CHAPTER 8 INSURANCE AND ASSURANCE

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Insurance and assurance

An insurance policy is a contract between an insured person and an insurance company that gives the insured person protection against the occurrence of a risk that might happen.

An assurance policy gives protection against the occurrence of something that will happen.

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Obtaining Insurance

1. Apply directly to an insurance company.2. Apply to an insurance agent who is

employed by one insurance company and sells policies on behalf of that company. The agent receives commission on each policy sold.

3. Apply to an insurance broker who is a self employed individual (or company) and sells policies on behalf of many different insurance companies. The broker should be able to advise customers about the best policies for their needs.

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The Premium

The premium is the price paid for the insurance cover

The size (value) of the premium depends on:1. The degree of risk involved2. The potential sum of money involved3. The administration costs of the

insurance companyA no-claims bonus is a reduction in the

standard premium if the insured person has not made a claim against the policy for a given period of time.

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Principles Of An Insurance Or An Assurance Contract

1. The principle of utmost good faith2. The principle of insurable interest3. The principle of indemnity4. The principle of contribution5. The principle of subrogation

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Applying For An Insurance or Assurance Policy

1. The person applying for a policy fills out a Proposal Form.

2. If the application is accepted the actuary will calculate the premium.

3. The insurance company will issue a Cover Note once the first premium is received.

4. Finally, the insurance company will issue the Insurance Policy.

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Making a Claim

1. The insured person fills out a Claim Form giving details of the loss, and its estimated value. The Gardaí may have to be informed of the loss.

2. The insurance company will then send out an assessor or a loss adjuster to calculate the value of the loss.

3. Finally, if the claimant is properly insured, the insurance company will indemnify him or her.

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The Average Clause

The average clause is a condition included in insurance policies that limits the value of a claim if you are under-insured.

If you insure your house for only two thirds of its value you will only receive two thirds of the value of any damage to the house.

Example: Your house is worth €300,000 but you only insure it for €200,000 (i.e. 2/3 of its value)

A fire causes €60,000 worth of damage to it.You will only receive €40,000 (2/3 of €60,000)

from the insurance company

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Household Insurance

Household insurance policies are usually classified under four headings: each of these also have subheadings shown on the following slides.

1. Personal insurance2. Property insurance

3. Life assurance4. Motor insurance

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Personal insurance

1. Personal accident insurance

2. Private medical health insurance

3. Income protection insurance

4. Travel insurance5. PRSI / USC6. Loan repayment

protection insurance

“Lloyds building in London”

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Property insurance, Life Assurance and Motor Insurance

Property Insurance Policies

1. Building insurance2. Contents insurance3. All risks insurance Life Assurance Policies1. A term policy2. A whole life policy3. An endowment policy

Motor Insurance Policies1. Third party policy2. Third party fire and

theft policy3. Fully comprehensive

policy

“Couple nervously awaiting an insurance quotation”

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Non-Insurable Risks

An insurance company will refuse insurance if a risk has any or all of the following characteristics:

1. An actuary, due to lack of statistics, cannot calculate the probability of the risk occurring.

2. There are not enough people seeking similar insurance to share the risk.

3. The loss is imminently inevitable (bound to happen soon).

4. The damage is gradual, e.g. depreciation of an asset.

5. The occurrence of the risk would be catastrophic for the insurance company.