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LIBF Unit 1 > Topic 10 - Dealing With Unexpected Events > Flashcards

Topic 10 - Dealing With Unexpected Events Flashcards

1
Q

E.g. of unexpected events w pos. impacts

A
  • unexpected promotion at work
  • win lottery
  • win prize draw
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2
Q

E.g. of unexpected events w neg. impacts

A
  • redundancy
  • covid
  • car damage (vandalism/accident)
  • inc. in rent/mortgage payments
  • damage to home from flooding
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3
Q

What are insurance policies?

A
  • policies designed to protect ppl from financial losses associated w unexpected events
  • e.g. fire, theft or accident
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4
Q

What are 4 types of insurance policies?

A
  • general insurance
  • life cover
  • health insurance
  • pensions policies
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5
Q

What does general insurance include?

A
  • motor
  • buildings
  • home contents
  • travel
  • pet policies
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6
Q

What is life cover?

A
  • protects other ppl from financial consequences of someone’s death
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7
Q

What is health insurance?

A
  • protects ppl from financial loss of being too unwell to work
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8
Q

What do pension policies do?

A
  • enable ppl to save for retirement
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9
Q

What is a legal insurance requirement?

A
  • motor insurance for car drivers
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10
Q

What is a premium?

A
  • the price of an insurance policy
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11
Q

What are premiums based on?

A
  • likelihood of event
  • sum insured
  • term of policy
  • voluntary excess
  • how premium is paid (1 payment/monthly instalments)
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12
Q

How do insurance companies set a price for the premium?

A
  • look at probability of an event happening based on statistics
  • inc. premium if more likely
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13
Q

What is a no claims discount?

A
  • ppl w insurance build up a no claims discount for each yr they don’t make a claim
  • also a protected no claims discount
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14
Q

What is premium tax?

A
  • most general insurance premiums are subject to insurance premium tax
    - 10% for most premiums
    - 20% for travel insurance
  • cost of tax is included in policyholders premium
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15
Q

Why is providing full info to insurers important?

A
  • insurers use info ppl provide to set premium
  • if ppl enter misleading info it may make their insurance void + insurer will refuse any claims
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16
Q

What are policy documents?

A
  • proof policyholder is covered by insurance + includes policy number
  • receive a policy document + certificate when insurance premium is paid
17
Q

When can you make an insurance claim?

A
  • if events covered by insurance policy occur
  • make claim to insurance company
18
Q

When does a company pay an insurance claim?

A
  • assesses each claim + only pays out if policyholder is covered
19
Q

What is 3rd party motor insurance?

A
  • in event of an accident + driver causes injury to a person or damages their car/property (a 3rd party) insurance covers that person
  • compulsory for all motorists
20
Q

What are the 3 types of motor insurance?

A
  • third-party
  • third-party, fire + theft
  • comprehensive motor insurance
21
Q

What does third-party motor insurance cover?

A
  • a third party (other ppl’s injuries/damaged properties)
22
Q

What does third-party, fire + theft motor insurance cover?

A
  • a third-party
  • policyholders from fire + theft (car damaged from fire/stolen car)
23
Q

What does comprehensive motor insurance cover?

A
  • fully covered (includes accidental damage to driver’s car)
24
Q

Considerations when choosing which motor insurance?

A
  • what can they afford
  • how much it would cost to make repairs to or replace car
  • if personal possessions are covered by other insurance policy or not
25
Q

What is pay-as-you-go insurance?

A
  • for ppl who don’t drive very often
  • can use a black box w a GPS tracking device: monitors speed + distance
  • charge per-mile cost based on how safely driver drives
26
Q

Ways to reduce cost of motor insurance

A
  • fit an alarm or immobiliser
  • pay a higher voluntary excess
  • build up no claims credit
  • pay premium in 1payment to avoid extra charges
  • drive car w a smaller engine
27
Q

What is voluntary excess?

A
  • amount of money policyholder pays towards cost of a claim
28
Q

What is buildings + home contents insurance?

A
  • covers cost of repairing and rebuilding a property
  • lenders insist borrowers take out buildings insurance
  • contents insurance covers belongings kept in a person’s house (e.g. furniture, electrical goods)
29
Q

What are 3 other types of insurance?

A
  • pet insurance
  • travel insurance
  • mobile phone insurance
30
Q

What is a ‘good debt’?

A
  • borrowing that’s affordable + improves personal finances in long term
  • e.g. repairing car to travel to work
31
Q

What is a ‘bad debt’?

A
  • borrowing thats unaffordable + doesn’t have a long term value
  • e.g. not paying off a credit card balance
32
Q

What are the main ways to deal with expected income?

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

LIBF Unit 1 (12 decks)

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