U4 Ch.15 Insurance Flashcards
Risk Management
Planned approach to deal with risks that can affect them. Involves identifying all possible risks and calculating the cost of protecting themselves against them
Ways to minimise risks
- Security Systems
- Training
- Appointing Health and Safety Officer
- Health and Safety Awareness
- Insurance
Insurance
Financial Protection against possible loss
Proposal Form
fill in when applying for insurance
Claim Form
fill in when making claim
renewal notice
sent out before policy is due for renewal
insurance policy
document you receive when buy insurance. Legally binding sets out terms and conditions
Cover note
Document proving insurance is in place. Used until full policy document is sent to the insured
Policy Excess
Amount insured agrees to pay towards a claim, insurance company pays the rest.
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Additional Charge on top of basic premium because of an extra risk
No claims bonus
reduction in premium charged if no claim has been made since last renewal date
Days of grace
Short period of time given to insured to pay insurance premium
Actuary
Calculates premium to be paid by insured
Assessor
Calculates compensation to be paid in claim
Loss adjuster
when the insured is unhappy with the amount of compensation decided by firm after loss occurs, independent person is appointed to assess insurance situation and has power to adjust compensation
Insurance Agent
Sells insurance on behalf of one insurance business
Insurance Broker
Sells insurance on behalf of a number of different insurance firms. Get a commission from when final policy is taken out.
Principles of Insurance
- Insurable Interest
- Utmost Good Faith
- Indemnity
- Contribution
- Subrogation
Insurable Interest
Insured must gain from the existance of item and suffer financially from its loss. Can’t insure something unless you have a vested interest in it. E.g. can ensure your car but not your neighbours
Utmost Good Faith
Person must reveal all material facts when applying for insurance and be truthful in their application for insurance. E.g. Proposal Forms must be completed accurately
Material Facts
Info that may not be asked on the proposal form but could affect the premium or compensation. E.g. house near a river prone to flooding
Indemnity
Insured person cannot make profit from insurance claim. Insurance can at best put an insured person in the same financial position they were prior to a loss occurring. E.g. If a car is written off in accident, the insured recieves its replacement value and not the original sum paid for it
Average Clause
Used by insurance firms to calculate compensation when item is insured for less than its actual value.
(Amount insured for X Claim) / real value
-Always write formula
Contribution
If you hold more than one insurer liable for your loss, they share the loss. Linked to indemnity since insured isn’t allowed to profit from insurance claim. E.g. if you take out 2 policies on your car, you can’t collect from both insurers. Both companies would share the compensation between them.
Subrogation
Once insured receives compensation, they give up their right to make further claims or sue third parties responsible for damage. Insurance firm can pursue whoever caused damage for compensation. E.g. If a third party is responsible for damaging your car and your insurer compensates you, your insurer takes your right to sue the third party
Premium Factors
- Risk
- Claims (in past)
- Value
- Loadings
- Discounts
Calculating Premium Order
Basic Premium + Loadings -Discounts
Household Insurances
- Property (fire/storm/flood)
- Contents (furniture/goods from things like theft)
- Motor
- PRSI (compulsary from gross pay)
- Health
- Mortgage Protection (cannot meet repayments. Often Compulsary)
- Income Protection (main earner is unable to work)
- Personal Accident
- Travel (Baggage loss + delayed flights)
- Identity theft
- Life Assurance
Motor Insurance
Required by law
1. Third Party (damage by insured to third party)
2. Third Party, fire and theft (1 + insured car from fire and theft damages)
3. Comprehensive (1 + 2 + Accidental damage to insured vehicle)
Life Assurance
Payed to named person when insured dies
1. Whole Life (pay premium until death)
2. Term Life (pay for a certain length. Only pays out if they die within period)
3. Endowment (Pays out either when policy reaches maturity or person dies. Whichever is first)
Business Insurance
- Premises/Property Insurance
- Contents
- Motor (if have own vehicles)
- PRSI (pay PRSI on behalf of each employee. Known as Employer’s PRSI)
- Product Liability (injured/ill because of product)
- Public Liability (members of public injured on business premises)
- Employer’s Liability (employee injured/ill in workplace)
- Key Personnel (if key employee leaves business)
- Fidelity Guarantee (fraudulent activities by employees)
- Consequential Loss (loss arise as a result of other risk)
- Cash In Transit (theft of cash while off premises)
- Plate Glass (large shop windows broken)
Underinsurance and its implication
Underinsurance is when insured fails to ensure asset for its full value. In a claim for total/partial loss there may be economic losses for the policy holder, since claim would exceed maximum amount policy can pay out. Usually done for lower premiums however losses arising from claim will far outweigh savings experienced
Potentially Uninsurable Risks
- Home Insurance when House on a flood plain
- Motor Insurance if previous driving disqualifications deem applicant to be to great a risk
Importance of Insurance
- Cost Saving (premium cost is usually less than cost if risk occurs
- Legal Requirements
- Risk Management (reduce risk)
