Chaoter 9: Insurance for Households and Individuals Flashcards
What is Insurance ?
Insurance offers financial protection against possible loss and is designed to place the insured person back in the same financial position they were in before the loss occurred.
What’s a Premium?
Premium The amount charged by an insurer in return for providing insurance cover for a particular risk.
Compensation The financial payment made to the insured person if they suffer an insured loss.
Why insure something and what can you insure ( insurance interest)
Insurable Interest To insure something, you must benefit by its existence and suffer (financially) from its loss. You can insure your own property and possessions but not your friend’s or neighbour’s.
Utmost good faith meaning?
Utmost Good Faith When applying for insurance, all material facts relating to the policy must be disclosed to the insurance company. A material fact is anything that is likely to influence the decision to grant insurance, or, to affect the level of premium charged. The basic rule here is to be truthful and honest and tell the insurance company everything which may be relevant.
Indemnity meaning?
Indemnity A profit cannot be made from insurance. This recognises that insurance exists to put the insured person back in the same financial position as they were in before suffering the loss.
Subrogation meaning?
Subrogation Once an insurance company has paid compensation for any insured item, the right of ownership of that item passes to the insurance company. The insurance company is also entitled to sue any third party responsible for the loss in order to recover any compensation paid.
What’s the meaning of Contribution?
Contribution Where the same risk is insured with more than one insurer they will divide the cost of the claim between them. The amount paid by each company will be proportionate to risk insured by each of them. The total compensation paid will not exceed the value of the item.
LIFE ASSURANCE
Life Assurance: Assurance is protection against a certain future loss; in the case of life assurance, this means death.
The 3 types of life assurance?
• Term policy: This is for a fixed time period and usually covers the duration of a loan or mortgage, so that if the insured person dies during the term of the loan or mortgage, any outstanding amount is paid off.
• Whole-life policy: This pays compensation on the death of the insured person.
• Endowment policy: This pays a guaranteed amount on a specified date or, if it occurs sooner, on the death of the insured
What are three different motor insurances ?
Third party only: Covers injury to another person or damage to another person’s car or property caused by the insured driver. It does not cover the policyholder or their vehicle. This is the minimum car insurance required by law.
Third party, fire and theft: As for third party, plus covers the insured person for their car catching fire or being stolen.
Comprehensive: Covers all parties and vehicles that suffer loss in an incident, including the insured person and their car.
HOME INSURANCE
Home insurance (buildings cover): This covers the building in the event of fire, flood or storm damage. It provides compensation if the structure of the building is damaged.
Home contents insurance: This covers all the contents of the house from damage such as fire, flood, burst pipes, etc. It also covers against burglary. Most home insurance policies cover both buildings and contents.
What is. Personal Accident Insurance: ?
Personal Accident Insurance: This covers the insured person in the event of an accident.
Health Insurance:
Health Insurance: This covers the cost of private hospital care and some medical bills.
What is Critical Illness Cover?
Critical Illness Cover: This is cover in the event of a serious illness. It pays out a tax-free lump sum if you are diagnosed with one of the serious illnesses or disabilities that your policy covers.
What is Critical Illness Cover?
Critical Illness Cover: This is cover in the event of a serious illness. It pays out a tax-free lump sum if you are diagnosed with one of the serious illnesses or disabilities that your policy covers.
