NISM Series X-B · Chapter 3: Features of non-Life Insurance Products

L1 · Foundation

Foundation — The elements of a non-life policy and the ten types of non-life product

Sum insured, term, premium, deductible, restore and recharge, and no claim bonus; then property, health, motor, personal accident, critical illness, overseas travel, liability, fidelity, directors and officers, and keyman insurance.

24 min read · Worth 6% of the paper · Written from pages 58–70 of the official NISM workbook · Updated 18 September 2026

3.1 What non-life insurance does

Two purposes, and both matter: protecting assets, and protecting income from an unexpected charge.

3.1.1 The elements of a non-life product

Sum insured

Note the phrase "maximum liability for claims made DURING THE POLICY PERIOD" — it is an annual ceiling on the aggregate, not on each claim, which is exactly what makes the restore and recharge benefits below worth buying.

Term of the insurance

This is the sharpest contrast with life insurance, where terms run for decades.

Premium payable

And how the risk is assessed depends on the cover:

Cover	Risk factors named
Medical cover	AGE, GENDER AND HEALTH HISTORY
Motor insurance	CUBIC CAPACITY OF THE VEHICLE, PLACE OF REGISTRATION AND AGE OF THE VEHICLE

Deductible

Restore and Recharge — the distinction that gets examined

Benefit	When the sum insured is brought back
RESTORATION benefit	The health insurance company RESTORES THE SUM INSURED TO 100% IN CASE OF EITHER PARTIAL OR FULL EXHAUSTION of the sum insured amount, as the case may be
RECHARGE benefit	The sum insured is RESTORED TO 100% ONLY WHEN IT GETS REDUCED DUE TO A CLAIM

Learn them by their trigger. Restore works on PARTIAL OR FULL exhaustion; recharge works ONLY when the sum insured HAS BEEN REDUCED DUE TO A CLAIM.

No claim bonus

Two forms, then: a LOWER PREMIUM, or ADDITIONAL BONUS COVER.

3.1.2 The ten types of non-life insurance product

a. Property insurance

What is NOT covered: WILFUL DESTRUCTION OF PROPERTY, AND LOSS OR DAMAGE DUE TO NORMAL WEAR AND TEAR, IS GENERALLY NOT COVERED.

What needs separate cover: VALUABLES SUCH AS JEWELLERY AND ART AND ANTIQUES TYPICALLY REQUIRE AN ADD-ON OR SEPARATE INSURANCE POLICY.

And when it is bought: THESE KINDS OF POLICIES ARE NORMALLY TAKEN ALONG WITH A HOME LOAN, AS THE LENDER INSISTS ON SUCH A POLICY TO BE TAKEN BY THE BORROWER.

b. Health insurance

What is claimable: the expenses that can be claimed — CONSULTATION FEES, MEDICINE AND TREATMENT COSTS, ROOM COSTS — are specified in the policy, and SUB-LIMITS MAY BE FIXED FOR EACH HEAD.

The three categories of treatment:

Category	Definition
IN-PATIENT	Patients who are ADMITTED IN A HOSPITAL for treatment that requires AT LEAST OVERNIGHT OR 24 HOURS OF STAY
DOMICILIARY	Patients can be TREATED AT HOME WHEN THEY ARE NOT IN A CONDITION TO BE MOVED TO THE HOSPITAL
DAY CARE	Many policies now cover day care treatment for CERTAIN PROCEDURES WHICH REQUIRE HOSPITALISATION BUT, DUE TO ADVANCEMENT OF TECHNOLOGY, THE INSURED MAY BE RELEASED ON THE SAME DAY

Pre-existing illnesses: MAY BE EXCLUDED FROM COVER FOR A FIXED PERIOD WHEN INSURANCE IS BEING TAKEN FOR THE FIRST TIME, OR IF IT IS BEING RENEWED AFTER A LAPSE.

Cashless and floater: health policies provide CASHLESS FACILITY, WHERE THE BILLS ARE DIRECTLY SETTLED WITH THE HOSPITAL AND THE INSURED IS NOT REQUIRED TO PAY UPFRONT, UP TO THE SUM APPROVED FOR THIS FACILITY. There is also the option to take a FAMILY FLOATER POLICY THAT WILL COVER MULTIPLE FAMILY MEMBERS UNDER THE SAME POLICY UP TO THE SUM INSURED.

Premium and portability:

That last condition is the examinable one: portability requires an UNBROKEN policy history.

c. Motor insurance

The compulsion rule, which is a standard exam question:

Own damage: optional. Third-party liability: compulsory.

Three lesser known facts about car insurance

(i) The no claim bonus and who owns it.

It follows the PERSON, not the CAR — and note that it reduces the own damage premium, not the third-party portion.

(ii) Own damage premiums vary between insurers.

(iii) The bonus survives a change of insurer.

So the bonus moves with you between INSURERS and between YOUR CARS — but not to the BUYER of your old car.

d. Personal accident insurance

Memorise the test: SOLELY AND DIRECTLY from an accident caused by EXTERNAL, VIOLENT AND VISIBLE MEANS.

The three disablements covered:

PERMANENT TOTAL DISABLEMENT
PERMANENT PARTIAL DISABLEMENT
TEMPORARY TOTAL DISABLEMENT

And the workbook's warning:

e. Critical illness insurance

The freedom of use: THE LUMP SUM PAYMENT CAN BE USED IN WHATEVER WAY THE CLAIMANT CHOOSES, SUCH AS FOR GENERATING INCOME, OR FOR REPAYING A MORTGAGE. Currently, these are available EITHER WITH LIFE INSURANCE POLICIES OR AS STANDALONE POLICIES.

And the workbook's argument about how the product is misunderstood:

So the sizing method is the HLV or needs-analysis method of Chapter 2, and the two routes to a genuinely large sum are standalone or accelerated rider on a life policy.

f. Overseas travel insurance

g. Liability insurance

The two sources of liability:

The most common example, which names this exam's own candidates:

What it covers and what it does not: liability insurance provides cover for LEGAL EXPENSES INCURRED IN DEFENDING SUITS OR PAYMENT OF DAMAGES TO THIRD PARTIES for which the insured is found liable. LIABILITY INSURANCE WILL NOT COVER INTENTIONAL DAMAGE OR DAMAGES CAUSED DUE TO CRIMINAL ACTIVITIES.

h. Fidelity insurance

Note who is protected: THE EMPLOYER, against his own EMPLOYEE.

i. Directors and Officers liability insurance

The exposures that make it necessary: VULNERABILITY TO SHAREHOLDERS AND THEIR CLAIMS, DISCRIMINATION ALLEGATIONS, REGULATORY INVESTIGATIONS, CORPORATE GOVERNANCE REQUIREMENTS, COMPLIANCE WITH LEGAL STATUTES AND OTHER EMPLOYMENT PRACTICE VIOLATIONS.

j. Keyman insurance

Note the anomaly: keyman insurance appears in the NON-LIFE chapter but is itself A LIFE INSURANCE POLICY. It is here because the buyer and beneficiary is a business, not a family. It is also the clearest application of Chapter 1's rule that employers have insurable interest in their key employees.

The three business-facing covers, distinguished

Candidates confuse fidelity, D&O and keyman. Separate them by who is protected against what:

Product	Who is protected	Against what
FIDELITY	The EMPLOYER	Forgery, fraud or dishonesty BY AN EMPLOYEE
DIRECTORS AND OFFICERS	The DIRECTORS, MANAGEMENT and supervisory or managerial EMPLOYEES	PERSONAL LIABILITY AND DEFENCE COSTS from claims alleging a WRONGFUL ACT in the line of duty
KEYMAN	The COMPANY	LOSS OF LIFE of a key executive

Think of it like this

One year, not thirty

The single biggest structural difference from Chapter 2 is duration. The term of non-life insurance is TYPICALLY 1 YEAR, extending to two or three years for health or two wheeler policies. That is why renewal, portability and no claim bonus dominate this chapter, while surrender value, paid-up and bonus dominated the last one.

Restore works on empty or half-empty; recharge only after a claim

Two benefits that sound identical and are not. RESTORATION restores the sum insured to 100% in case of EITHER PARTIAL OR FULL EXHAUSTION. RECHARGE restores it to 100% ONLY WHEN IT GETS REDUCED DUE TO A CLAIM. Learn them by their trigger, because an exam option will simply swap the two words.

The bonus that belongs to you, not your car

Five claim-free years can cut your own damage premium by up to 50 per cent — but sell the car and the buyer gets nothing. The "no claim" bonus is available to the INSURED PERSON and is NOT ATTACHED TO THE CAR. You may carry it to your next car, and the new insurance company provides it if a policy is shifted at the time of renewal. It follows the driver.

You may drive uninsured against theft, but not against your neighbour

Insurance of motor vehicles against damage or theft is NOT compulsory, but insurance of THIRD-PARTY LIABILITY arising out of the use of motor vehicles in public places IS COMPULSORY. The law does not care whether your car is protected; it cares that the pedestrian you injure can be compensated. No motor vehicle can be used in a public place without such third-party insurance.

External, violent and visible

A personal accident policy pays where bodily injury results SOLELY AND DIRECTLY from accident caused by EXTERNAL VIOLENT AND VISIBLE MEANS. Three adjectives, all doing work: a slow internal illness fails all three. The policy covers permanent total, permanent partial and temporary total disablement — and the workbook warns that the need is often over-looked, and hence permanent disability cover is often inadequate.

The critical illness policy that is really an income policy

Most people buy a small critical illness cover to top up their health policy. The workbook says this misses the point: there is a LACK OF AWARENESS ABOUT THE IMPORTANCE OF CRITICAL ILLNESS POLICY AS AN INCOME REPLACEMENT POLICY, and the calculation for the amount required has to be done LIKE A LIFE INSURANCE POLICY. Size it by HLV, and buy it standalone or as an accelerated rider — a health rider will not be large enough.

Three covers a business buys, and who each protects

FIDELITY protects the EMPLOYER against forgery, fraud or dishonesty BY an employee. DIRECTORS AND OFFICERS protects the DIRECTORS AND MANAGEMENT against personal liability and defence costs. KEYMAN protects the COMPANY against the death of a key executive, the company being both premium payer and beneficiary. Ask "who is the claimant?" and the three separate cleanly.

The professional indemnity policy for an Investment Adviser

The workbook names this exam's own candidates: the most common example of liability insurance is PROFESSIONAL INDEMNITY PLANS taken by professionals like DOCTORS, LAWYERS OR INVESTMENT ADVISERS. It covers legal expenses in defending suits and damages to third parties — but will NOT cover intentional damage or damages caused due to criminal activities. Negligence is insurable; wrongdoing is not.

Key terms in this chapter

Critical illness insurance: A policy paying a lump sum on contracting specified diseases such as cancer, heart attack, stroke, kidney failure or multiple sclerosis. There is no payment on death, and payment is usually subject to a minimum survival period of 30 days after diagnosis.
Day care treatment: Treatment for certain procedures which require hospitalisation but where, due to advancement of technology, the insured may be released on the same day.
Directors and Officers liability insurance: A policy insuring board members, management and employees in supervisory or managerial roles against personal liability and defence costs from claims alleging a wrongful act in the line of their duties.
Domiciliary treatment: Treatment given at home where the patient is not in a condition to be moved to the hospital.
Family floater policy: A health policy covering multiple family members under the same policy up to the sum insured.
Fidelity insurance: A policy covering losses sustained by the employer as a result of an act of forgery, fraud or dishonesty from an employee, of money or goods, usually taken where employees handle large sums of cash or valuables.
In-patient treatment: Treatment of patients admitted in a hospital where the treatment requires at least overnight or 24 hours of stay in hospital.
Keyman insurance: A life insurance policy a company purchases to cover itself against the loss of life of a key executive. The company is the beneficiary and pays the premiums.
Liability insurance: Indemnity for damages payable under law for personal injury to third parties or damage to their property, whether the liability arises under common law on negligence or under statutory law on a no fault basis. It does not cover intentional damage or criminal activity.
Motor no claim bonus: A reduction in next year's own damage premium where no claim has been made, going up to 50 per cent after 5 claim-free years. It belongs to the insured person and not to the car, and is provided by a new insurer if the policy is shifted at renewal.
No claim bonus: The benefit of lower premiums enjoyed in subsequent years for each year in which no claim is made. It can also be offered as additional bonus cover.
Non-life insurance: Insurance providing risk cover from loss or destruction of assets, and cover against unexpected large expenses that can be a drain on the available income of the individual.
Overseas travel insurance: A policy providing medical, financial and other assistance during international travel, covering medical help, delay in baggage clearance and accident, by reimbursement up to the maximum stated. It may be mandatory for some countries.
Personal accident insurance: A policy paying a defined sum where the insured sustains bodily injury resulting solely and directly from accident caused by external violent and visible means, covering permanent total, permanent partial and temporary total disablement.
Portability of health policies: The facility to transfer benefits of no-claim, bonus and time-bound exclusions for existing conditions on switching insurance company. It requires that the previous policy was maintained without a break.
Professional indemnity plan: The most common example of liability insurance, taken by professionals such as doctors, lawyers or investment advisers, covering legal expenses in defending suits and damages payable to third parties.
Property insurance: Cover for the structure and contents of a building against natural and man-made disasters. Wilful destruction and normal wear and tear are generally not covered, and valuables such as jewellery, art and antiques need an add-on or separate policy.
Recharge benefit: A health insurance benefit under which the sum insured is restored to 100 per cent only when it gets reduced due to a claim.
Restoration benefit: A health insurance benefit under which the insurer restores the sum insured to 100 per cent in case of either partial or full exhaustion of the sum insured amount.
Sum insured: The amount specified in the policy that represents the insurer's maximum liability for claims made during the policy period. The minimum and maximum sum may be specified by the insurer.
Super top up policy: A health policy paying for hospitalisation expenses above a pre-agreed threshold, where the threshold limit is applied on the total of all hospitalisation claims for the year.
Third party motor insurance: Cover for liability arising out of the use of motor vehicles in public places. Unlike own damage or theft cover it is compulsory, and no motor vehicle can be used in a public place without it.
Threshold or deductible in top up plans: The pre-agreed limit above which a top up or super top up policy responds. Its method of application, per claim or on the annual aggregate, is the only difference between the two products.
Top up policy: A health policy paying for hospitalisation expenses above a pre-agreed threshold, where the threshold limit is applied for every claim separately.

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Original explanatory writing based on the official NISM workbook for Series X-B, which is published and copyrighted by NISM. Check figures against the current edition at nism.ac.in.

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