DEBRE MARKOS UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT
RISK MANAGEMENT AND INSURANCE
GROUP ASSIGNMENT
STUDENT NAME ID/NO
1 ZENEBE CHOMA ----------------------------------------- 1407301
2 WUBETU SITOTIE --------------------------------------------1407189
3 TESFAYE KASSU ------------------------------------------1407121
4 MULUNEH FANTAYE ------------------------------------------1406857
5 MESERET AMARE ------------------------------------------1406783
6 SEBLE SEMAWU .----------------------------------------1406977
SUBMITTED TO INS:WORKU.A
SUBMISSION DATE MAR 9 2025 G.C
DEBRE MARKOS , ETHIOPIA
TABLET OF CONTENT PAGE
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CHAPTER SIX NON LIFE INSURANCE ---------------------------------------------------------------1
6.1 INTRODUCTION ------------------------------------------------------------------------------------------1
6.2 AUTOMOBILE INSURANCE ------------------------------------------------------------------------------1
6.3 THEFT INSURANCE ----------------------------------------------------------------------------------------2
6.4 FIRE INSURANCE -----------------------------------------------------------------------------------------3
6.5 MARINE INSURANCE ----------------------------------------------------------------------------------4
6.6 AVIATION INSURANCE --------------------------------------------------------------------------------6
6.7 PUBLIC LIABILITY INSURANCE ------------------------------------------------------------------6
6.8 PECUNIARY INSURANCE ---------------------------------------------------------------------------7
6.9 FIDELITY GUARANTEE INSURANCE ---------------------------------------------------------8
6.10 ENGINEERING INSURANCE --------------------------------------------------------------------9
CONCLUSION ------------------------------------------------------------------------------------------------10
II
6.1. Introduction
Non – life insurance consists of property and liability insurance that are designed to provide
protection against losses resulting from damage to or loss of property and losses resulting from
legal liability1
6.2. Automobile Insurance
Most automobile insurance contracts are schedule contracts that permit the insured to purchase
both property and liability insurance under one policy. The contract can be divided, however,
into two separate contracts one providing insurance against physical damage to automobiles and
the other protecting against potential liability arising out of the ownership or use of an
automobile.
The object of automobile insurance is to indemnify the insured against accidental loss or damage
to his auto and/or his liability at law for bodily injury or material damage caused by the use of
the motor vehicle, subject to the terms and conditions and to the cover granted.
There are two main types of insurance covers in both motor commercial and motor private
insurance, viz.
Comprehensive cover and third party cover.
a) Comprehensive Cover:- A comprehensive cover provides protection against a wide range of
contingencies. It includes indemnity in respect of the insured’s legal liability for death or bodily
injury or damange caused to the property of third parties arising out of the insured’s vehicle. The
policy also indemnifies the insured in1respect of all damages to the vehicle caused by an
accidental, external physical means as a result of collision, overturning, fire, self-ignition,
lightning, explosion, and burglary.
The policy excludes, among other things, the following:
- Consequential loss sustained by the insured,
- Wear and tear /depreciation/ of motor vehicle,
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- Mechanical or electrical breakdown of failure of any part of a motor vehicle,
- Death of or injury to members of insured family or his employees,
- Damage to property of the insured or held by him in trust or in custody.
b) Third Party Cover: - There are two parties involved in an insurance contract, the insurer and
the insured. Accordingly, any other person who may become linked in some way with the
insurance is regarded as third party. A third party only policy covers the insured’s legal liability
(i.e., property damage, death, and injury) towards other people in the event of an accident arising
out of the use of a motor vehicle.
A third party policy may be extended to include at an additional premium the policy holder’s
vehicle against the risks of fire and theft as follows:-
- Third party, fire and theft
- Third party and fire
- Third party and theft.
The basic cover guaranteed by the Ethiopian Insurance Corporation’s policies can be extended to
2cover additional risks at an additional premium2.
6.3. Theft Insurance
Although theft is generally one of the perils covered under an all risks policy, the contract
usually excludes or limits the amount of protection on certain types of property, such as money,
that is highly susceptible to theft losses.
Theft insurance protects a business against losses by burglary, robbery, or some other form of
theft by persons other than employees. Fidelity guarantee insurance or dishonesty insurance
covers losses caused by dishonest acts of employees.
Burglary is the act of unauthorized entry, with criminal intentions into any building or residence.
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It is the unlawful taking of property from within premises closed for business, entry to which has
been obtained by force. There must be visible marks of the forcible entry. Thus, if a customer
hides in a store until after closing hours, or enters by an unlocked door, steals some goods, and
leaves without having to force a door or a window, the definition of burglary is not met under a
burglary policy.
Robbery, on the other hand, is defined to mean the unlawful taking of property from another
person by force, by threat of force, or by violence. Personal contract is the key to understanding
the basic characteristic of the robbery peril. However, if a burglar enters a premise and steals the
wallet of a sleeping night guard, this crime is not one of robbery because there was no violence
or threat thereof. The person robbed must be cognizant of this fact. On the other hand if the thief
knocks out or kills the guard and then robs the guard or the owner, the crime would be classed as
robbery. Robbery thus means the forcible taking of property from a messenger or a custodian.
According to the EIC burglary policy it does not cover losses or theft committed by:
1) Members of the insured’s household,
2) The insured himself or his assignee,
3) Theft connected with war (declared or undeclared) or any kind of population uprising, or
4) Theft of valuables including documents and works of art unless agreed pre hand.
6.4. Fire Insurance
Fire insurance is designed to indemnify the insured for loss of, or damage to, buildings and
personal property by fire, lighting, windstorm, hail, explosion, and a vast array of other perils.
Coverage may be provided for both the direct loss (that is the actual loss represented by the
destruction of the asset), and indirect loss (defined as the loss of income and/or extra expenses
caused by the loss of use of the asset protected). Originally, only fire was an insured peril, but
the number of perils insured against has gradually been expended.3
Business may therefore, purchase fire insurance contracts covering their building and its
contents, to both the perils of fire and lightning. The standard fire policy promises in its insuring
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clause to indemnify the insured for “direct loss by fire, lightning and by removal from premises
endangered by the perils insured against.”
Insurers, however, may offer protection against a very great number of perils other than fire and
lightning by extending the contract in relation to the interest of the insured through additional
premium payment. For additional premium, the standard fire policy may be extended to cover
any of the following perils: windstorm, explosion, damage by aircraft, damage by vehicle, flood,
earthquake fire and shock, bursting of pipes and water damage, etc.
Not all fires are covered under the fire insurance contract, but the exclusions are few:
1. fires caused by war
2. fires intentionally set by public authorities, and
3. fires set intentionally by the insured.4
6.5. Marine Insurance
Marine insurance is designed to protect against financial loss resulting from damage to, or
destruction of owned property, due to the perils primarily connected with transportation. It is a
contract of transport insurance whereby the insurer undertakes to indemnify the insured in the
manner and to the extent thereby agreed, against losses and damages involved in being
transported. In consideration of the payment of a certain sum called the “premium,” the insurer
(underwriter), agrees to indemnify the insured (the client) against loss or damage caused by
certain specified perils, termed “maritime perils.
The marine Cargo Policies of Ethiopian Insurance Corporation are internationally accepted,
worded and standardized insurance policies. Accordingly, the coverage it affords is to indemnify
the insuring public as per the terms, conditions, warranties, and exceptions of the policy in
respect of loss of or damage to the cargo insured mainly resulting from maritime perils: (heavy
weather, stranding, collision, etc.) or inland-transit accident (such as collision, overturning of the
carrying conveyance, explosion, fire, theft, non-delivery of the goods, etc.)
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Marine insurance is divided into two classes: ocean marine and inland marine.
Ocean Marine Insurance
Contracts concerned primarily with water transportation are considered to be ocean marine
insurance. For a considerable time ocean marine insurance was the only kind of modern
insurance5
Insurance has been developed and has attained a high degree of refinement in modern-day
commerce. As world trade grew and values at risk became larger, the need for coverage become
more apparent. Larger ships and more refined instruments of navigation made long voyages
possible, and with this development insurance protection was looked upon as almost a necessity.
Major Types of Coverage
The four chief interests to be insured in an ocean voyage are:
1. The vessel, or the hull
2. The cargo
3. The shipping revenue or freight received by the ship owners
4. Legal liability for proved negligence
5Inland Marine Insurance
Inland marine cargo insurance covers shipments primarily by land or by air. Although the
trucker, railroad, or airline may be a common carrier with the extensive liability (balled liability
exposures), the shipper may still be interested in cargo insurance because:
1. It is usually more convenient to collect from an insurer than a carrier,
2. A common carrier is not responsible for perils such as an act of war, exercise of public
authority, or inherent defects in the cargo.
56.6 Aviation Insurance
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Aviation insurance is a comparatively recent phenomenon that has been developing with the
development of passenger planes, particularly “Jumbo Jets.” The overall increase in the number
of different passenger planes and the increase in their value called for aviation insurance.
Aviation insurance is an insurance that provides protection against loss of or damage to the
different types of passenger and cargo planes, and associated losses.
Like automobile insurance, aviation insurance includes both property insurance, on the planes
and liability insurance.
Types of Policies
The most common types of policies under aviation insurance are:-
1) Aircraft comprehensive policy
2) Freight liability policy which includes airmail liability policy.
6.7. Public Liability Insurance
Public liability insurance was developed with employees’ liability insurance. Once, public
opinion
had accepted the morality of being able to insure one’s liability, and the availability of such
insurance became known, the business grew rapidly.
The policy provides compensation for legal liability for death, injury, or disease to people other
than employees (which should be covered by employers’ liability policy). Public liability
insurance provides what is popularly termed “third party cover”. It indemnifies the insured in
respect of his legal liability for accidents to members of the public, or for damage to their
property, occurring in circumstances set out in the policy.
Under public liability insurance, policies are available to cover liabilities attaching to:
a) Pedal cyclists
b) Private individuals. The so called “personal liability” policy is available to protect private
persons from claims arising due to injury caused by such things as polished floor, a loose rooftile
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or by pet animal. A pedestrian, for example, can incur heavy liabilities by causing a serious road
accident.
c) Product liability: liability arising out of defects of goods produced or sold.
d) Professional men such as doctors, dentists, solicitors, and bankers may take out policies to
protect themselves from claims arising out of negligence or mistake committed in the exercise of
their professional duties.7
6.8 Pecuniary Insurance:
Pecuniary insurance is a type of coverage designed to protect against financial losses that are
purely monetary in nature, rather than physical damage to property or bodily injury. It
indemnifies the insured for quantifiable economic harm arising from specific risks, such as
business interruptions, credit defaults, or fraudulent activities.
Pecuniary insurance is critical for businesses and individuals to mitigate financial vulnerabilities
that could disrupt cash flow, profitability, or contractual obligations. It provides a safety net
against unforeseen economic risks, enabling continuity and stability in commercial and personal
financial planning.
Distinction from Other Insurance Types:
Unlike liability insurance (which covers third-party claims) or property insurance (which covers
physical damage), pecuniary insurance focuses exclusively on monetary losses stemming from
predefined financial risks. This makes it a specialized tool for managing economic exposures in
complex financial environments.
6 .9. Fidelity Guarantee Insurance
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Fidelity guarantee insurance indemnifies an employer for any loss suffered at the hands of
dishonest employees. It provides guarantee against loss through the dishonesty or incapacity of
individuals who are trusted with money or other property and who violate this trust.
Cashiers and others who handle money, and other persons employed in positions of trust, are
frequently required by their employers to provide security as protection against their personal
dishonesty usually in the form of fidelity guarantee policy. The policy indemnifies the employer
against losses from the dishonesty of his employees. The employer himself often takes out the
policy. He may insure a number of employees either individually or in a group basis under a
variety of policies.
Unlike other policies, fidelity guarantee policies specify a time limit to discover the loss and
report it to the insurer after the resignation, dismissal, retirement, or death of the employee in
question. Hence, while the insurer undertakes to make the insured’s financial losses lighter, it is
also a requirement that the insured should
1) Inform the insurer of such fraudulent act immediately upon discovery
2) Either obtain admission of fraud or take appropriate legal action to establish fraud,
and
3) Cooperate with the insurer to bring the defaulter before the court of law.
6.10 Engineering Insurance
Engineering insurance is a specialized form of coverage designed to protect against risks
associated with engineering projects, construction, machinery, and technical operations. It
addresses financial losses arising from physical damage, technical failures, design errors, or
third-party liabilities during the planning, execution, or maintenance phases of engineering
works.
Key Features:
1. Project-Specific Coverage,Tailored to construction, infrastructure, manufacturing, or
installation projects (e.g., bridges, power plants, industrial machinery).
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2. Technical Risks: Covers damage or failure due to design flaws, material defects, operational
errors, or unforeseen events (e.g., explosions, collapses).
3. Third-Party Liability,: Protects against claims for property damage or bodily injury caused to
others during project execution.
4. Machinery & Equipment: Includes coverage for breakdowns, repairs, or accidental damage to
specialized machinery.
Common Types & Examples:
1. Contractors’ All Risks (CAR) Insurance: Covers construction projects against physical
damage, theft, and natural disasters.
2. Erection All Risks (EAR) Insurance: Protects machinery/equipment during installation,
testing, or commissioning.
3. Machinery Breakdown Insurance: Compensates for losses from sudden mechanical/electrical
failures.
4. Decennial Liability Insurance: Covers structural defects in buildings or infrastructure for up to
10 years post-completion (common in civil law countries).
5. Professional Indemnity for Engineers: Shields against claims of design errors, negligence, or
contractual breaches.
Importance:
Engineering insurance is critical for managing high-value, complex risksin sectors like
construction, energy, and manufacturing. It ensures financial protection against delays, costly
repairs, legal disputes, or project abandonment, enabling businesses to meet contractual
obligations and maintain operational continuity.
Distinction from Other Insurance Types:
Unlike general property or liability insurance, engineering insurance focuses on technical and
project-specific risks, often involving bespoke policies for large-scale, long-term projects. It
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combines elements of property damage, liability, and professional risk coverage into a unified
solution for engineering endeavors.
Conclusion:
Non-life insurance, also known as general insurance plays a pivotal role in modern risk
management by providing financial protection against short-term, unpredictable losses affecting
assets, liabilities, and third-party interests. Unlike life insurance, which covers human life risks,
non-life insurance addresses tangible and intangible risks across diverse sectors, from property
and health to liability and specialized industries.
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