Topic 10: Principals of insurance

Question 1

Idemnification?

Answer 1

• Applies to short term insurance
• Insurer agrees to compensate the insured for damages specified in the contract, in return for premiums paid
• Protect the insured against a specified event that may occur

Question 2

Security?

Answer 2

• Applies to Long Term insurance
• Insurer undertakes to pay out an agreed amount in the event of loss of life
• A predetermined amount will be paid out when the insured reaches a predetermined event.

Question 3

Utmost good faith?

Answer 3

• The insured must be honest in providing details when entering into an insurance contract.
• Both the insurer and insured must disclose all relevant facts
• The insured must disclose everything that may affect the extent of the risk.

Question 4

Insurable intrest?

Answer 4

• The insured must prove that a financial loss will be suffered if the insured item is lost, damaged
• Must be expressed in financial terms.
• The insured must have a legal relationship with the insured item