insurance true or false

Study Notes

Insurance is a contract (policy) between an insurer (insurance company) and the insured (individual or business) for compensation against loss or damage.
Premiums are fees paid for insurance; higher perceived risk results in higher premiums.
Loading is an additional charge applied to premiums based on increased risk factors, e.g., health risks for smokers.
Actuaries calculate premiums by assessing risks, while assessors evaluate claims to determine compensation costs.

Proposal Form: Application form where all material facts must be truthfully disclosed for accurate premium calculation.
Cover Note: Temporary proof of insurance until the full policy is finalized.
Renewal Notice: Reminder sent to the insured about upcoming premium dues; options to renew, switch providers, or cancel are given.
Exemption Clause: Specifies exclusions and risks not covered, e.g., injuries during extreme sports.

Risk management involves systematic identification, measurement, cost calculation, and reduction strategies to mitigate risks.
Effective risk reduction includes taking out insurance, implementing safe procedures, enhancing health and safety practices, and installing security systems.

Higher risk levels, item values, and additional loading increase premiums.
No claims bonuses offer discounts for claim-free years; company profit targets can result in premium hikes.
Government levies may add costs to premiums, exemplified by a government-mandated 2% levy on motor insurance premiums.

Initial contact with the insurance company and completion of a proposal form.
Assessment of risk and valuation to determine premium pricing, followed by issuing a policy contract.
A cover note serves as interim proof of insurance until the formal policy is delivered.

Insurance provides coverage against uncertain risks (e.g., fire), while assurance covers known eventualities (e.g., life assurance).

Whole Life Insurance: Payout occurs only upon the insured's death.
Endowment Policies: Pay out either upon reaching a certain age or upon death, combining savings and risk coverage.
Term Policies: Coverage is valid for a specific period; no payout if the insured survives the term.

Insurable Interest: Requires a financial interest in the insured item; compensation is disallowed for items without insurable interest.
Utmost Good Faith: All material facts must be disclosed in good faith during the application process; failure results in void contracts.
Indemnity: Prevents profit from insurance payouts; compensation reflects the insured's pre-loss financial state.

Subrogation: Insurers have the right to recover costs from third parties after compensation is paid.
Contribution: Ensures that if an asset is insured with multiple companies, they collectively pay based on their coverage portion.
Average Clause: Ensures that underinsurance results in proportionate compensation, precluding profit from claims.

Public Liability, Employer’s Liability, Fidelity Guarantee, Theft, Fire, Consequential Loss, Products Liability, Cash In Transit, Goods In Transit, Motor Insurance (various levels of coverage).

Buildings and Contents Insurance, Life Assurance, Health Insurance, Mortgage Protection Policy, Permanent Health Insurance to safeguard against financial liabilities and health costs.