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Insurance
BUS JC 1ST YR
| Question | Answer |
|---|---|
| What is insurance | Insurance is a written promise by an insurance company to pay money to a person who has suffered a loss |
| What is a premium | Customers pay a fee (premium) each year to be insured. |
| What is pooling of risk | The premiums of all customers go into a shared pot. If a customer has an accident it is paid out of this pot (pooling of risk). |
| How do insurance companies make a profit | The money left in the pot after pooling of risk is the profit |
| What are the 2 parts of home insurance that affect cost | The value of the house and value of its contents. |
| How can the cost of home insurance be reduced? | Install smoke detectors, window locks, alarms etc |
| What affects the price of motor insurance | Your age, license type, engine size and previous driving history |
| What is 3rd party motor insurance | Required by law. if the accident is your fault, it insures damage/injury to the car/passengers involved in an accident but NOT you unless your car is stolen or damaged |
| What is comprehensive motor insurance | More expensive than 3rd party, if the accident is your fault, it pays for everyone and everything |
| What is a no claims bonus | If you don't have any accidents in the year, you may get a % off your premium next year as a reward |
| What is life insurance | Provides money to peoples families after they die, useful is the deceased if the breadwinner |
| Explain the 3 types of life insurance | Pure - Keep paying until you die, Paid in lump sum Endowment - Paid until a certain age, then you cash out your policy value Term - Pays off a loan if you die |
| What is income protection insurance | The company will pay you if you have to stop working, payment continues until you are 60yrs old or fit to work |
| What is insurable interest | 1st principle of insurance. It means you can only insure something that you benefit from and would cost money to replace e.g. your house is valid but not your friends |
| What is Utmost Good Faith | 2nd principle When you apply for insurance you must answer all questions honestly and truthfully. The company can refuse to pay out if you don't |
| What is a material fact | Pieces of information that might increase the chance of an accident |
| What is Indemnity | 3rd principle. You must not make a profit from insurance. You must be in the same position as before |
| What is subrogation | 4th principle. After you are paid compensation, the item is now property of the insurance company. If you find the item and decide to keep it, you must pay back the compensation |
| What is contribution | 5th principle. If you are insured with multiple companies, you will only receive a portion of the pay-out to not break indemnity. e.g. a 100 item insured by 2 companies will only pay 50 each |
| What is loading | This is money added onto the price of your insurance if you are deemed higher risk e.g. young people, smokers |
| What is an exclusion clause | Companies may refuse to pay certain risks if they cost too much e.g. earthquakes, floods |
| What is compensation | The money you receive to help replace/repair the damaged items |
| What is a policy excess | When a loss occurs you have to pay yourself a small amount (200 etc) and the insurance company pays the rest |
| What are some details on a claims form | Insured person, insured item, details on the loss/damage, cost and current value, other policies, police report |
| What is over insurance | If you insure an item for more then its worth, the company will only pay its current value |
| What is under insurance | If you under insure something for less than its worth, the average clause formula is used to determine a pay out |
Created by:
georgejoseph
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