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Insurance (For the individual and the household) (What is Insurance?…
Insurance (For the individual and the household)
What is Insurance?
Insurance is an agreement between an individual who is afraid of incurring a loss (insured) and an insurance company (insurer). In return for a fee (called a Premium) the insurer will make good to the insured (compensate) if this loss occurs.
Basis of Insurance
Is based on the sharing of risks with others
The insurance company brings together all those who want to share a particular risk, collects their fees (premiums), pays out compensation if a loss is made and hopefully make a profit as well
Adequate Insurance
Cover all possible risks
Be enough to cover any loss that might occur, e.g. if a house is worth 60000 it should be insured for 600000 and not for less
Insurable and Non-Insurable risks
In general most things can be insured
For a risk to be insurable it:
Must be an insurable interest (ownership) in the thing or person being insured. The insurable interest principle states that the insured must gain from its existence and suffer from its loss
There must be a large number of similar risks being insured
Any losses incurred must be accidental
The possible losses should not be too great as to ruin the insurance company
It must be possible to calculate the risk of a loss occuring
Types of Insurance
Personal
Personal Accident Insurance
Where people recive compensation because they are injured and unable to work
Medical Insurance
Covers the cost of doctors and hospitals in times of illness
The VHI, BUPA and VIVAS are the main medical insurance
Salary Protection Insurance
Gives an extra pension to someone who has to go out on early retirement with a small pension
PRSI (Pay Related Social Insurance)
State or social insurance covers people who are out of work through illness or unemployment
Holiday Insurance
Gives compensation in the event of a holiday having to be cancelled, a person becoming ill on holiday or goods being stolen while on holidays
Property
House Insurance
Covers the house against damage by fire or break-in.
It is very important that the insurance cover is adequate
House contents insurance
Gives compensation if household contents are stolen or damaged e.g. furniture, clothes etc.
All Risks Insurance
Covers any accidental loss or damage to selected household items anywhere in Ireland or in Europe
Each item to be covered musbe named when taking out the insurance cover
This gives wider cover than that given by house contents insurance
Life Assurance
Is similar to insurance in that it offers financial help to families who lose the income earner
Differs from insurance in two main ways
In insurance, there is a possibility of the event occurring, whereas in life assurance, there is a certainty that a person will die or reach a certain age
Insurance is taken out on an annual basis, whereas life assurance is taken out for a definite number of years
Three main types
Whole Life Assurance
Guarantees to pay an agreed sum of money to the dependents when the insured person dies
Term Assurance
Also known ads temporary assurance
Provides cover for an agreed period of time
The insurance company guarantees to pay an agreed sum of money to the dependents of an insured person if that person dies before a certain date
It is used to cover the period when children are growing up and being educated, or when a mortgage is being paid.
Once the set age has been reached the cover ceases
Endowment Assurance
Guarantees to pay an agreed sum of money on the death of the insured person or on the insured person reaching a certain age - which ever comes first
Motor Vehicle
By law any person who drives a car must have insurance for any claims made by third parties - hence the name third party insurance
Can also take out the following
Fire and theft insurance - which compensates the insured in the case of the car going on fire or being stolen
Comprehensive insurance - which gives third party, fire and theft cover, as well as accidental damage
Purchasing Insurance/Assurance
1: Decide what cover you require by obtaining advise from an insurance broker 2: Complete the proposal form truthfully 3: Have your proposal for insurance accepted. Pay your premium as calculated by the actuary 4: Obtain a policy or insurance certificate setting out what risks are covered and how long
Proposal Form
An application from for insurance or assurance
On receiving a completed proposal form, the insurer can then:
Accept or reject the proposal
Calculate the premium to be charged
The proposal form must be completed truthfully and accurately, as the principle of utmost goof faith applies