Insurance

Question 1

What is insurance?

Answer 1

An agreement between the insurer and insured that states that the insurer will compensate for any loss made by the insured, provided that the insured pays premiums

Question 2

What is assurance?

Answer 2

Agreement between the policy holder and beneficiary to Cover for losses that are guaranteed to happen, provides security

Question 3

What are the advantages of insurance?

Answer 3

• indemnification: put back in original financial position

- protects businesses against any insurable losses

Question 4

What are the advantages of assurance?

Answer 4

• security to families

- compensation for medical and hospital bills

Question 5

What are the requirements of a valid insurance contract?

Answer 5

• faith/honesty: when the investigator asks questions, they must be answered honestly, otherwise the contract becomes null and void
• insurable interest: insured has to prove that they will lose financially if asset is damaged/stolen
• contractual capacity: insured must be of legal age
• legality: asset that is being insured must be legal.
• intention to bind: both parties must have the full intention of entering contract
• obligation: both parties are fully aware of the duties they have to fulfill in this contract.
• executionable: contract must be physically possible to perform

Question 6

Name and explain the non compulsory types of insurance (9)

Answer 6

Fire: 
Damage caused by weather 
Vehicle insurance 
Fidelity: loss due to dishonest employees 
Theft: 
Money in transit 
Crop 
Loss of income: if an entrepreneur is injured and unable to work 
Group life cover: employees

Question 7

Name 2 types of non insurable

Answer 7

• normal operational clauses: out of trend, exchange rates etc
• loss due to natural disasters/war/ illegal activities

Question 8

Name and explain the compulsory insurance (3)

Answer 8

• UIF: compensates employees who have lost their jobs. Cannot claim of you quit. Contributions from both employee and owner
• RAF: innocent drivers and passengers are covered for any losses due to road accidents
• COIDA: compensation for workers injured at work. Medical and loss of income compensated

Question 9

Name the concepts of insurance. (10)

Answer 9

Paid up value 
Excess
Re-insurance 
Under- paid 
Proximate clause
Surrender value 
Subrogation
Security
Over- paid
Indemnification

Question 10

Explain paid up value

Answer 10

When you’ve paid enough premiums. Paid up value only for contracts that have a surrender value. Policy still remains in place but no more premiums paid/ adjusted lower

Question 11

Explain excess

Answer 11

Amount of money that is not covered in the plan e.g.: 1st 5000 had to come from pocket

Question 12

Explain re-insurance

Answer 12

Agreement between insurance houses and re-insurance companies to spread risk.

Re-insurance is an insurance company that insures other insurance companies, in case they have insufficient funds to pay out a client

Question 13

Explain under value

Answer 13

This is when a client has not paid enough premiums. Their policy might cover 100, but the value of the asset is 500. Only the value of the premiums is paid out

Question 14

Explain proximate clause

Answer 14

Contracts specify exactly what is being covered in the event. Extensions are the proximate clause

Question 15

Explain subrogation

Answer 15

Only 1 person can claim in the event. Only one insurance company pays for damages. Loss is incurred to the guilty party. Ensures that no party makes a profit

Question 16

Surrender value

Answer 16

If the insured wants to cancel his policy, a surrender value has to be paid first. Money paid before one can leave the contract

Question 17

Explain over paid

Answer 17

Client is paying too much premiums. If event takes place, only the value of the assets damaged is claimable.