Fundamentals of Risk Management

types of insurance cover
The different types of insurance cover that may be required by an organization are 
set out in Table 17.1. Generally speaking, there are three reasons why an organization 
will wish to purchase insurance cover. In summary, the reasons for buying insurance 
are as follows:
●
●
mandatory legal and contractual obligations;
●
●
balance sheet/profit and loss protection;
●
●
employee benefit/protection of employee assets.
Table 17.1 provides more information on the different types of insurance that are 
available and the circumstances in which insurance should be purchased. In most 

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Insurance and risk transfer 
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Mandatory, legal and contractual obligations
Employers’ liability – compensation to employees injured at work
Public liability – compensation to public or customers
Motor third party – compensation following motor accident
Product liability – compensation for damage or injury
Professional indemnity – compensation to client for negligent advice
balance sheet /profit and loss protection
Business premises – damage to premises by adverse events
Business interruption – loss of profit and increased cost of working
Asset protection – losses, such as loss of cash, goods in transit, credit risk and 
fidelity guarantee (staff dishonesty)
Motor accidental damage – repair of own vehicles
Terrorism – compensation for damage caused by terrorism
Loss of a key person – compensation on loss of key staff member
employee benefit /protection of employee assets
Life and health – benefits to employees that can include: life cover, critical illness 
cover, income protection, private medical costs, permanent health cover, 
personal accident and travel injury/losses
Directors’ and officers’ liability – legal and compensation costs