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Business Studies > Chapter 17- Insurance > Flashcards

Chapter 17- Insurance Flashcards

1
Q

What is insurance?

A

Insurance is financial protection that covers any loss that might happen E.G. burglary

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2
Q

What is a premium?

A

A premium is the fee paid by the insured to the insurance company to cover a particular risk

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3
Q

What is compensation?

A

Compensation is the payment made to an insured person if they suffer a loss or injury

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4
Q

How does insurance work? (premiums and compensation)

A

The premiums collected are managed by the insurance company and used to pay compensation for any claims.
Any money not paid out as compensation is profit for the insurance company.

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5
Q

Principles of insurance: Utmost good faith

A

A person is obliged to answer all questions truthfully when completing the proposal form and disclose all relevant facts.
If you lie you may not get compensated if you make a claim

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6
Q

Utmost good faith: Example

A

If you are asked if you smoke you must be truthful when answering questions or you will not receive any compensation

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7
Q

Principles of insurance: Insurable interest

A

You must gain (financially) by its existence and suffer (financially) by its loss

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8
Q

Insurable interest: Example

A

You cannot insure your friend’s bike as if it gets stolen you will not be financially affected

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9
Q

Principles of insurance: Indemnity

A

You cannot make a profit from insurance. The compensation you receive will only be equal to the current value of the item

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10
Q

Indemnity: Example

A

If a watch is insured for €200 you cannot make a claim for €300 if it is stolen

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11
Q

Principles of insurance: Subrogation

A

The insurance company has the right to seek compensation form the party that caused the loss/damage and take the damaged item for scrap value

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12
Q

Subrogation: Example

A

An insurance company pays compensation to a business whose stock was destroyed by a fire caused by a negligent electrician.
The insurance company can sue the electrician for the amount of compensation it had to pay out. The insurance company can sell any remaining stock to recover some of its compensation

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13
Q

Principles of insurance: Contribution

A

If you insure and item with more than one company, each insurance company will contribute/divide the compensation.
You will not benefit any more than if you were insured by one company

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14
Q

TYPES OF PERSONAL INSURANCE: Life assurance

A

Assurance is protection against a risk that will happen E.G. death

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15
Q

LIFE ASSURANCE: Whole life assurance

A

An agreed amount of money is paid to the person’s dependants when the individual dies

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16
Q

LIFE ASSURANCE: Endowment assurance

A

An agreed amount of money is paid when the insured reaches a certain age or on the death of the person - whichever comes first

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17
Q

TYPES OF PERSONAL INSURANCE: Motor Insurance

A

Motor insurance is required by law

18
Q

MOTOR INSURANCE: Third party insurance

A

Provides compensation to owners of property damaged by your car - it does not compensate for any damage to your car

19
Q

MOTOR INSURANCE: Third party fire and theft

A

Provides compensation to owners of property damaged by your car - it does not compensate for any damage to your car.
Car is also covered in case of a fire or if it is stolen

20
Q

MOTOR INSURANCE: Fully comprehensive

A

Provides compensation to all injured parties by your car and also compensation for any damage to your car.
Due to extra cover the premium is more expensive - but worth it

21
Q

MOTOR INSURANCE: Key terms

No Claims Bonus and Loading

A

NO CLAIMS BONUS : a discount on an insurance premium. It is a reward for not making any claims

LOADING : is an extra amount added to your premium due to added risk

22
Q

Home Insurance

A

This covers the house building in the case of fire, storm or flood damage.

23
Q

Home Contents Insurance

A

This covers the house contents in the case of fire, theft or flood damage.

24
Q

Health Insurance

A

This covers the cost of hospital care and medical bills in case of accident or illness.

25
Q

Travel Insurance

A

The covers the person on holiday in case of missing luggage, passports or cancelled flights.

26
Q

Mobile Insurance

A

This covers the person in case their phone is lost or stolen.

27
Q

Mortgage Protection Insurance

A

This is a type of life insurance policy that repays your mortgage if you die during the repayment term.

28
Q

Step one to taking out insurance:

A

SEEK QUOTE: shop around for the best quote/ price.

29
Q

Step two to taking out insurance:

A

COMPLETE PROPOSAL FORM: This is an application form to be completed when applying for insurance. You must tell the truth when filling in the proposal form.
Items in proposal form include- age, address, gender, value of item.

30
Q

Step three to taking out insurance:

A

PAY PREMIUM: This is the fee paid for insurance.

31
Q

Step four to taking out insurance:

A

ISSUE POLICY: The insurance company will send you out your insurance policy. This is the contract of insurance. It is a document stating the details of:

  • risks covered
  • period covered
  • value of cover
  • condition of contract
32
Q

Actuary

A

This is the person who calculates premium (how much insurance you will pay)

33
Q

How does an actuary calculate a quote?

A

When calculating the quote the actuary will establish how risky or how likely it is for you to have an accident.
The greater the risk, the higher the premium you must pay.

34
Q

Compensation

A

Is a reward (usually money) awarded to someone in recognition of loss, suffering or injury.

35
Q

Fully insured:

A

This means that you will be compensated for the full amount of the damage or loss caused.

36
Q

Over insured:

A

This means that you will only be compensated for the value of the damage or loss caused. You will not receive extra.

37
Q

Under-insured:

A

This means that you will only be compensated for a proportion of the damage or loss caused.
In business this is called Average Clause.

38
Q

Average Clause:

A

Average clause is a condition included in insurance policies that limits the value of a claim if you are under-insured.
It means you will only be compensated for the same proportion to which you are insured.

39
Q

Average Clause Formula

A

Average Clause= (Sum Insured / Actual Value) x Loss

40
Q

Insurable risk:

A

It must be possible to calculate the risk involved and there must be a likelihood of the risk not happening.
E.G. burglary

41
Q

Non-insurable risk:

A

Chances of the risk/ loss happening are impossible to estimate.
E.G. end of the world.

Business Studies (26 decks)

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