What is Insurance?
Why do people get insurance?
People get insurance as financial protection against something that might happen, accident, illness etc.
Name a benefit of Insurance
Allows individuals and households to financially cover a loss such as an accident, theft or illness.
First Step
Choosing the right insurance company
What is HOME INSURANCE?
•Home insurance (or property insurance) policies cover a range of losses.
(e.g. fire, theft, accidental damage and flooding)
What is an uninsurable risk?
•In some cases, an insurance company may refuse to insure a risk because the likelihood of it taking place is too high. This is called an uninsurable risk.
For example, most home insurance policies will not cover for damage caused by flooding if the house is located near a body of water that is known to flood.
Explain what is Insurance?
Insurance is a written agreement between an individual and an insurance company.
What does Insurance promote?
•Promotes risk reduction and encourages individuals and households to think more carefully about their safety. If risk is reduced, the cost of insurance will be lower.
Step 2
The proposal form
Is home insurance required by law?
No, •It is not required by law, but you must get home insurance if you are taking out a mortgage.
•To lower life assurance and health insurance premiums you would...
-Exercise regularly and eat a healthy diet.
-Do not smoke.
What does the Insurance company do?
•It states that the insurance company (the insurer) will pay money to the individual (the insured) if that person suffers a loss.
What is an example of loading?
•People over the age of 34 pay more than people under that age when they take out health insurance for the first time.
•People who live in a city pay more for home insurance.
•Drivers with a provisional licence pay more for car insurance than drivers with a full licence.
•People who drive expensive cars pay more for car insurance.
•People who work in dangerous jobs (e.g. firefighters) pay more for life assurance.
•People with existing health problems pay more for travel insurance.
Step 3
The premium
What is LIFE ASSURANCE
•Life assurance policies pay a sum of money to the policy holder’s family in the event of their death.
•
•Life assurance is not required by law, but it is important in allowing a household to continue paying its bills should something happen to an income earner.
What is a no claims discount?
•If a driver does not have any accidents during the period their car insurance policy covers, they are rewarded with a discount when they renew the policy. This is called a no claims bonus.
HOW DOES INSURANCE WORK?
In return for the insurer’s promise to pay money in the event of a loss, the insured person must pay a fee to the insurance company. Because there are many people paying these fees at the same time, the insurance company can afford to pay an individual if they suffer a loss.
What does loading mean in insurance terms?
•When calculating premiums, there is an increase in the price for each risk factor identified. An amount that is added to the basic premium due to risk is called a loading.
Step 4
The insurance documents
What are the three types of home insurance cover you can take?
•Buildings insurance covers damage to the house itself.
(e.g. the roof, the walls and the foundations)
•Contents insurance covers damage to or theft of the items inside the house.
(e.g. electronics, furniture and valuable items)
•All risks insurance covers the loss or theft of or damage to a homeowner’s belongings even when they are outside the house (in addition to when they are inside the house).
(e.g. jewellery that is stolen while on holiday)
What are the two types of car insurance you can purchase?
•Fully comprehensive insurance covers damage to the policy holder’s own car and to the other driver’s car in the event of an accident. It also covers the policy holder if their car is stolen or damaged by fire.
•
•Third party fire and theft insurance only covers damage to the other driver’s (the third party) car in the event of an accident. It also covers the policy holder if their car is stolen or fire damaged.
What is risk pooling?
•In return for the insurer’s promise to pay money in the event of a loss, the insured person must pay a fee to the insurance company. Because there are many people paying these fees at the same time, the insurance company can afford to pay an individual if they suffer a loss. This is called risk pooling.
What are the 5 principles of Insurance
•There are five principles (rules) of insurance, which protect the insurance company.
1.Insurable interest
2.Indemnity
3.Utmost good faith
4.Subrogation
5.Contribution
What are the insurance documents?
•These documents are:
-The insurance policy
-The certificate of insurance
What are the four main types of household insurance:
1.Home insurance
2.Life assurance
3.Car insurance
4.Personal insurance
What are the three types of Life Assurance
•Term assurance is taken out for a fixed period of time, or ‘term’. It pays out a lump sum if the insured person dies during the agreed period.
•Whole-life assurance pays out a lump sum when the policy holder dies. Whole-life assurance is more expensive than term assurance as the insurer will definitely have to pay out.
•Endowment assurance pays out a lump sum when the insured person dies or reaches an agreed age. Endowment policies can also be cashed in at an earlier date – the amount paid out is called the surrender value. The longer the insured waits before cashing in the policy, the greater the surrender value will be.