Topic 10 - Dealing With Unexpected Events

Question 1

What financial product is designed to protect people from financial losses associated with unexpected events?

Answer 1

Insurance policies

Question 2

What are the four different types of insurance?

Answer 2

• general insurance
• life cover
• health insurance
• pension policies

Question 3

What are examples of general insurance?(5)

Answer 3

Motor,
building,
home contents,
travel
and pet policies

Question 4

What is life cover?

Answer 4

Designed to protect other people from the financial consequences of someone’s death

Question 5

What is health insurance?

Answer 5

Used to protect people against the financial loss of being too unwell to work or being diagnosed with a critical illness

Question 6

What do pension policies do?

Answer 6

Enable people to save for their retirement

Question 7

What are 2 examples of unexpected events that has a positive impact on finances?

Answer 7

• Win the lottery
• Win on a prize draw

Question 8

What are 5 examples of unexpected events having a negative impact on finances?

Answer 8

• made redundant
• covid
• damage to car due to vandalism/ accident
• damage to home flooding
• separations / divorce

Question 9

What is a premium?

Answer 9

The price of an insurance policy

Question 10

What is the premium based on? (5)

Answer 10

• how likely an event is to happen
• sum insured
• the term (how long)
• voluntary excess
• how the premium is paid - as one payment or monthly stallmentd

Question 11

What is the sum insured?

Answer 11

The amount of money needed to put things right if the event happens
E.g. to replace a bike that has been stolen

Question 12

What is the term?

Answer 12

the length of time that the policy will be in force

Question 13

What is voluntary access?

Answer 13

The amount of money the policyholder will pay towards repairs or replacement

Question 14

How do insurance companies monitor the probability of an event happening?

Answer 14

It is based on previous statistics. The premium is higher when more likely to happen.
- e.g. how likely a driver is to have an accident
- those holding motor insurance make claims when necessary.
- when no claims are made a no claims discount may be received.

Question 15

What is the tax on insurance called? And what is it?

Answer 15

Most general insurance premiums are subject to insurance premium tax.
- 10% for most premiums
- 20% for travel insurance
The cost of the tax is included in the policyholders premium

Question 16

What can make insurance void?

Answer 16

Entering misleading information when providing information to the insurance provider

Question 17

What must a policyholder check that the insurance they have bought:

Answer 17

• covers the events the policyholder wants to insure against
• will pay sufficient compensation if the event occurs

Question 18

What degree of motor insurance must all motorists have?

Answer 18

Third party insurance

Question 19

What is 3rd party insurance?

Answer 19

Insurance that covers any damages to other people or property

Question 20

What are the 3 main types of motor insurance?

Answer 20

• third party
• third party, fire and theft motor insurance
• comprehensive motor insurance

Question 21

What does third party motor insurance cover the cost of? (4)

Answer 21

• Injuries to other people including passengers
• damage to other peoples property
• accidents caused by passengers
• damage caused by a caravan or trailer while attached to the car

Question 22

What does third party, fire and theft motor insurance cover the cost off?

Answer 22

• all third party items
• repairs or replacement of the drivers car if it is damaged or destroyed in a fire or is stolen

Question 23

What is comprehensive motor insurance usually cover? (5)

Answer 23

• all third party fire and theft items.
• accidental damage to the drivers car
• a personal accident benefit
  
  • a sum of money paid on the death of the driver or for specific types of permanent disablement that the driver sustains in an accident
• medical expenses related to an accident (up to a stated limit)
• loss or damage to personal possessions in the car (up to a stated limit)

Question 24

What should be considered when choosing motor insurance?

Answer 24

• what they can afford
• how much it would cost to make repairs to or replace their car
• whether or not their personal possessions are covered by another insurance policy

Question 25

What is pay as you go motor insurance?

Answer 25

For those who don’t drive often it can reduce the cost of insurance.
- sometimes monitored using a black box

Question 26

What does a black box device in a car monitor? (5)

Answer 26

• # of miles drivendriving habits in terms of:
• speed
• type of road travelling on
• The time at which the journey is made
• how the driver is braking and cornering
  The insurance company tracks this and charged based on these factors

Question 27

5 ways to reduce the cost of motor insurance?

Answer 27

• pay a higher voluntary excess
• fit an alarm or immobiliser
• pay the premium in one payment to avoid direct debit monthly payments
• drive a car with a smaller engines
• build up no claims discount

Question 28

What is the voluntary excess?

Answer 28

This is the amount of money the policyholder pays towards the costs of a claim

Question 29

What does building insurance cover?

Answer 29

The cost of repairing or rebuilding a property if it is damaged or destroyed.

Policyholders may pay an extra premium for accidental damage caused?

Question 30

What does content insurance cover?

Answer 30

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

Question 31

What are 3 other types of insurance?

Answer 31

• pet
• travel
• mobile phone

Question 32

What is pet insurance?

Answer 32

Covers the cost of vet bills in case a pet needs treatment

Question 33

What is travel insurance?

Answer 33

• Covers the cost of medical treatment,
• replacing luggage or belongings that are lost or stolen or damaged abroad.
• cost of delays to a journey, having to stay in a hotel for extra nights

Question 34

What is mobile phone insurance?

Answer 34

Covers loss or damage to mobile phones.
- sometimes covered under home contents policy

Question 35

How can one revise their budget in the case of an unexpected event?

Answer 35

• reducing the amount spent on socialising
• cutting back on coffees or lunches bought in cafes or restaurants
• delaying spending on clothes, DVDs or games

Question 36

How can one prepare by saving in the case of an unexpected event?

Answer 36

• saving in an instant access account such as an ISA

Question 37

What are 4 possibilities that people can undergo when receiving unexpected income?

Answer 37

• save it
• pay back borrowing
• spend it
• create an emergency fund