Insurance

Question 1

Define Insurance

Answer 1

A contract of utmost good faith between an insurance company and an individual. Insurer promises to compensate the insured

Question 2

Assurance

Answer 2

Taken out as cover for a risk that is certain, like loss of life

Question 3

Examples of assurance (6)

Answer 3

• Life assurance
• Endowment
• Retirement annuity
• Disability cover
• Trauma or dread disease cover
• Funeral cover

Question 4

Insurable risks (9)

Answer 4

• Fire insurance
• Vehicle insurance
• All-weather insurance
• Insurance of money in transit
• Fidelity insurance
• Liability insurance
• Crop insurance
• Group life cover
• Loss of income

Question 5

Non-insurable risks (7)

Answer 5

- Normal operational risks
    > Inflationary factors
    > Changes in fashion
    > Improvements in machinery
    > Losses from bad debts
- Losses caused by war
- Illegal activities

Question 6

Compulsory Insurance (3)

Answer 6

• Unemployment insurance
• Compensation for Occupational Injuries and Diseases
• Road Accident Fund

Question 7

Requirements for valid contract (2)

Answer 7

• Insurable interest: prove financial loss if object damaged

- Good faith: disclosure of all relevant info

Question 8

Indemnification

Answer 8

Insurer undertakes to indemnify the insured in the event of a specific loss

Question 9

Security

Answer 9

Give security to the insured’s dependants in the event of death or retirement

Question 10

Average Clause

Answer 10

If the property is not insured for the full values, the full value of the loss will not be paid out

Question 11

Excess

Answer 11

The amount on each claim that is not covered by the policy

Question 12

Re-insurance

Answer 12

When there is insurance of insurance

Question 13

Proximate Clause

Answer 13

The insurer is only responsible for the losses that are the direct result of the event that was insured

Question 14

Subrogation

Answer 14

The right to only claim once for one incident

Question 15

Cession or Assignment

Answer 15

Any rights that the insured has in a policy may be transferred to another person when a written clause is added

Question 16

Surrender Value

Answer 16

If a policy is ended before its time, the value insurance works out to pay

Question 17

Advantages of insurance (2)

Answer 17

• Protects a business against different kinds of losses

- Puts them back in financial position before

Question 18

Advantages of assurance (4)

Answer 18

• Life assurance provides security to families
• Life assurance can be ceded for a loan
• Protects creditors
• Provides security by making provision for accidents