Topic 10 - Dealing With Unexpected Events Flashcards
E.g. of unexpected events w pos. impacts
- unexpected promotion at work
- win lottery
- win prize draw
E.g. of unexpected events w neg. impacts
- redundancy
- covid
- car damage (vandalism/accident)
- inc. in rent/mortgage payments
- damage to home from flooding
What are insurance policies?
- policies designed to protect ppl from financial losses associated w unexpected events
- e.g. fire, theft or accident
What are 4 types of insurance policies?
- general insurance
- life cover
- health insurance
- pensions policies
What does general insurance include?
- motor
- buildings
- home contents
- travel
- pet policies
What is life cover?
- protects other ppl from financial consequences of someone’s death
What is health insurance?
- protects ppl from financial loss of being too unwell to work
What do pension policies do?
- enable ppl to save for retirement
What is a legal insurance requirement?
- motor insurance for car drivers
What is a premium?
- the price of an insurance policy
What are premiums based on?
- likelihood of event
- sum insured
- term of policy
- voluntary excess
- how premium is paid (1 payment/monthly instalments)
How do insurance companies set a price for the premium?
- look at probability of an event happening based on statistics
- inc. premium if more likely
What is a no claims discount?
- ppl w insurance build up a no claims discount for each yr they don’t make a claim
- also a protected no claims discount
What is premium tax?
- most general insurance premiums are subject to insurance premium tax
- 10% for most premiums
- 20% for travel insurance - cost of tax is included in policyholders premium
Why is providing full info to insurers important?
- insurers use info ppl provide to set premium
- if ppl enter misleading info it may make their insurance void + insurer will refuse any claims
What are policy documents?
- proof policyholder is covered by insurance + includes policy number
- receive a policy document + certificate when insurance premium is paid
When can you make an insurance claim?
- if events covered by insurance policy occur
- make claim to insurance company
When does a company pay an insurance claim?
- assesses each claim + only pays out if policyholder is covered
What is 3rd party motor insurance?
- in event of an accident + driver causes injury to a person or damages their car/property (a 3rd party) insurance covers that person
- compulsory for all motorists
What are the 3 types of motor insurance?
- third-party
- third-party, fire + theft
- comprehensive motor insurance
What does third-party motor insurance cover?
- a third party (other ppl’s injuries/damaged properties)
What does third-party, fire + theft motor insurance cover?
- a third-party
- policyholders from fire + theft (car damaged from fire/stolen car)
What does comprehensive motor insurance cover?
- fully covered (includes accidental damage to driver’s car)
Considerations when choosing which motor insurance?
- what can they afford
- how much it would cost to make repairs to or replace car
- if personal possessions are covered by other insurance policy or not
What is pay-as-you-go insurance?
- for ppl who don’t drive very often
- can use a black box w a GPS tracking device: monitors speed + distance
- charge per-mile cost based on how safely driver drives
Ways to reduce cost of motor insurance
- fit an alarm or immobiliser
- pay a higher voluntary excess
- build up no claims credit
- pay premium in 1payment to avoid extra charges
- drive car w a smaller engine
What is voluntary excess?
- amount of money policyholder pays towards cost of a claim
What is buildings + home contents insurance?
- covers cost of repairing and rebuilding a property
- lenders insist borrowers take out buildings insurance
- contents insurance covers belongings kept in a person’s house (e.g. furniture, electrical goods)
What are 3 other types of insurance?
- pet insurance
- travel insurance
- mobile phone insurance
What is a ‘good debt’?
- borrowing that’s affordable + improves personal finances in long term
- e.g. repairing car to travel to work
What is a ‘bad debt’?
- borrowing thats unaffordable + doesn’t have a long term value
- e.g. not paying off a credit card balance
What are the main ways to deal with expected income?
- save it
- pay back borrowing
- spend it
- create emergency fund
