Insurance

Question 1

What is insurance?

Answer 1

An agreement between an insurance company (the insurer) and someone who wants financial protection ( the insurer) that compensation (indemnity) will be paid if a particular loss occurs.

Question 2

Define the term premium

Answer 2

The charge made by a insurance company

Question 3

What is an insurance policy

Answer 3

The term drawn up between the insurer and in the insured person

Question 4

Pooling of risks

Answer 4

This occurs when all those persons at risks contributes a small premium to a fund or pool operated by an insurance company so that when a contributor of that pool suffers a loss there is enough money to indemnify them.

Question 5

Subrogate

Answer 5

(To take the place of) when an insurance company pays out compensation against a claim, the money they pay out takes the place of the article damaged. For example if the insured has a damaged car and the repairs exceeds the value of the item they will pay the owner the value of the vehicle and the damaged car is not property of the insurance company who will sell it and retain the scrap value

Question 6

Proximate cause

Answer 6

When an insurance company covers a particular risks, it is quite possible that damage may be incurred which is not directly related to the terms of the policy but which may be indemnified by the insurance company.

Question 7

Indemnity

Answer 7

The insurance principle by which the policy holder is compensated for the loss incurred.

Question 8

The three important aspects of indemnity

Answer 8

No profiteering, overinsurance and underinsurance

Question 9

No profiteering

Answer 9

You should not make a profit from our compensation claim but to exactly replace what was there before.

Question 10

Overinsurance

Answer 10

If the insured over insures an item more than it’s true value, in the event of a loss they will only be compensated for the true value

Question 11

Underinsurance

Answer 11

If a loss occurs where an item is underinsured less that its true value then the policy holder will be compensated in proportion to its true value in the event of a loss

Question 12

Utmost good faith

Answer 12

This principle of insurance means that the parties to insurance has a legal obligation to be truthful in the declaration they make. They most disclose all relevant information and must not make any misrepresentations.

Question 13

Contribution

Answer 13

This occurs when two insurance companies are liable to indemnify the insured for the same event. The proportion the insurer pays depends on the amount of premium paid by the insured into that company.