Insurance Flashcards
What is insurance?
It is a way of spreading risk among a large number of people who contribute to a pool of common funds. People obtain financial protection against losses that result from the occurrence of risks.
Insured
insurance is taken out by this person who requires the insurance cover
Insurer
Insurance company
Premium
payment for insurance cover
What are the purposes of insurance?
Risk reduction
Financial protection for private individuals
Provides compensation
Insurance companies also try to prevent or reduce losses
Helps to build business confidence
For import and export purposes
It is compulsory by law to be insured
Insurance companies help a country’s economy to expand
Provides employment
Savings and investment opportunities
Compensation
payment in response to an insurance claim
What is the pooling of risks?
refers to the spreading of financial risks evenly among a large number of contributors to the program
How do insurance companies make profits?
Premiums are fixed according to the level of risk, the size of the insurance pool, and the amount of claims paid from the insurance pool.
How to Calculate profit earned by Insurance companies
Profit = (premiums + investment income) – (losses resulting in claims + administrative costs + dividends)
Liability insurance
This is a product, employer, and public liability insurance that offers cover against the risks of claims made because of the negligence of the company
What are the main responsibilities of a business?
To make sure that the product it makes is safe for consumers.
To provide a safe workplace for its employees
To ensure that its activities do not injure members of the public or their property.
Employer’s liability insurance?
Insurance cover required by law to cover the risk of accidents to employees in the work place
Product liability insurance
Insurance covering claims made by the public because of a business’s negligence
Key person insurance
This is a special type of life insurance that pays out compensation to a business if a named person who is important to the business dies
What is a fidelity bond/guarantee?
This type of insurance, insurances a business against possible losses resulting from the dishonesty of an employee
What is cash in transit?
This insurance covers the theft of money, bank notes cheques, and credit or debit cards that are being carried by employees. It also covers the injury or death of employees effected.
What is goods in transit?
Insurance cover provided force single consignments of goods or all goods while they are being transported
Premises insurance
This covers burglary and theft insurance and fire insurance.
It provides cover against risk of damaged buildings by fire, wind, flood, impact of aircraft/ road vehicle and damage by intruders.
Consequential loss/ Business interruption insurance
This insurance covers for loss of profits for a business that is disrupted or that has to close because of a fire/ flood.
This covers;
Loss of revenue
Hiring temporary premises
Payment of interest on loads and other financial commitments
Payments of wages and salaries
Payment of other expenses
Motor insurance
Businesses owning vehicles must have third-party insurance as it is the minimum legal requirement and most businesses will have comprehensive cover.
Plate glass insurance
This insures toughened glass in shock windows, showrooms and other commercial premises which are expensive to replace, to cover the risk of breakage as a result of vandalism or accident.
Bad debt/ credit insurance
This covers the risks of selling goods on credit and the customer failing to pay their debts.
