AOA: AOY LIMIT IN LIABILTY POLICIES

 

                                      AOA: AOY LIMIT IN LIABILTY POLICIES

Sum Insured under a liability policy is different from any other policy that we purchase.

In liability policy the Sum Insured is set as AOA: AOY limit .It is identified as the Any One Accident (AOA) limit and the Any One Year (AOY) limit, respectively.

AOA limit and AOY limit can be set as 1:1,1:2,1:3,1:4. The AOA limit, indicates the maximum claim payable for a single accident and cannot exceed the AOA limit. Sum Insured is selected based on the extent of damage that is anticipated .This again depends on the nature of the Insured’s business, previous claims data, scale of the Insured’s operations.

Sum Insured must be selected with a proper analysis of the potential areas of risk where claims are likely and the volume of claims expected. Adequate Sum Insured must be opted.

An example of the application of Sum Insured for Rs.1,00,000/- is detailed below:

Limit of Indemnity AOA:AOY	Sum Insured Example Rs 100,000/-	Claim Payable
1:1	AOA sum insured Rs 1,00,000/-	Rs 1,00,000/- in respect of any one accident (AOA).If one accident consumes the entire sum insured then there is nil sum insured for the next accident in the same policy year. However if the claim is for Rs 25000/- then balance sum insured of Rs 75000/- Sum insured is available for the next accidents in the policy year since the total Sum insured is Rs 100,000/-
1:2	AOA sum insured is Rs 50,000/-	Rs 50,000/- in respect of any one accident .If one accident consumes 50% sum insured then there is 50% sum insured for any next accident in the same policy year. However if claim under one accident (AOA) exceeds 50% of Total Sum Insured then the balance is borne by the Insured i.e. if  a claim of AOA under this set limit is Rs 75000/- then Rs 50,000/- only is payable for this one accident.
1:3	AOA Sum insured Rs. 33000/-	Rs 33,000/- in respect of any one accident. If one accident consumes 1/3rd  sum insured then there is 2/3rds sum insured for any next accident in the same policy year
1:4	AOA Sum insured Rs. 25000/-	Rs 25,000/- in respect of any one accident. If one accident consumes 25% sum insured then there is 75% sum insured for any next accident in the same policy year with the same AOA limit of Rs 25000/- per accident

 

Liability policies like Professional Indemnity, Public Liability, Directors & Officers policy etc. have this set pattern of sum insured and some policies do offer 1:5 ratio too. Any one person (AOP) limit can be set based on the requirement of the Insured.

Optimal use of risk measures adopted requires correct analysis of the risk and the evaluation must be accurate. Premium payable also varies with the choice of Sum Insured .Proper insurance cover and adequacy of sum insured helps organizations in funds utilization and minimizes the impact of a loss.

We at Zen Insurance  assist you in choosing your Insurance Program wisely,you may contact us for assistance.

Disclaimer:   

Zen Insurance is an IRDAI registered broker which facilitates quick & accurate insurance broking services. We deal with only regulator approved products of insurers. We do not underwrite the products.