Topic 10 - Dealing With Unexpected Events Flashcards
What financial product is designed to protect people from financial losses associated with unexpected events?
Insurance policies
What are the four different types of insurance?
- general insurance
- life cover
- health insurance
- pension policies
What are examples of general insurance?(5)
Motor,
building,
home contents,
travel
and pet policies
What is life cover?
Designed to protect other people from the financial consequences of someone’s death
What is health insurance?
Used to protect people against the financial loss of being too unwell to work or being diagnosed with a critical illness
What do pension policies do?
Enable people to save for their retirement
What are 2 examples of unexpected events that has a positive impact on finances?
- Win the lottery
- Win on a prize draw
What are 5 examples of unexpected events having a negative impact on finances?
- made redundant
- covid
- damage to car due to vandalism/ accident
- damage to home flooding
- separations / divorce
What is a premium?
The price of an insurance policy
What is the premium based on? (5)
- 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
What is the sum insured?
The amount of money needed to put things right if the event happens
E.g. to replace a bike that has been stolen
What is the term?
the length of time that the policy will be in force
What is voluntary access?
The amount of money the policyholder will pay towards repairs or replacement
How do insurance companies monitor the probability of an event happening?
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.
What is the tax on insurance called? And what is it?
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
What can make insurance void?
Entering misleading information when providing information to the insurance provider
What must a policyholder check that the insurance they have bought:
- covers the events the policyholder wants to insure against
- will pay sufficient compensation if the event occurs
What degree of motor insurance must all motorists have?
Third party insurance
What is 3rd party insurance?
Insurance that covers any damages to other people or property
What are the 3 main types of motor insurance?
- third party
- third party, fire and theft motor insurance
- comprehensive motor insurance
What does third party motor insurance cover the cost of? (4)
- 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
What does third party, fire and theft motor insurance cover the cost off?
- all third party items
- repairs or replacement of the drivers car if it is damaged or destroyed in a fire or is stolen
What is comprehensive motor insurance usually cover? (5)
- 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)
What should be considered when choosing motor insurance?
- 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
