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Business > Insurance > Flashcards

Insurance Flashcards

1
Q

What is Insurance? Give an example of something you can insure against.

A

Insurance is financial protection that covers any losses that MIGHT happen. e.g. burglary, car accident

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2
Q

How does insurance work?

A

The fees (premiums) collected by the insurance company are used to pay compensation for any claims.

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3
Q

What is a Premium?

A

A premium is a fee paid by the insured to the insurance company to cover a particular risk.

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4
Q

What is Compensation?

A

Compensation is the payment made to an insured person if they suffer a loss or injury.

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5
Q

How does an insurance company make a profit?

A

Any money not paid out as compensation is profit for the insurance company.

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6
Q

What are the five principles of Insurance?

A 
Utmost Good Faith
Insurable Interest
Indemnity
Subrogation
Contribution
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7
Q

What is Utmost Good Faith? What is the consequence of not obeying this principle of insurance? Give an example.

A

It means a person applying for insurance is obliged to answer all question truthfully when completing the proposal form and disclose all relevant factors.
If you lie you will not get compensated when you make a claim.
Example: If you are asked if you smoke you must be truthful when answering or you will not receive compensation.

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8
Q

What is Insurable Interest? Give an example of something that breaks this principle of insurance.

A

You must gain (financially) by the insured assets existence and suffer (financially) by it’s loss.
Example: You cannot insure your friends bike as if it gets stolen you will not be financially affected.

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9
Q

What is Indemnity? Give an example.

A

You cannot make a profit from a loss. The compensation you receive will only be equal to the current value of the item.
Example: If a watch is insured for €20 you cannot make a claim for €300 if it is stolen.

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10
Q

What is Subrogation? Give an example.

A

The insurance company has the right to seek compensation from the party that caused the loss/damage and take the damaged item for scrap value.
Example: An insurance company pays compensation to a business whose stock was destroyed by a fire caused by a negligent electrician.
The insurance company can sue the electrician for the amount of compensation it had to pay out.
The insurance company can sell any remaining stock to recover some of it’s compensation.

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11
Q

What is Contribution? Give an example.

A

If you insure an item with more than one insurance company, each insurance company will contribute/divide the compensation. You will not benefit any more than if you were with one company

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12
Q

What are the types of personal assurance? (8)

A
  1. Life Assurance
  2. Motor Insurance
  3. Home Insurance
  4. Home Contents Insurance
  5. Health Insurance
  6. Travel Insurance
  7. Mobile Insurance
  8. Mortgage Protection Insurance
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13
Q

What is Assurance? Give an example.

A

Assurance is protection against something that will happen.E.g. Death

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14
Q

What is Life Assurance? What are the three types of Life Assurance?

A

Life Assurance is protection against a death that will happen. The three types of life assurance are:

  1. Whole Life Assurance
  2. Endowment Assurance
  3. Term Policy
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15
Q

What is Endowment Assurance

A

An agreed amount of money is paid when the insured reaches a certain age or on the death of the person whichever comes first.

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16
Q

What is Whole Life Assurance?

A

An agreed amount of money is paid to the person’s dependents when the individual dies.

17
Q

What is a Term Policy

A

An agreed amount is paid if you die within a certain period of time. This might be appropriate if you want to protect your family while they are young.

18
Q

What is Motor Insurance? What makes sure more people get motor insurance? What are the three types of Motor Insurance?

A

Motor Insurance is more common because it is required by law.
Motor Insurance is insurance against the POSSIBILITY of you being involved in a car accident or having your car stolen or damaged.
1. Third Party
2. Third Party Fire and Theft
3. Fully Comprehensive

19
Q

What is third party motor insurance?

A

Provides compensation to owners of property damaged by your car- it does not compensate for any damage to your car.

20
Q

What is third party fire and theft motor insurance?

A

Provides compensation to owners of property damaged by your car-it does not compensate for any damage to your car BUT your car is covered in case of fire or theft.

21
Q

What is fully comprehensive motor insurance? Why would people not buy fully comprehensive insurance?

A

Provides compensation to all injured parties by your car AND also compensation for any damage to your car. Due to extra cover-premium is more expensive (but worth it. However third party is cheaper and suitable for younger drivers.)

22
Q

What is Home insurance?

A

This covers the house building in the case of fire, storm or flood damage.

23
Q

What is Home Contents Insurance?

A

This covers the house contents in the case of fire, theft or flood damage.

24
Q

What is Health Insurance?

A

This covers the cost of hospital care and medical bills in case of accident or illness.

25
Q

What is travel insurance?

A

This covers the person on holiday in case of missing luggage, passports, cancelled flights.

26
Q

What is Mobile Insurance?

A

This covers the person in case their phone is lost or stolen.

27
Q

What is mortgage protection insurance?

A

This is a type of life insurance policy that repays your mortgage if you die during the repayment term.

28
Q

Explain briefly the 4 steps to taking insurance.

A
  1. Seek quote: Shop around for the best quote
  2. Complete Proposal Form: This is an application form to be completed when applying for insurance. “You must tell the truth when filling in the proposal form.” Items on proposal Form, Age, Address, Gender, Value of Item.
  3. Pay Premium: This is the fee paid for insurance.
  4. Issue Policy: the insurance company will send you out your Insurance Policy. This is a document stating all the details of:
    -the risks covered
    -period covered
    -value of cover
    -conditions of the contract
    It is the contract of Insurance.
29
Q

What is Insurable Risk?

A

It must be possible to calculate the risk involved and there must be a likelihood of the risk not happening.
E.g. Burglary

30
Q

What is Non-Insurable Risk?

A

Chances of risk/loss happening are impossible to estimate.

E.g. The End of the World

31
Q

Name three ways you can reduce your risk levels and therefore have a cheaper premium.

A

Install a sprinkler system to reduce the risk of fire
Install an alarm to reduce the risk of burglary
Avoid smoking to reduce the risk of illness.

32
Q

What is an actuary? How is a premium determined?

A

Actuary: this is the person who calculates premium i.e. how much insurance that you will pay.
When calculating the quote the Actuary will establish how risky or how likely it is for you to have an accident.
The greater the risk the higher the premium you must pay.

33
Q

What is compensation? What are the three levels/types of insurance? Explain each.

A

Compensation is a reward (usually money) awarded to someone in recognition of loss, suffering or injury.

Fully Insured - this means that you will be compensated for the full amount of the damage/loss caused.

Over Insured - this means that you will only be compensated for the value of the damage/loss caused. You will not get extra.

Under- Insured - this means that you will only be compensated for a proportion of the damage/loss caused.

34
Q

What is loading? Explain with example.

A

Extra money added on to a premium because of added risk. E.g. a young inexperienced driver will pay a more expensive premium because there is a higher risk of an accident.

35
Q

What is a no claims bonus? Explain with example.

A

A no claims bonus is a discount taken from a premium because of lowered risk. E.g. No claims in your insurance while driving for 20 years.

36
Q

What is an average clause? Give an example and the formula.

A

It is a condition included in insurance policies that limits the value of the claim if you are under-insured. E.g. House Value 250,000
Insured for: 150,000, House is only 3/5 insured so if there is a claim of 40,000 only 24,000 (3/5 of 40,000) in compensation will be paid.
Formula: Average clause=Sum Insured/Actual Value (x) (multiplied by) loss.

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