PECUNIARY INSURANCE — EVERYTHING YOU NEED TO KNOW

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Pecuniary insurance protect against the loss of intangibles items such as income level and revenue.

The word pecuniary comes from the Latin word "pecunia"' which means money. 

Hence, pecuniary insurance can be defined as any insurance policy that protects against financial losses.

Pecuniary insurance may also be defined as insurance that covers intangible financial interests that may be harmed or affected by an insured event.

There are different types of insurance of pecuniary insurance including business interruption, legal expenses, credit insurance and fidelity guarantee.

Let's take a closer look at each one of them

1. Business interruption insurance: This is an insurance policy that provides coverage to policyholders for losses arising from interruption of business activities.

It compensates a business for loss of income during periods when it is unable to carry out business activities due to unexpected events.

The following items are commonly covered by a business interruption insurance policy:

  • Fixed costs: The overheads costs and other costs that the company will incur even if it is not producing.
  • Profit: Business interruption insurance also provides for profits they would have earned if the business is not affected by the peril.

Business interruption coverage usually extends till the end of the business interruption as determined by the insurance policy.

2. Fidelity guarantee insurance: This insurance policy indemnifies the employer against direct financial losses resulting from acts of fraud or dishonesty of his employees.

Such fraudulent acts include falsification of documents, stealing of cash, stocks, and properties.

Fidelity Guarantee Policies cover losses due to fraud or dishonesty by employees.

Fidelity guarantee insurance is also called staff honesty insurance

There are three main forms of fidelity guarantee insurance, viz:

A. Individual policy: This fidelity guarantee covers specific employee (s) and is limited to a certain amount.

It is one of the simplest forms of fidelity guarantee. It does, however, have the following drawbacks:

  • The insurer would not pay if the insured was defrauded by an employee who was not named in the individual fidelity guarantee policy.
  • Where the amount defrauded exceeds the amount guaranteed against the named employee, the insurer would only pay up to the amount guaranteed. In effect, the insured would have to bear part of the loss by himself.
  • Whenever there are changes in employees, the insured updates the individuals named in the individual policy. You will agree with me that this is not very stressful.

B. Blanket policy: This covers all employees of the insured without showing names or positions.

The blanket policy, sometimes called collective policy, can be named or unnamed.

  • Named blanket policy: Here, the name, duty, as well as the amount guaranteed to each employee is clearly stated.
  • Unnamed blanket policy: Here, the employees are covered by category e.g 12 cashiers, 10 clerical staff. An unnamed blanket policy is usually more expensive than a named blanket policy.

C. Positions policy: This covers the positions, and not individuals.

Positions are usually guaranteed for specific amounts so that changes in the occupant of the position does not affect the cover. 

3. Credit insurance: In most companies, account receivable (or debtors) usually constitute the largest single item on the balance sheet.

If a large number of debtors refuses to pay, the business may be liquidated.

This is the reason for the existence of a credit insurance policy.

Credit insurance is a type of insurance policy that is used to provide for losses that may result from the debtor's inability to pay his losses due to death, disability and unemployment.

It is designed to cover risks associated with credit facilities by a seller to his customers.

Credit insurance protects the policyholder from the borrower's or debtors inability to repay loans or debt due to various reasons.

It should, however, be noted that credit insurance does not cover non-payment through the debtor unwillingness to pay, or through the insured refusal to collect debt settlement.

To put it another way, credit insurance will not protect the insured against a debtor who refuses to pay his debt despite having the financial means to do so.

Insured refusal to collect a settlement is also not covered by credit insurance.

There are two types of credit insurance:

1. Whole turnover policy: As its name seems to suggest, the whole turnover policy is an insurance policy that covers all receivables of the insured.

It provides a whole or substantial cover for the debtors in the insured's balance sheet. 

2. Single buyer policy: This provides cover against loss associated with non-payment by one single customer.

Single buyer policy usually comes with a higher premium.

Besides the exclusions already stated, credit insurance does not cover the transactions that are subject to a dispute.

For instance, if there is a dispute that results in the consumer refusing to pay, the credit insurance may not cover it.

4. Legal expenses insurance: This is an insurance policy purchased by organisations, professional bodies, trade unions and associations to cover unexpected large amounts of legal fees that might have to meet.

The advantage of legal expense insurance care is that it reimburses the insured for the costs of seeking legal advice, pursuing, or defending civil actions.

Legal expenses insurance is also known as legal protection insurance, more simply, as legal insurance

There are two main types of legal expenses

1. Group legal benefits policies: These are intended to cover a group of people, such as the employees of a firm, members of a club or society, trade unions and professional bodies.

This kind of policy usually covers members of a group who are eligible for one or more of the following:

A. Employment cover: This protects members from any claims or legal actions made against them as a result of their employment.

It covers compensation awards made against the defendants as well as costs associated with the pursuit of actions against wrongful dismissal or for injury arising out of employment.

B. Personal cover: This covers the costs of defending a family against a lawsuit brought by a third party.

C. Conveyancing cover: This covers the legal costs associated with relocating a house

D. Motorist cover: This covers the cost of legal action brought against a member as a result of ownership and usage of the motor vehicle.

2. Commercial legal protection policies: Companies and manufacturers buy these policies to protect themselves if their business activities lead to legal action

Commercial legal protection policies cover costs of legal expenses which are associated with pursuing and defending civil actions.

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