Chapter 2 Flashcards
In terms of the offer and acceptance required to form a contract, how would you view an insurance quotation?
A quotation can be viewed as an offer by the insurer, and for a contract to come into force, there must be an acceptance by the proposer. This acceptance must be within any timescales as specified by the insurer.
What is the purpose of the declaration found within a proposal form?
The declaration states that the information supplied in the proposal form is true and correct to the best of the proposer’s knowledge and belief. It must be signed by the proposer.
Distinguish between general and specific questions in a proposal form.
General questions are usually common to most general insurances and consist of items such as name, address and period of insurance. Specific questions are risk specific, that is they relate to the particular details of the risk to be insured, e.g. description of the insured subject matter, proposer’s age.
What is a premium?
A premium is the amount an insured pays to the insurer for the insurer to accept the risk. It is the insured’s consideration in respect of the insurance contract.
Distinguish between a premium rate per cent and per mille.
A premium is usually arrived at by applying a premium rate to a premium base. A rate per cent is a price in pounds for each one hundred pounds of exposure, while a rate per mille is the price for each one thousand pounds.
What is a deposit premium?
If a premium base is unknown at the start of an insurance period, this can be estimated and a premium charged on this estimated figure. At the end of the period, the premium will be adjusted up or down accordingly. The initial premium paid is known as a deposit premium.
What is a cover note?
A cover note is a document issued as evidence that insurance is in force, pending the issue of the policy.
What is insurance premium tax and at what rate is it charged?
Insurance premium tax is payable on most insurance premiums to HM Revenue and Customs (although collected by insurers). The rate is currently 12%, which took effect from 1 June 2017. This is for all policies except travel insurance and some engineering insurances which have a rate of 20%.
