All policies of insurance, whatever the kind of insurance to which they relate, may be classified in two ways:
1. According to the manner in which the subject-matter is described.
2. According to the amount recoverable in the event of loss.
1. According to the description of the subject-matter
Two types of policy fall within this class:
(a) Policies in which the definition of the subject-matter is so precise as to confine the insurance to a specific object
E g policies of insurance against personal accident, and policies of insurance against the loss of particular property, or loss by the defalcations of a particular employee, or by the insolvency of a particular debtor.
(b) Policies in which the definition of subject-matter is expressed in general terms so that the insurance is capable of applying to any object falling within the definition
E g policies of insurance on property generally, and policies o insurance against public liability.
2. According to the amount recoverable
Two types of policy fall within this class:
a. ‘Unvalued’ policies.
b. ‘Valued’ policies.
(a) ‘Unvalued’ policies
In the case of an ‘unvalued’ policy the sum to be paid to the assured is not fixed by the policy, but left to be ascertained after the loss has happened, e g in the case of policies of insurance against liability and most policies of insurance on property.
The sum specified in the policy as the amount of insurance, if any, merely indicates the amount beyond which the liability of the insurers does not extend.
As far as marine insurance is concerned, the Marine Insurance Act 1906, s 28, provides:
‘An unvalued policy is a policy which does not specify the value of the subject-matter insured, but subject to the limit of the sum insured, leaves the insurable value to be subsequently ascertained, in the manner hereinbefore specified.’
(b) ‘Valued’ policies
In the case of a ‘valued’ policy the amount recoverable is fixed by the policy, e g personal accident policies and certain policies in insurance on property.
All personal accident policies belong to this class, and, as the value of life or limb cannot be accurately measured, the sum fixed in the policy is not open to objection on the ground of over-valuation.
In the case of an insurance on property, the value of the subject-matter may be fixed by agreement and inserted in the policy as the amount recoverable in the event loss.
This valuation is binding, except in the case of fraud or mistake, and dispense the assured from the necessity of proving the value of his interest, though he must still prove that he has an interest in the subject-matter of insurance.
In the event of a partial loss, however, the valuation has no effect, and the assured must prove and is entitled to recover the actual amount of his loss.
As far as marine insurance is concerned, the Marine Insurance Act 1906, s 27(2), states:
‘A valued policy is a policy which specifies the agreed value of the subject-matter insured.’
Section 27(3) goes on to provide:
‘Subject to the provisions of this Act, and in the absence of fraud, the value fixed by the policy is, as between the insurer, conclusive of the insurable value of the subject intended to be insured whether the loss be total or partial’