Post on 31-Dec-2015
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Household Insurance
Distinguish between Insurance Protection against
a loss you hope will not happen.
Eg. car accident.
Assurance Protection against
a loss you know will happen.
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 of
small premiumsInsurance pool/fund
Ins. co. expenses
Ins. co. profit
Compensation
Distinguish between Insurable risk Things that can
be insured. Eg. Houshold
insurance; fire theft, damage.
Personal accident for a farmer.
Non-insurable risk Things that cannot
be insured against. Eg. Damage to car
used in crash testing.
Personal accident for a bungee jumper.
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. Eg:
Agent
Sell insurance for only one co.
Eg: FBD, Quinn Direct……..
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
Loading 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 : 1/10/08
Days of Grace You may be given a few
extra days to pay your premium
Not allowed in motor insurance
Premium Calculation Questions
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
Loading Older, smoker, risky job
Discount Younger, non-smoker, low risk job