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Insurance Flashcards

c11

1
Q

Define insurance

A

Insurance is a protection against loss which we hope will not happen.

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2
Q

How does insurance work?

A

A large number of people facing similar risks will pay a relatively small premium, into a fund administered by the insurance company and if they have
an accident they can claim compensation from this fund.

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3
Q

What is an actuary?

A

This is a person who calculates insurance premiums

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4
Q

What is an assessor?

A

this is a person who inspects damage and calculates compensation to be paid to the insured party for loss suffered

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5
Q

What is an insurance broker?

A

This is a person who sells insurance on behalf of different insurance companies

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6
Q

What is an insurance agent?

A

These people sell insurance on behalf of once insurance company

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7
Q

What is risk management?

A

It is a planned approach to minimise risks that households and businesses are exposed to

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8
Q

What are the steps in risk management?

A

Identify- Identify all possible risks

Work out- costs that will be incurred if the risks actually happen

Work out- How much it will cost to protect itself

Take-measures to reduce the likelihood of these happening

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9
Q

What are the way to minimise risks?

A

Install security systems- secrurity risks can be reduced by alarm and cctv

Training- everyone should be aware of health and safety procedures

Appoint a health and safety officer-they can report health and safety issues and conduct regular safety inspections

Ensure employees are aware of health and safety rules

Take out insurance cover to transfer the risk to an insurance firm in return for paying a premnium

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10
Q

What are the principles of insurance?

A

5

Insurable interest
Utmost good faith
Indemnity
Subrogation
Contribution

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11
Q

What is the principle of utmost good faith

A

Utmost good faith means that when you are
completing the proposal and claim forms, you
must be completely truthful.

This includes material facts which may not be
asked for on the forms but may affect the
premium or compensation to be paid.

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12
Q

What is the principle of insurable interest

A

This means that the insured
person must own the item to
be insured. They must benefit
from its existence and suffer
financially from its loss.

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13
Q

What is the principle of contribution

A

It is used when a household or business insures an item
with two or more insurance firms.

This might occur if an individual or business tries to make
a profit from an insurance claim by claiming from each
insurance firm.

Any compensation payable will be divided between them
in proportion to the value insured with each.

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14
Q

What is the principle of indemnity

A

The aim of indemnity is to place the insured person in the
same financial position they were in before the loss
occurred and not in a better position. You cannot make a
profit from insurance.

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15
Q

What is the principle of subrogation

A

This principle states that once the insurance company has given you compensation for that item.

The insurance company owns the item and has the right to claim compensation from the person who caused damage.

Passing the legal right for an item from the insured to the insurer.

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16
Q

Which principles apply to before you take out insurance?

A

Utmost good faith and insurable interest

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17
Q

What does policy mean?

A

Policy – this is a legal contract outlining what exactly is insured and in what circumstances. It also contains any exclusions
and policy excesses.

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18
Q

What does premium mean?

A

Premium - The fee paid for insurance. This will vary with the likelihood of the risk occurring.

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19
Q

What does compensation mean?

A

Compensation – This is the amount of money paid out by the insurance company in the event of a successful claim.

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20
Q

What does loading mean?

A

Loading is an additional cost to your insurance premium because you are a high risk factor.

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21
Q

What does reduction mean?

A

Reduction is a discount to your insurance premium because you are a low risk factor.

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22
Q

What does a proposal form mean?

A

Proposal form- This is the application form for insurance.

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23
Q

What is under insurance?

A

The insured fails to insure the asset for the full value of the asset. In the event of a claim for total loss or partial loss
under insurance may result in economic losses to the policy holder, since the claim would exceed the maximum amount that
can be paid out by the insurance policy. The motivation for being under insured is the lower premiums paid by the policy
holder, however, the losses arising from a claim will far outweigh savings experienced in reduced insurance premiums as a consequence of the inadequate insurance.

24
Q

What are the two categories of insurance?

A

Business and Household insurance

25
Q

What is contents insurance?

A

Contents Insurance-This provides the business with protection against any loss or damage to stock, raw materials,
components etc. caused by burglary, fire or flood.

26
Q

What is plate glass insurance?

A

Plate Glass Insurance- if the business’s windows are damaged the insurance company will pay compensation.

27
Q

What is motor insurance?

A

Motor Insurance-A compulsory type of insurance that must be paid by law if the business or individual own a motor vehicle.
Protects the business from being at a financial loss as a result of a motor accident. Three types of motor insurance include;
third party insurance, third party fire & theft and fully comprehensive insurance.

28
Q

what is consequential loss insurance?

A

Consequential loss Insurance- the company will pay the business for the profits that they lost while the business was closed
or having repairs as a result of major damage.

29
Q

What is product liability insurance?

A

Product liability insurance- the insurance company will cover if anyone is killed or injured while using the company’s
product.

30
Q

What is fidelity guarentee insurance?

A

Fidelity Guarantee Insurance- the insurance company will give the business money if any of the employees steal from them.

31
Q

What is transit insurance?

A

Transit insurance- the business will receive money if cash or stock is stolen while being transported.

32
Q

What is public liability insurance?

A

Public Liability Insurance-Public liability insurance protects the business against financial loss as a result claims made by
members of the public such as consumers who are injured or hurt on the business premises.

33
Q

What is employers liability insurance?

A

Employer’s Liability Insurance-Employer’s liability protects the business against financial loss as a result claims made by
employees as a result of injuries they have sustained in the workplace.

34
Q

What is building insurance?

A

Premises/Buildings Insurance- This provides the business with protection against any loss caused by damage to the structure of the building caused by fire, flood or storm. You should ensure a smoke alarm is fitted and there are adequate fire extinguishers in the premises.

35
Q

What is the importance of insurance for business?

A

BUSINESS SURVIVAL: Ensures business will continue to exist if faced with a catastrophe. It will financial protect the
business against different areas of loss/damage.

RISK MANAGEMENT: insurance helps a business to lower its risks. It makes a business more aware of how to avoid
loss/damage.

IMPROVED CASH FLOW: paying out of small premiums each year is better financial sense than paying out a lump sum if
loss/damage occurs.

36
Q

What are the types of household insurance?

A

Heath insurance
Life assurance
Whole life insurance
Endownment
House and contents insurance
Mortgage insurance

37
Q

What is health insurance?

A

Health insurance- this insurance pays private medical bills such as cost of staying in hospital. By law insurance companies
cannot charge older people more, this is called a community rating.

38
Q

what is life assurance?

A

Life assurance- Assurance is protection against certain future loss.

It involves setting aside a portion of current income in order to provide for a definite future need. Protects the people whom are financially dependent on the insured.

39
Q

What is whole life insurance?

A

Whole life: covers a person all of their life and when they die the money is paid to the next of kin.

40
Q

What is endowment insurance?

A

Endowment : the premium is paid for a certain number of years and when you die or reach a certain age a lump sum is paid
out.

41
Q

What is house and contents insurance?

A

House and contents insurance- this covers buildings and contents against fire, flood, storm, theft.

42
Q

What is mortgage insurance?

A

Mortgage protection- protects the insured if they cannot pay their mortgage repayments due to ill health, redundancy or
death. The insurance company will pay it until they can afford to pay it again themselves.

43
Q

What are the types of motor insurance?

A

Motor insurance
Comprehensive car insurance
Third party fire and theft

44
Q

What is motor insurance?

A

Motor Insurance- It is compulsory to have 3rd party motor insurance. This is to protect any injury or damage caused to
another person.

45
Q

What is comprehensive car insurance?

A

Comprehensive car insurance- covers everyone/ everything that may be involved in an accident. It is more expensive than
3rd party.

46
Q

What is third party fire and theft insurance?

A

Third party fire and theft- the insurance company pays compensation for any damage, injury, theft or fire caused.

47
Q

What ae the steps to insurance?

A

1- contact an insurance company or broker
2- complete an insurance proposal form
3- premium calculated by actuary
4-insurance policy issued to customer
5- insurance claim if loss occurs
6- receive compensation

48
Q

What does under insured mean?

A

Underinsured means the business has inadequate insurance cover. The insured fails to insure for the full value of the policy.

In the event of a claim for total loss or partial loss underinsurance may result in economic losses to the the policy holder, since the
claim would exceed the maximum amount that can be paid out by the insurance policy.

49
Q

What are consequences of under insurance?

A

Underinsurance could result in a serious financial crisis in a business depending on the asset that is insured. For example if a
building is insured for €300,000 and is subsequently destroyed in a fire and the cost to replace the building is €500,000 the
business will have to make up the difference of €200,000 from its own resources.

The lower premiums will reduce the business costs and thereby increase profits. This could be intentional with the full
knowledge of the risk. However, the losses arising from a claim may far exceed any marginal savings in insurance premiums.
It may not be intentional.

50
Q

Why would someone under insure?

A

The motivation for being underinsured is the lower premiums paid by the policy holder, however, the losses arising from a
claim will far outweigh savings experienced in reduced insurance premiums as a consequence of the inadequate insurance.

51
Q

What are similarities between business and household insurance/?

A

-They both carry out risk management and choose what risks to insure against
-They both apply for and fill out insurance forms
-They both should reassess and update the value of items so they are not underinsured or over insured

52
Q

What are differences between business and household insurance/?

A

-Businesses face a larger amount of risk
-Businesses face larger potential financial losses than a household
-Businesses can treat insurance premiums as a taxable expense, whereas households cannot pay for insurance before being taxed

53
Q

What is a no claims bonus?

A

A new claims bonus is the policyholder will get a discount or deduction on their motor insurance premium for every year that they do not make a claim. If you make a claim, your new claims bonus will be affected either it will be lost or reduced and term, you will face higher premium the following

54
Q

What is a claim form?

A

It is a form that you submit when submitting an insurance claim when you request reimbursement or compensation following an accident

55
Q

What is an insurance policy?

A

It is a contract between the insured person and the insurance company which outlines the terms and conditions of the insurance cover

56
Q

What are the factors that influence the size of your insurance premium?

A

Level of risk faced - the higher the probability of the insurance company having to pay a claim the higher the premium

Value of item - the higher the value of the item the higher the potential compensation the insurance company would have to pay out and so the higher the premium

Number of claims made - if the insurance company sees an increase in the number of payout for a certain claim it will increase the cost of premiums to offset this increase

Profit level required by insurance company - insurance companies such as Aviva a public limited company so their main objective is to achieve a certain level of profit to satisfy the shareholders. So they need to make a certain amount of money in order to satisfy their shareholders meaning that they may need to adjust premiums if money is not being made.

Government Levies- Evie is an extra charge imposed on something. If a levy is applied to an insurance type, it will be applied to relevant premiums increasing the price.

Business (12 decks)

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