Insurance Unit 4 Flashcards
Define Insurance
Financial protection against a possible loss that may or may not happen
Define Risk Management and outline the steps in risk management
A planned approach to minimising risks to which the company is exposed
Steps:
- Identify all risks that the business might experience e.g fire, negligence
- What could cause the loss?
- What is the likelihood of the loss happening?
- Calculate the various methods of protecting the business
- Take out insurance on the risk
Outline 2 risk reducing methods in a business
Cease activities that could cause the loss
Educate and train employees
Name the 7 principals of insurance
- Insurable Interest
- Utmost Good Faith
- Indemnity
- Subrogation
- Contribution
- Average Clause
- Proximate Clause
Outline Insurable Interest
The policy holder must benefit from the existence of the object and suffer from its loss, loss must be financial
It is not necessary to own the asset to have Insurable interest
Emotional attachment is not enough to establish Insurable interest, must be a legal relationship
Outline Utmost Good Faith (Uberrima Fidei)
The insured must give truthful information and disclose all material facts on the proposal form
Material Fact: a piece of information that helps the insurance company assess the risk
If a material fact is deliberately omitted the contract can be declared void
Outline Indemnity
The insurance company guarantees the person taking insurance to compensate a loss cannot make a profit from insurance
Compensation is only for the actual loss, usually cost of replacement
Outline Subrogation
Taking over by one party from another the right to take legal action
After paying compensation the insurance company is entitled to take over property left
It also takes over rights to sue any party responsible for damage
Outline Contribution
If a person insures the same property/items with different insurance companies, then each will only pay a proportion of the claim
Outline Average Clause
This applies to a partial loss when you are under insured
The insured will only be compensated for a proportional amount of the loss
Outline Proximate Clause
An insurance is not liable for any loss under an insurance contract unless the proximate cause of the event was the risk injured against
E.g Theft isn’t covered under fire
Define Re-Insurance
When the risk is considered too large to be insured by one insurance company, so they spread the risk over a number of companies e.g Shipping, aviation
Define Loading in relation to insurance
Cost of insurance is directly related to the risk being insured against, the higher the risk the higher the cost of insurance
E.g Young people more likely to have a car accident, therefore their premiums are more expensive
Name the 4 types of compensation
Cash
Re-instalment/rebuilt
Repair
Replace the asset
Cover Note
Temporary document issued by insurance company as proof of existence until full contract is ready
Define Insurance Policy
Outlines the full insurance contract including items covered, value of compensation, any conditions
Name the 3 ways to make an insurance claim
Report to Gardai
Report to insurance company
Complete claim form
Define Claim Form
Document that must be completed describing what happened and stating the amount of loss suffered
Define Insurance Assessor
An employee of the insurance company who will calculate the value of the compensation resulting from the damage
Define Proposal Form
Application form completed by the person applying for insurance
Define exposure unit
Item being insured such as a premises
Define No claims bonus
Discount offered on premiums to customers who have made no insurance claims during the previous year
Outline similarities between insurance for Households and Businesses
Both households and businesses must:
Identify risks facing them
Take all steps to minimise risks
Shop around to get the policies which best suit their needs
Outline the differences between insurance for a Household and a Business
Business face a wider range of risks than households
They also suffer greater losses than households
Business must protect their staff against risk of unemployment arising from accidental damage or fire
Outline the types of insurance for a business
Fire: Insures stock and premises being destroyed by fire, also covers water damage, consequential loss and loss of profits
Employers Liability: Insured against employee injury on premises
Public Liability: Protection against members of the public getting injured on premises
Motor Insurance: Insured against consequences of a motor accident, compulsory under the Road Traffic Act 1933
Cash in Transit: Insurance against money on its way to be lodged in the bank being stolen
Fidelity Guarantee: Insured against embezzlement of revenue by employees
Outline the types of insurance for Households
Mortgage Protection: Compulsory for people taking out a mortgage, provides full repayment of balance due on mortgage in the event of the death of the mortgage holder
Health: Advised to take out health insurance e.g VHI or LAYA
Life Assurance: The exception to principle of indemnity, it provides:
Financial protection for the family in event of an untimely death
Savings for any special purpose e.g retirement
Motor: If the household owns a car, then at least Third Party insurance should be taken out
