Questions and Answers
Key Person Insurance can compensate a company for financial loss due to the death of an important employee.
True
Plate Glass Insurance is meant to protect personal property against theft.
False
Buildings and Contents Insurance offers protection only for the contents of a house.
False
Life Assurance pays out to dependent family members upon the insured person's death.
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Health Insurance covers the medical bills of family members in case of illness.
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A Mortgage Protection Policy pays off the mortgage amount if the holder dies while the mortgage is still active.
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Permanent Health Insurance provides a full salary to individuals who cannot work due to accident or illness.
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Endowment is a type of permanent health insurance.
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Health Insurance is often required by mortgage lenders as a form of security.
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Key Person Insurance is not related to the personal life of an employee.
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Study Notes
Insurance Overview
- 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.
Key Insurance Terms
- 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 Approach
- 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.
Factors Influencing Premium Costs
- 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.
Insurance Process Steps
- 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 vs. Assurance
- Insurance provides coverage against uncertain risks (e.g., fire), while assurance covers known eventualities (e.g., life assurance).
Life Assurance Policies
- 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.
Principles of Insurance
- 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.
Indemnity Concepts
- 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.
Types of Business Insurance
- 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).
Types of Household Insurance
- Buildings and Contents Insurance, Life Assurance, Health Insurance, Mortgage Protection Policy, Permanent Health Insurance to safeguard against financial liabilities and health costs.
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Description
This quiz covers different types of insurance relevant to businesses and households. It includes key person insurance, plate glass insurance, and buildings and contents insurance. Test your knowledge on how these insurances protect against financial losses and damages.
