NISM XB Short Notes – Part 3: Non-Life Insurance Products (Chapter 3)

NISM Series X-B Investment Adviser Level 2 | Exam Notes | PassNISM.in

This is Part 3 of the NISM XB short notes series. Here we cover Chapter 3: Non-Life Insurance Products. Non-life insurance (also called general insurance) covers assets, health, liability, and various other risks that are not related to human life.

👉 Read Part 2: Life Insurance Products

What Is Non-Life Insurance?

Non-life insurance covers the risk of financial loss from damage or destruction of physical assets and protects against large unexpected expenses that can strain a household's finances. Unlike life insurance which covers the risk of death, non-life insurance primarily protects assets and income from specific perils.

Featured Snippet Answer: Non-life insurance (general insurance) provides financial protection against loss or damage to assets such as property, vehicles, and health, as well as liability claims from third parties. Elements of Non-Life Insurance Products

Sum Insured – The maximum amount the insurer will pay for a valid claim. Unlike life insurance, non-life insurance usually indemnifies actual loss up to the sum insured.
Term of the insurance – The period for which the policy is in force (usually one year for most non-life policies).
Premium Payable – The cost of the insurance cover.
Deductible – The amount the insured bears from any claim before the insurer pays the balance.
No Claim Bonus (NCB) – A discount on the renewal premium given when no claim is made during the policy year. Very common in motor insurance.

Types of Non-Life Insurance Products 1. Property Insurance

Property insurance protects the structure of a building and its contents against natural hazards (fire, flood, earthquake) and man-made risks (theft, vandalism). Homeowners and businesses use property insurance to ensure that a loss does not devastate their financial position.

2. Health Insurance

Health insurance reimburses medical expenses for hospitalisation, surgery, and in some policies, domiciliary (home-based) treatment for illness or injury. The policyholder and specified family members are covered up to the sum insured.

Key features for NISM XB exam:

Reimbursement or cashless mode of settlement
Network hospitals for cashless claims
Pre-existing disease waiting period

3. Motor Insurance

Motor insurance covers financial liability arising from accidents involving the insured vehicle anywhere in India. It covers third-party liability (legally mandatory in India) and can also include own-damage cover (optional but advisable).

4. Personal Accident Insurance

This policy pays a specified benefit if the insured suffers bodily injury as a direct result of an accident caused by external, violent, and visible means. It typically covers:

Accidental death
Permanent total disability
Permanent partial disability
Temporary total disability (weekly benefit)

5. Critical Illness Insurance

A critical illness policy pays a lump sum amount upon the first diagnosis of a specified critical condition such as cancer, heart attack, stroke, kidney failure, or organ transplant. The payout is not linked to actual medical costs — it is a fixed benefit that the insured can use as they see fit (treatment, income replacement, loan repayment).

6. Overseas Travel Insurance

This policy covers medical emergencies, trip cancellations, lost baggage, and other travel-related risks during international travel. Medical costs abroad can be extremely high, making travel insurance important for anyone travelling outside India.

7. Liability Insurance

Liability insurance protects the insured against claims made by third parties for bodily injury or property damage caused by the insured's negligence. It is widely used by businesses and professionals.

8. Fidelity Insurance

Fidelity insurance compensates an employer for losses caused by fraudulent or dishonest acts by employees, such as theft, embezzlement, or forgery.

9. Directors and Officers (D&O) Insurance

D&O insurance protects the personal assets of board members, senior managers, and supervisory employees against legal claims that they committed a wrongful act while performing their duties for the company. The policy covers both legal defence costs and any damages awarded.

10. Keyman Insurance

Keyman insurance is a life insurance policy purchased by a company on the life of a key executive (someone whose skills and knowledge are critical to the company's success). The company pays the premiums and is the beneficiary. If the key person dies, the company receives the sum assured to compensate for the financial impact of losing that person.

Multiple Policies for Non-Life Insurance — Key Rules

This is a frequently tested topic in the NISM XB exam.

For indemnity-based policies (like health insurance), having multiple policies covering the same risk does not increase the total amount recoverable. The insured cannot profit from a claim — the total payout across all policies cannot exceed the actual loss.

The insured can choose which insurer to claim from first.
If the claim amount is less than the sum insured of the chosen policy, that insurer alone will pay. There is no automatic invoking of the contribution clause.
If the claim exceeds the sum insured under the first policy, the insured can then claim the excess from the second policy.

Top-Up vs Super Top-Up Health Insurance

This comparison is important for the NISM XB exam and for client advisory:

Top-Up Plan: The threshold (deductible) limit is applied to each individual claim. For example, if the threshold is Rs 3 lakh, the top-up kicks in only when a single claim exceeds Rs 3 lakh.
Super Top-Up Plan: The threshold limit is applied to the total of all hospitalisation claims in a policy year. Once total claims in the year cross Rs 3 lakh (for example), the super top-up covers all further claims that year.

Super top-up plans are generally more useful for families with multiple members or those with chronic conditions who may have multiple smaller hospitalisations in a year.

Quick Revision Checklist — Non-Life Insurance (NISM XB)

☑ 5 elements: Sum insured, Term, Premium, Deductible, NCB
☑ 10 types of non-life insurance (property, health, motor, PA, critical illness, travel, liability, fidelity, D&O, keyman)
☑ Multiple health policies = no gain over actual loss
☑ Top-up = per claim threshold; Super top-up = aggregate annual threshold
☑ Critical illness = lump sum on diagnosis, not linked to actual cost
☑ Keyman = company buys policy on key employee; company is beneficiary

Internal Links

Original content written for exam preparation purposes on PassNISM.in. Refer to the official NISM workbook for complete authoritative content.