Insurance

Question 1

What is insurance ?

Answer 1

Insurance is financial protection that covers any loss that might occur e.g burglary , car accident

Question 2

How does insurance work ? ( include premium , compensation , claims etc )

Answer 2

A Premium is the fee paid by the insured to the insurance company to
cover a particular risk
● The fees (premiums) collected are managed by the insurance
company and use to pay compensation for any claims.
● Compensation is the payment made to an insured person if they
suffer a loss or injury
● Any money not paid out as compensation is profit for the insurance
company

Question 3

What are the (5) principles of insurance ?

Answer 3

. Utmost good faith
. Indemnity
.insurable interest
. Subrogation
. Contribution

Question 4

Explain utmost good faith

Answer 4

A person is obliged to answer all questions truthfully when filling out a proposal form and disclose all relèvent facts

Question 5

Explain insurable interest

Answer 5

You must gain financially from its existence and suffer financially from its loss

Question 6

Explain indemnity

Answer 6

You cannot make a profit from a loss. The compensation that you will receive for an item must be equal to the current value of the item

Question 7

Subrogation

Answer 7

The insurance company has the right to seek compensation from the party / partys that caused the loss / damage

Question 8

Contribution

Answer 8

If you insure an item with more than one insurance company the company’s will divide what they compensate together , you will not benefit more than having the item insured by one company .

Question 9

What are the (8) types of personal insurance?

Answer 9

1. Life assurance
2. Motor insurance
3. Home insurance
4. Home contents insurance
5. Health insurance
6. Travel insurance
7. Mobile insurance
8. Mortgage protection insurance

Question 10

What are the four steps to taking out insurance ?

Answer 10

1. Seek quote : shop around for the best quote
2. Complete proposal form ( an application when filling for insurance where you must tell the whole truth )
   3.pay premium ( fee paid for insurance )
3. Issue policy : the insurance company will send out your insurance policy which will cover
   .risks covered
   . Period covered
   . Value of cover
   . Conditions of contract

It is the contract of insurance

Question 11

What is an actuary ?

Answer 11

An actuary is the person who calculates premium
They will calculate how risky or how likely it is that you will have an accident ( the greater the risk the higher the premium )

Question 13

What is compensation ?

Answer 13

Compensation is a reward ( usually money ) given to someone in recognition for a loss / damage

Question 14

What does it mean if you are fully insured ?

Answer 14

You will be compensated for the full amount of damage or loss caused

Question 15

What does it mean if you are over insured ?

Answer 15

This means that you will only be compensated for the full amount value of the damage / loss caused . No extra

Question 16

What does under insured mean ?

Answer 16

You will only be compensated for a proportion of the damage / loss caused

Question 17

What is average clause ?

Answer 17

A condition included in insurance policies that limits the value of a claim if you are under insured

This means that you will only be compensated for the same proportion you are insured e.g 1/3insured means 1/3 compensated

Question 18

Insurable risk

Answer 18

It must be possible to calculate the risk involved and there must be a likelihood of the risk not happening e.g burglary

Question 20

Non insurable risk

Answer 20

The chances of the risk happening are impossible to calculate