Insurance Flashcards
Why do people get insurance
People get insurance as a financial protection against something that might happen such as illness or theift
What is insurance
Insurance is a written agreement between an individual and an insurance company to cover the financial loss suffered if their asset is damaged in return for a fee.
Name the 2 types of car insurance
Fully comprehensive insurance
Third party fire and thieft insurance
Explain both of them
Fully comprehensive insurance covers the damage to the policy’s holders own car and to the other drivers car in the even of an accident, fire, or thieft.
Third party fire and theft insurance only covers damage to the other drivers car in the event of an accident.
Name the 5 principles of insurance
- Insurable interest
- Indemnity
- Utmost good faith
- Contribution
- Subrogation
Explain insurable interest
You must gain by existence of an item and suffer from its loss. You can only insure an item you own.
Explain indemnity
You cannot make a profit on insurance
Explain utmost good faith
You cannot lie when filling in insurance forms
Explain contribution
If an item is insured with 2 insurance companies they share paying
Explain subrogation
The insurance company can sue the person who caused the damage to recoup the money they paid out.
What is an actuary
The person who assesses the risk and calculates premiums for an insurance company is called an actuary.
What is the name given to the amount that is added to the basic premium due to risk
A loading
Explain what a no claims bonus is
A no claims bonus is a discount received for not making a claim on car insurance. This is deducted from premium cost
What is the premium formula and the average clause formula
Basic premium + loadings - discounts
Amount insured x loss
