Topic 10: Insurance concepts Flashcards
Non-compulsory insurance?
- Where the insured has the option of being insured against insurable risks
- The decision to insure the asset is solely with the insurer and not influnced by government
Over-insurance?
- When assets are insured for more than its market value
- The insurer can choose to reinstate the insured
- Compensation will not be more than the market value of the item
Under-insurance?
- Occurs when items are insured for less than its market value
- Insured will be compensated partly foe losses and damages in the event of a claim
Average clause?
- A stipulation by the insurer which is applicable when goods are insured for less than its market value
- The insurer will pay for loss in proportion to the insured value
- The insured will be personally liable for the part of the risk that was not covered by the insurer
Formula
Amount insured/value of the insured item x Amount of damages
Reinstatement?
- Applied when the item is over insured
- Lost or damaged property can be replaces instead of compensation
- Insurer will repair or replace the damage
Excess?
- Not paid out when the claim is settles
- Prevents insured from climing minor damages
- Amount or value is stipulated in the insurance policy
Under insurance vs over insurance?
Over insurance
- insured for more than market value
- Insurer will aplly the reinstatement clause
- Insurer will replace or repair the damages
Under insurance
- Insured for less than the market value
- Average clause to be applied
- Insured will be compensated partly for the damages
Insurance vs assurance?
Insurance
- Based oon the principal of idemnity
- Applicable to short-term insurance.
- It covers a specifi ed event that may occur
Assurance
- Based on the principle of security
- Applicable to long-term insurance
- Specifi ed event is a certainty, but the time of the event is uncertain
