Unit 1 Topic 10

Question 1

What is a benefit?

Answer 1

A government payment made to individuals who meet specific conditions to help them meet their living expenses.

Question 2

What is fronting?

Answer 2

A fraudulent method of lowering car insurance costs by naming a person as the main driver on a policy when they are not.

Question 3

What is general insurance?

Answer 3

A broad category of insurance that provides protection against financial losses associated with events such as car accidents, loss of or damage to a home and its contents, problems with a holiday and vet bills.

Question 4

What is health insurance?

Answer 4

Products used to protect against the financial loss of being too unwell to work or being diagnosed with a critical illness.

Question 5

Define ‘inheritance’

Answer 5

The property, money, etc passed from one person to another upon death.

Question 6

What is an insurance certificate?

Answer 6

A document issued by an insurance provider that verifies the existence of coverage for the policyholder, and offers a summary of the cover given.

Question 7

What is a no claims discount?

Answer 7

A discount on the insurance premium that builds up for each year a person does not make a claim.

Question 8

What’s a pension policy?

Answer 8

A product that enables people to save money for their retirement.

Question 9

What is redundancy?

Answer 9

Losing a job because the business no longer needs, wants, or can afford that job to be done; it is related to the needs of the business and not to how well or badly an individual does their job.

Question 10

Define ‘sum insured’

Answer 10

The maximum amount an insurance provider will pay out.

Question 11

What is third-party insurance?

Answer 11

Insurance that covers damage that the policyholder causes to someone else (the ‘third party’) or to their property but does not cover the policyholder for any injury or loss that they suffer themselves.

Question 12

Explain voluntary excess

Answer 12

The excess is the amount paid on any claim by the policyholder before the insurance company will pay anything. A compulsory excess is usually set by the insurance company, but consumers can opt for a higher voluntary excess in exchange for a lower premium.

Question 13

Name the 4 main types of insurance

Answer 13

General Insurance
Life cover
Health insurance
Pensions policies

Question 14

Name 4 key features of insurance

Answer 14

Protection against financial consequences of unexpected events

Covered by the FOS

Provided by specialist companies called insurers

Premiums

Question 15

Name 4 factors that influence an insurance premium

Answer 15

How likely an event is to occur
The amount of money needed to fix problems if they occur
Length of time the policy will be in force
Amount of money the policy holder will pay towards repairs

Question 16

What’s the % of tax charged on insurance premiums?

Answer 16

12%
20% for travel insurance

Question 17

Name 2 details that are included in a policy document

Answer 17

What is covered by the insurance policy
Terms and conditions for policyholders making a claim

Question 18

Name 3 areas covered by comprehensive insurance

Answer 18

Accidental damage to the driver’s car
Medical expenses related to an accident
Loss of or damage to personal possessions in the car, up to a stated limit

Question 19

Name 3 areas to consider when choosing what motor insurance to buy

Answer 19

What they can afford

How much it would cost to make repairs or replace their car

Whether or not their personal possessions are covered by another insurance policy

Question 20

Explain ‘pay-as-you-go’ insurance

Answer 20

• insurer fits telematic gps tracking device (black box)
• device records number of miles driven and driving habits in terms of speed, type of road being travelled on, time of journey and how the driver is braking + cornering
• insurer uses information to charge a per mile cost based on how safely the driver is driving, when they drive and how long for

Question 21

Name 3 methods of cutting the cost of car insurance

Answer 21

Comparing the details of what is covered by different policies as well as the cost when shopping around

Fit an approved alarm or immobiliser as insurers offer discounts for cars that’re secure.

Paying a higher voluntary excess, as this will mean the insurer pays less on any claims made.

Only use the vehicle for social, domestic and pleasure purposes as business use increases premiums.

Build up a no-claims discount

Question 22

What does buildings insurance cover the cost of?

Answer 22

Repairing or rebuilding a property if it’s damaged or destroyed.

Question 23

What does contents insurance cover the cost of?

Answer 23

Belongings kept in the home that people can take with them when they move.

Question 24

Name 5 events that may result in contents insurance being paid by the provider

Answer 24

Fire, explosion, lightning and earthquakes
Storm and flood
Theft and attempted theft
Falling trees and branches
Water escaping tanks or pipes

Question 25

Name 3 methods for dealing with unexpected events

Answer 25

Savings
Borrowing
Benefits

Question 26

How long do the MAS recommend that your emergency funds cover mandatory and essential expenses?

Answer 26

3 months

Question 27

Name 4 things you could do with unexpected income

Answer 27

Save it
Create emergency fund
Spend it
Pay back borrowing