Household & Business
Insurance
Distinguish between
Insurance Assurance
Protection against Protection against
a loss you hope a loss you know
will not happen. will happen.
Eg. car accident. Eg. death.
Two reasons for
adequate insurance
You must cover all possible risks.
Eg. In household insurance: fire,
theft, flood and accidental damage.
You must insure enough to cover
full amount of loss.
Eg. If your house is worth €200,00
you must insure it for that value.
The basis for insurance is
sharing the risk.
Large number Ins. co. expenses
of Insurance
small premiums Ins. co. profit
pool/fund
Compensation
Distinguish between
Insurable risk Non-insurable risk
Things that can
Things that cannot
be insured against.
be insured.
Eg.
Eg. Damage to car
Houshold used in crash
insurance; fire testing.
theft, damage. Personal accident
Personal accident for a bungee
jumper.
for a farmer.
Insurance Terms
Exclusion Clause:
Situations that cannot be insured.
Eg.
Household insurance:
A house situated near a river that
is known to flood every year.
Insurance Terms
Policy Excess/Excess Clause:
The insured person may have to
pay the first €100 of the
compensation themselves.
This is to reduce the number of
small claims being made.
To make people more careful.
Insurance Terms
Proximate Cause:
What is the exact cause of the loss.
Eg. was it fire or theft or flood?
ie. what actually happened?
This helps the insurer decide if
compensation is due.
Insurance Terms
Compensation:
Is the money you get when you
make a claim.
Principles of insurance
Insurable Interest
Utmost Good Faith
Indemnity
Contribution
Subrogation
Insurable Interest
In order to insure something you
must benefit from its existence
& suffer from its loss.
Eg. You can insure your own
house but you cannot insure
your neighbours’s house.
Utmost Good Faith
You must tell all relevant
information when filling out
an application for insurance.
Eg. If you have an illness
you must tell the ins. co. as
they may want to charge a
higher premium or not
insure you at all.
Indemnity
You cannot make a profit from
insurance.
There is no point in insuring
your house for more than it is
worth as the ins. co. will only
compensate you for the actual
value of the house.
Contribution
If a risk is insured with two
insurance companies each will
pay half of the compensation.
Eg: A ring insured with two
ins. co.’s. for €1,000
Both will give ??
€500 each.
Subrogation
Passes the legal right of the
insured over to the insurer to
claim from a third party who
caused the loss.
Eg. Whirlpool oven causes
house to go on fire. Ins. co.
pays compensation to insured
and then seeks their own
compensation from whirlpool.
Average Clause
Related to underinsurance and partial
loss.
If you only insure an item for a fraction
of the value, you only get the same
fraction compensation.
Formula
SUM INSURED x CLAIM =
COMPENSATION
ACTUAL VALUE
EXAMPLE 1.
Mary insured her house for
€200,000.
The market value is €250,000.
A fire causes €10,000 worth of
damage.
How much compensation will she
receive???
Solution 1
200,000 x 10,000 = 8,000
250,000
Documents used in
insurance
Proposal Form
Application form for insurance
Policy
Contract of insurance
Gives full details of cover
Must be filled away safely
Cover Note
Temporary policy
Used in car insurance, while
you are waiting for insuracne
disc
Certificate of Insurance
Proof of insurance
Claim Form
Form you fill out when a
loss occurrs and you want
compensation
People in insurance
Broker
Gives advice on insurance
Sells insurance on behalf of
lots of companies.
Agent
Sell insurance for only one
co.
Actuary
Calculates insurance
premiums
Loss Adjuster
Calculates the value of the
loss
Works for the insurance co.
Loss Assessor
Calculates the value of the
loss
Represents the insured
Steps involved in taking
out insurance
1. Decide what risks you want
covered. (ask a broker)
2. Fill out proposal form. (ugf)
3. Pay your premium.
4. File your policy in a safe
place.
Steps involved in making a
claim.
1. Contact guards & ins. co.
2. Obtain estimates of lost/stolen
items.
3. Fill out claim form. (ugf)
4. Talk to assessor and agree on
compenstaion.
Terms relating to
premium calculation
Premium
The cost of insurance
Money you pay to be
insured
The higher the risk the
higher the premium
Risk Effect
Things that cause premiums to
be high or low
Eg: In car insurance
No car accidents = lower
premium
Under 25 male = higher
premium
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Extra premium for higher
risk
Eg: A smoker will have a
higher premium for life
assurance than a non
smoker
Discount
Money taken off premium
for a lower risk
Eg: In house insurance you
get a discount for having an
alarm
No Claims Bonus
In car insurance you get a
discount if you do not claim
for any accidents the
previous year
It encourages people not to
claim for small amounts
Renewal Date
The date you must have
your premium paid by.
Eg : 1/10/12
Days of Grace
You may be given a few
extra days to pay your
premium
Not allowed in motor
insurance
Types of Personal
Insurance
PRSI
Pay Related Social Insurance.
Statutory Deduction from you
salary.
You will receive an income if
you are out of work due to
illness, disabiity, maternity
leave…
Medical Insurance
In case you get sick or need
an operation
Eg: VHI
Voluntary Health Insurance
Personal Accident
Covers people who are
injured due to an accident.
Lump sum payment for loss
of finger, sight, hearing etc.
Salary Protection
Provides an income in case
you can’t work due to
illness.
Will provide you with a
higher income than PRSI
only.
Pension Plan
Provides you with lump sum
and income for your
retirement.
Holiday Insurance
Provides you with health
care if you get sick on
holidays.
Risk Effects for
Personal Insurance
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Older, smoker, risky job
Discount
Younger, non-smoker,
low risk job
Business Insurance Terms
Types of Business
Insurance
Theft Insurance: theft of
equipment and stock
Fire Insurance: damage to
premises, equipment and stock
Consequential Loss: covers the
firm for loss of profits while a
business is closed as a result of fire
or flood.
Continued…………….
Fidelity Guarantee: compensates an
employer for loss of cash arising from
dishonest workers
Cash in Transit: covers theft of cash while
in transit between the business and bank
Goods in Transit: covers theft or damage
to goods while been transported
Motor Insurance: compulsory covers
damage or injury cause by motor vehicles.
Continued……..
Employers liability: employees
injured at work
Public liability: customers injured
while visiting the business
Product liability: injury to
customers using the product
Bad debts: loss due to customers
not paying their debts.
Reasons for business
insurance
Protection of assets against fire
and theft
Protection against legal action as a
result of accidents to the public or
staff
Legal reasons- motor insurance
