commercial code of Ethiopia defines life insurance as “a contract by which the insurer, for a certain
sum of money or premium proportioned to the age, health, profession, and other circumstances of the
person whose life is insured engages that, if such person shall die within the period limited in the
policy, the insurer will pay according to the terms specified thereof, to the person in whose favor such
policies are granted.”
From this definition we can consider the following important features of life insurance
1. Life insurance, like other insurance, is a contract between the insurer and the insured whose
life is insured or someone who has an insurable interest.
2. Its purpose is financial protection of the dependents of the insured with financial
compensation amounting the sum assured if the insured die while the policy is in force. Of
course, life insurance may also be engaged in encouraging savings to accumulate an
educational fund that could be used to pay tuition fees for children when they join higher
education, and to settle an outstanding balance of a debt.
3. The insurer charges premium based on age, sex, health condition, occupation, and other
criteria.
4. Life insurance policy gives protection against special types of risks. i.e death whose
occurrence is certain. The uncertainty is related to the cause and time of death.
5. The benefit, financial compensation upon death is determined in advance based on the
decision made by the insured and reasonableness of the premium.
6. The insured and policy owner may be different. For example, an individual may insure the life
of another person, if he/she has a financial interest.
7. Life insurance is not strictly a contract of indemnity, because life is priceless for this reason, if
the insured buys more than one policy all of the insurance companies will indemnify fully.

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 8. The probability of claim for compensation increases with the passage of time due to insured‟s
deteriorating health condition as they grow old.
Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to
pay a designated beneficiary a sum of money upon the occurrence of the insured individuals' death or
other event.

Life insurance is an insurance coverage that provides a monetary benefit to a decedent's family or
other designated beneficiary, and may specifically provide for income to an insured person's family.
Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in
a lump sum cash payment or in an annuity. The primary purpose of life insurance is to protect
financially the insured‟s family in the event of the insured‟s premature death.

5.1.1 Underwriting Life Insurance

Underwriting is the process through which an insurance company evaluates the risk of a potential
client, and this process allows the company to set premiums and coverage specific to the individual.
Life insurance underwriting consists of both medical underwriting as well as non-medical
underwriting.

Medical underwriting is an insurance term referring to the use of medical or health status
information in the evaluation of an applicant for coverage (typically for life or health insurance). As
part of the underwriting process, health information may be used in making two related decisions:
A. Whether to offer or deny coverage; and
B. What premium rate to set for the policy.
The use of medical underwriting may be restricted by law in certain insurance markets. Where
allowed, the criteria used should be objective, clearly related to the likely cost of providing coverage,
practical to administer, consistent with applicable law, and designed to protect the long term viability
of the insurance system.

To conduct medical underwriting, an insurer asks people who apply for coverage (typically people
applying for individual or family coverage) about pre-existing medical conditions. Life insurance
companies have their own extensive policy and procedure manuals they are supposed to follow in
determining whether or not to issue an Individual Life insurance policy, and in pricing that policy.
The insurer's underwriters typically use a combination of factors that experience shows equates with
the risk of death (and premature death). They include the applicant's answers to a series of questions
such as:
A. Age
B. Sex
C. Height and weight
D. Health history (and often family health history -- parents and siblings)
E. Marital status and number of children
F. Occupation (some are hazardous, and increase the risk of death)
G. Smoking or tobacco use (this is an important factor, as smokers have shorter lives)
H. Alcohol (excessive drinking seriously hurts life expectancy),
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 I. Drug use
J. Certain hobbies (such as race car driving, hang-gliding, piloting non-commercial aircraft) &
K. Foreign travel (certain foreign travel is risky).

Why is Underwriting Important?

The main purposes of life insurance underwriting are:
A. To prevent individuals who have a higher than average probability of loss from obtaining
insurance at average rates,
B. To decide whether to offer or deny the coverage, and
C. To set the premium rate for the policy
Diseases that can make an individual uninsurable include serious conditions such as:
A. Cancer
B. Heart disease
C. Overweight and underweight
D. Diabetes
E. Blood pressure etc.

5.2 Some Unique Characteristics of Life Insurance

A. The event insured against is an eventual certainty
B. There is no possibility of partial loss in life insurance as there is in the cause of property and
liability insurance
C. Life insurance is not a contract of indemnity
D. As legal principle, every contract of insurance must be supported by an insurable interest, but
in life insurance, the requirement of insurable interest is applied somewhat differently than in
property and liability insurance.

5. 3 Classification of life insurance policy

1. Whole life insurance policy:

Whole life insurance policy is defined as an insurance in which the insured person pays the premium
in the installment basis for full duration of his/her life. After the death of insured, his/her nominee
receives the insured amount. There are 3 types of whole life insurance policy

a. Ordinary whole life insurance policy. In this policy, insured person has to pay the premium
to his/her concerned insurance company till his/her death. The insured person can‟t utilize the
insured amount because this amount will be returned after his/her nominee

b. limited premium whole life insurance policy: Under this policy, the insured person has to
pay the premium for limited time and the insured amount will be returned after the death of
insured person to his/her nominee

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 c. Convertible whole life insurance policy: It is that type of policy which can be converted to
endowment life insurance policy after a certain time. It is suitable for those people who have
lower income at present and they hope for increment in income in the near future.

2. Endowment life insurance policy:

It is defined as that type of insurance in which the insured person pays the premium for a certain time
and after certain time they receive insured amount. If she/he dies before the insured period his/her
nominee receives the insured amount. Generally endowment life insurance policy is done for 10, 15
20 years and more. The insured has to pay the premium either till the end of insured period or till the
death of insured whichever is earlier.

a. Ordinary endowment life insurance policy: Under this policy, time will be fixed foe a
certain period and insured person have to pay either till the end of insured period or till his/her
death. If he/she dies earlier before insured period, his/her nominee receive the amount. And if
she/he is alive then himself/herself go and receive the amount.

b. Joint endowment life insurance policy: In this policy, two or more persons are involves s
the insured person .the premium amount should be paid till the insured person‟s death like in
ordinary endowment life insurance policy.

c. Double endowment life insurance policy: Under this policy, the insured person receives
double of the insured amount is she/he is alive till the end of the maturity time. If she/he dies
before the insured person his/her nominee receive only single insured amount.

d. Pure endowment life insurance policy: Under this policy, insured person receive the insured
amount after the certain time when he/she us alive. If the insured person dies before the end of
maturity time the insurer becomes free from its liability.

3. Term life insurance policy

a. Straight term life insurance policy: Under this policy premium is paid as lump sum money.
The insured time maturity period is not more than 2 year. Therefore it is known as temporary
term life insurance policy. If the insured person dies before the insured period his/her nominee
receives the insured amount. But if he/she is alive then he/she doesn‟t receive anything.

b. Renewal term life insurance policy: Under this period the insurance can be renewed after
the maturity of the insured period. Second rate of premium may be higher than the first rate of
premium. Because the age of the person also increases with renew of insurance. It doesn‟t
need a new health report or any sort of gent report for renewal.

c. Convertible term life insurance policy: It is generally done for 5, 6 or 7 years like term life
insurance policy. If the insured person want to convert this insurance policy in whole life
insurance policy and endowment life insurance policy it can easily be converted.

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4. On the basis of profit distribution

a. With profit policy: Under this policy the insured person receive the insured amount with the
profit of insurance company. In other words if the insured person dies before the term of
insured period his/her candidate receive only insured amount not the profit of the company.
But if he/she is alive then with the amount of premium the portion of profit of the insurance
company is also received by the insurer.

b. Without profit policy: Under this policy the insured person doesn‟t receive the insured amount
with the profit of insurance company .in other words if the insured person dies before the term
of insured period or remains alive till the end his/her nominee r himself/herself receive only
insured amount not the profit o the company.

5. On the basis of number of insured:

a. Single life insurance policy: Under this policy there is only one individual as a insured
person. In other words, the life of a single person is done insurance. Single life insurance
policy is applied in whole life insurance policy, endowment life insurance policy and term life
insurance policy.

b. Joint/ multiple life insurance policy : Under this policy two or more than 2 person are
involved as husband and wife, partners of partnership firm and other people may conduct the
joint life insurance policy. It may be applied in whole life insurance policy and endowment
life insurance policy.

6. On the basis premium payment:

a. Single premium life insurance policy: Under this policy, insured person pay the premium to
the insurance company at the beginning in the lump sum amount. There is no tension to pay
the premium timely later on. It is mostly used in that case when a person wins a lottery.

b. Regular premium life insurance policy: under this policy the insured person pay the
premium up to his/her death for a certain time. In other words, the insured person pays the
premium to insurance company regularly or timely.

c. Limited payment premium life insurance policy: under this policy the insured person pay
the premium up to his/her death for a certain time. The time is however less than the insured
period.

7. On the basis of payment of insured mount :

a. Lump sum payment policy: under this policy the insured person receives the total insured
amount. Even all premiums have not been paid total insured amount is received by the
nominee of the insured person and if the total amount has been paid she/he receives the total
insured amount himself or herself.
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 b. Installment payment policy: under this policy, the insured person and nominee receive the
insured amount in the installment basis. It is useful to those individual who are old and lump
sum mount may be misused.

SECTION II HEALTH INSURANCE

The term „Health Insurance‟ relates to a type of insurance that essentially covers your medical
expenses. A health insurance policy like other policies is a contract between an insurer and an
individual / group in which the insurer agrees to provide specified health insurance cover at a
particular “premium” subject to terms and conditions specified in the policy.

Health insurance provides a wide variety of specific individual health insurance coverage‟s. Among
the varieties the following are selected to be death in this section

5.2.1. Medical expense insurance

5.2.2. Disability income insurance

5.2.1. MEDICAL EXPENSE INSURANCE

As we have explained above medical expanse provides for the payment of the cost of medical care
that results from sickness and injury. Its benefits help to meet the expanses of physical hospital
nursing, surgical expanse, and related services, as well as medications and supplies. The benefits may
be in the form of reimbursement of actual expanses up to specified limit of insurance, cash payment
or the direct provision of services. Medical expanses insurance is paid under the following specific
coverage‟s

1. Hospital insurance

2. Surgical insurance

3. Physicals expanse insurance

4. Major medical insurance.

5.2.1.1 HOSPITAL INSURANCE

Hospital insurance contract is one of the basic health insurance policies. Hospital insurance pays for
medical expenses incurred while the insured is in a hospital. A typical hospital insurance policy
provides two basic benefits.

Daily hospital benefit

A benefit for miscellaneous expanse

A daily benefit is paid for room and board changes while hospitalized the plan typically pay for a
stated number of days. For example, the insured may be allowed to select a daily benefit of Br.175 or
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Br. 200 for 90,120 or 360 days. There are three basic approaches for paying the daily room and board
benefit.

 Indemnity approach: The plan pays the actual coasts of the daily services up to some
maximum limit.

 Valued approach: A fixed amount is paid for each day of hospitalization regardless of the
actual cost of the services provided.

 Service approach: Service benefits rather than cash benefits are provided to the insured. For
example, the full cost of hospital services in a semiprivate room may be paid for each day of
hospitalization up to some maximum number of days.

A hospital policy also provides a lump-sum benefit for miscellaneous expanses, such as laboratory
charges, X- ray drugs, and the use of the operating room. Depending on the plan, part or all of the
miscellaneous expenses are paid up to some maximum limit.

There are several methods for determining the amount paid for miscellaneous expenses.

Choice of maximum dollar amounts: Many plans offer the insured a choice of maximum dollar
amounts, such as Br.2000 or Br.3000.

Multiple of daily room benefit: Another approach is to pay a benefit for miscellaneous expenses that
is a multiple of the daily room benefit, such as 10,15, or 20 times the daily benefit.

Percentage participation clause: Another method is to use a percentage participation clause

(coinsurance). Such as payment of 80 percent of the miscellaneous expenses up to some maximum
limit.

With respect to maternity benefits, individual hospital policies generally cover only the complications
of pregnancy, and not eh normal costs of childbirth. A complication of pregnancy is a medical
condition that is distinct form a normal pregnancy, but which is caused by the pregnancy.

5.2.1.2. Surgical Expense Insurance

Individual hospital-surgical plans also insurer coverage for surgical expanses, such as physicians‟
fees associated with covered surgeries Surgical expense insurance can be added to a hospital policy.
There are three basic approaches for compensating physicians under surgical expense policy.

1. Surgical schedule: The benefits paid can be determined by a schedule of surgical operations. A
surgical schedule lists the different surgical procedures and the maximum amount paid for each
operation. The insured has a choice of surgical schedules, such as a Br.1200 or Br.1500 schedule. For
example, the policy may pay Br.2000 for a gallbladder operation but only Br.200 for a tonsillectomy.

2. Relative value schedule: A relative value schedule can also be used to determine the maximum
amounts paid for surgical operations. Instead of a stated dollar amount for each surgical procedure, a
relative value schedule assigns a number of units or points for each operation based on the
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complexity of the operation. The actual dollar amount paid for each operation is determined by
multiplying the number of units by the value of the unit (stated in the policy). The advantage of this
approach is that it determines the amounts paid based on the complexity and degree of difficulty of
each operation. For example, a complex eye operation may have a value of 100, wile a simple tonsil
operation may have a value of 15 thus, if the unit value is Br.10, the policy pays Br.1000 for the eye
operation but only Br.150 for the tonsil operation.

Another advantage of a relative value schedule is that it can be conveniently adapted to differences in
the cost of living and in surgeons‟ fees in different geographical areas.

3. Reasonable and customary charges: Another method for compensating physicians is on the basis
of their reasonable and customary charges. Reasonable and customary charges (also referred to as
usual, reasonable, and customary charges) are charges that fall within a range of fees charged by
physicians for a similar medical procedure in the same geographical area. If the actual charge falls
within the range o f allowable fees, insurers usually pay the charge in full, subject to any deductible
or coinsurance requirements. There is no uniform method for determining reasonable and customary
charges and insurers differ in the methodology used.

Surgical expanse plan can be reimbursed on the basis of schedule approach reasonable and
customary. Under Schedule charges approach; common surgical procedures are listed in a schedule
with a maximum dollar amount paid for each Procedure. However, schedule procedure with listed
maximum fees becomes obsolete quickly because of the increase in surgical fees over time,

Under reasonable and customary charges approach, surgeons are reimbursed based on their normal
fees as long as the fee is reasonable and customary.

5.2.1.3. PHYSICIAN’S EXPANSE INSURANCE

Physician‟s expanse insurance pays a benefit for non-surgical care provided by a physician in the
hospital, the patient‟s home, or in the doctor‟s office. Some plans also pay for diagnostic X-ray and
laboratory expenses performed outside the hospital. It also pays for visits to a doctor‟s office or for a
doctor house calls or hospital visits, usually with a limit per visit. Example Br 25 to Birr 100 and a
maximum number of calls per sickness or injury.

5.2.2. DISABILITY-INCOME INESURANCE

Disability-income insurance is another important form of individual health insurance. A serious

disability can result in a substantial loss of works earnings. Unless you have replacement income
from disability-income insurance or income from other sources, you may be financially insecure.
Many workers seldom think about the financial consequences of a long-term disability. However, the
probability of becoming disabled before age 65 is much higher than is commonly believed, especially
at the younger ages.

The financial loss to the family from long-term total and permanent disability can be substantially
greater than the financial loss that results from premature death at the same age. In the case of

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premature death, the family loses its share of the deceased family head's future earnings, and funeral
expenses are also incurred. However, in the case of long-term total and permanent disability, earned
income is lost; medical bills are being incurred; savings are reduced or depleted; employee benefits
may be lost; and additional expenses are incurred, such as getting someone to care for the disabled
person. It is clear that disability-income insurance should be a high priority in a personal risk
management program.

Generally this insurance provides income payments when the insured is unable to work because of
sickness or injury. An individual policy pays monthly income benefits to an insured who becomes
totally disabled from a sickness or accident. The amount of disability insurance you can buy is related
to your earnings.' To prevent over insurance and to reduce moral hazard and malingering, most
insurers limit the amount of disability income sold to no more than 60 to 80 percent of your gross
earnings.

Meaning of Total Disability

The most important policy provision in a disability income policy is the meaning of "total disability.”
Most policies require the worker to be totally disabled to receive benefits.

Definitions of Total Disability

There are several definitions of total disability. The most important include the following

 Inability to perform all duties of the insured sown occupation

 Inability to perform the duties of any Occupations for which the insured is reasonably
fitted by education, training, and experience

 Inability to perform the duties of any gainful occupation Loss of income test

The, first, most liberal definition defines total disability in terms of occupation. Total disability is the
complete inability of the insured to perform each and every duty of his / her occupation. An example
would be a surgeon whose hands blown off in a hunting accident. The surgeon could no longer
perform surgery and would be totally disabled under this definition.

The second definition is more restrictive intricate, total disability is the complete inability to perform
the duties of any occupation for which the insured is reasonably fitted by education, training, and
experience. Thus, if the surgeon who lost a hand in a hunting accident could get a job as a professor
in a medical school or as a research scientist, he or she would not be considered disabled because
these occupations are consistent with the surgeon's training and experience.

The third definition is the most restrictive and is commonly used for hazardous occupations where
disability is likely to occur. Total disability is depended as the inability to perform the duties a gainful
occupation. The courts generally have interprets this definition to mean that the person is totally
disabled if he or she cannot work in any gainful occupation reasonably fitted by education, training,
and experience.

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Finally, some insurers use a loss-of-income test to determine if the insured is disabled. You are
considered disabled if your income is reduced as a result of a sickness or accident. A disability-
income policy containing this definition typically pays a percentage of the maximum monthly benefit
equal to the percentage of earned income that is lost. For example, assume that Mesay earns birr 1000
monthly and has disability-income contract with a maximum monthly‟ benefit of Birr 800. If Mesay
work earnings are reduced to birr 500 monthly because of disability (50persent) the policy pays birr
400 monthly (50persent of birr 800).

3. Property Insurance

Property insurance is a policy that provides financial reimbursement to the owner or renter of a
structure and its contents in the event of damage or theft.

Property insurance can include homeowners insurance, renters insurance, flood insurance and
earthquake insurance.

Perils typically covered by property insurance include damage caused by fire, smoke, wind, hail,
weight of ice and snow, lightning, theft and more. Property insurance also provides liability
coverage in case someone other than the property owner or renter is injured while on the property
and decides to sue.

Property insurance policies normally do not cover water damage caused by floods, tsunamis,
drain backups, sewer backups, groundwater seepage, standing water and many other water
sources. They also may not cover mold, earthquakes, nuclear events or acts of war, such as terrorism
and insurrections.

There are three types of property insurance coverage: replacement cost, actual cash value, and
extended replacement costs.

Replacement cost coverage pays the cost of repairing or replacing your property with like kind &
quality. Coverage is based on replacement cost values, not actual cash value of items.

Actual cash value coverage provides for replacement cost minus depreciation.

Extended replacement cost will pay over the coverage limit if the costs for construction have
increased. This usually won't exceed 25 percent of the limit. When you obtain an insurance policy,
the limit is the maximum amount of benefit the insurance company will pay for a given situation or
occurrence.

Classification of property Insurance

a. Fire Insurance

Fire Insurance covers the risk of fire. In the absence of fire insurance, the fire waste will increase not
only to the individual but to the society as well. With the help of fire insurance, the losses arising due
to fire are compensated and the society is not losing much. The individual is preferred from such

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losses and his property or business or industry will remain approximately in the same position in
which it was before the loss.

The fire insurance does not protect only losses but it provides certain consequential losses also war
risk, turmoil, riots, etc. can be insured under this insurance, too.

Exclusions

1. The following are excluded from insurance coverage:

2. Loss or damage caused by war, civil war, and kindred perils

3. Loss or damage caused by nuclear activity

4. Loss or damage to the stocks in cold storage caused by change in temperature

5. Loss or damage due to over-running of electric and/or electronic machines

b. Contents or Personal Property: All contents or personal property owned by the Group or
Organization, its house corporations or parts. Personal property inventory including current
replacement cost estimates provides the most accurate information and the best resource for
claims handling when a loss occurs. These values should be reviewed at least annually and the
updated information provided to the insurer.

c. Aviation Insurance

Aviation insurance is a policy that offers property and liability coverage for aircraft. It covers
losses resulting from aviation risks that come about due to the maintenance and use of aircraft,
property damage, loss of cargo, or injury to people. It protects both its owners and aircraft
operators from unforeseen losses. Aviation insurance is also known as aircraft insurance.

It offers insurance to cover every aspect of aviation, all backed by the membership power of over
400,000 aircraft owners and pilots.

You're a fellow aviator.

Whether you're an aircraft owner, renter, aviation business operator, we offer the policies available
and the expertise to guide you to the one that's right for you.

a. Multiple A-rated aviation insurance carriers

b. Coverage options to fit your unique needs for the aircraft you own, operate, manage, rent or
borrow

c. Quick, easy no-obligation quotes

d. Outstanding personal service from aviator advocates

e. Aviation Insurance has been there for me from the beginning.

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Types of Aviation insurance

Aviation insurance is divided into several types of insurance coverage available.[6]

1. Public liability insurance

This coverage, often referred to as third party liability covers aircraft owners for damage that their
aircraft does to third party property, such as houses, cars, crops, airport facilities and other
aircraft struck in a collision. It does not provide coverage for damage to the insured aircraft itself or
coverage for passengers injured on the insured aircraft. After an accident an insurance company will
compensate victims for their losses, but if a settlement can not be reached then the case is usually
taken to court to decide liability and the amount of damages. Public liability insurance is mandatory
in most countries and is usually purchased in specified total amounts per incident, such as $1,000,000
or $5,000,000.

2. Passenger liability insurance

Passenger liability protects passengers riding in the accident aircraft who are injured or killed. In
many countries this coverage is mandatory only for commercial or large aircraft. Coverage is often
sold on a "per-seat" basis, with a specified limit for each passenger seat.

3. Combined Single Limit (CSL)

CSL coverage combines public liability and passenger liability coverage into a single coverage with a
single overall limit per accident. This type of coverage provides more flexibility in paying claims for
liability, especially if passengers are injured, but little damage is done to third party property on the
ground.

4. Ground risk hull insurance not in motion: This provides coverage for the insured aircraft
against damage when it is on the ground and not in motion. This would provide protection
for the aircraft for such events as fire, theft, vandalism, flood, mudslides, animal damage,
wind or hailstorms, hangar collapse or for uninsured vehicles or aircraft striking the aircraft.
The amount of coverage may be a blue book value or an agreed value that was set when the
policy was purchased.

5. In-flight insurance: In-flight coverage protects an insured aircraft against damage during all
phases of flight and ground operation, including while parked or stored. Naturally, it is
more expensive than not-in-motion coverage, since most aircraft are damaged while in
motion.

d. Marine insurance

Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or cargo by
which the property is transferred, acquired, or held between the points of origin and the final
destination. Cargo insurance is the sub-branch of marine insurance, though Marine insurance also

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includes Onshore and Offshore exposed property, (container terminals, ports, oil platforms,
pipelines), Body, Marine Casualty, and Marine Liability Marine insurance

4. Liability Insurance

Liability insurance is insurance that provides protection against claims resulting from injuries and
damage to people and/or property.

Liability insurance policies cover both legal costs and any legal payouts for which the insured would
be responsible if found legally liable.
Various Types of Liability Insurance

Business owners are exposed to a range of liabilities, any of which can subject their assets to
substantial claims. All business owners need to have in place an asset protection plan built around
available liability insurance coverage. Here are the main types of liability insurance:

a. Employer’s liability and workers' compensation is a type of mandatory coverage for

employers, which protect the business against liabilities arising from injuries or the death of
an employee.
b. Product liability insurance is for businesses that manufacture products for sale on the
general market. Product liability insurance protects against lawsuits arising from injury or
death caused by their products.
c. Indemnity insurance provides coverage to protect a business against negligence claims due to
financial harm resulting from mistakes or failure to perform.
d. Director and officer liability coverage is for a business that has a board of directors or
officers, with the insurance covering them against liability if the company is sued.
e. An umbrella liability policy is a personal liability policy designed to protect against
catastrophic losses. Generally, umbrella liability coverage kicks in when the liability limits
of other insurance are reached.
f. Commercial liability insurance is a standard commercial general liability policy (also
known as comprehensive general liability insurance) that provides insurance coverage for
lawsuits arising from injury to employees and public, property damage caused by an
employee and injuries suffered by the negligent action of employees.
g. The comprehensive general liability (CGL) policy is perfect for any small or large business,
partnership or joint venture businesses, a corporation or association, an organization, or even a
newly acquired business. Insurance coverage in a CGL policy includes bodily injury, property
damage, personal and advertising injury, medical payments, and premises and operations
liability. In the case of lawsuits, insurers provide coverage for compensatory and general
damages; punitive damages are generally not covered under the policy, although they may be
covered if they are permitted by the jurisdiction of the state in which the policy was issued.
The amount of risk associated with the business and the size of the business determines the
total coverage.

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