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M9 (Chapter 1: (Duty of Utmost Good Faith/ Uberrima fides (Duration of…
M9
Chapter 1:
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Types of risk
Speculative Risk
- NOT insurable
- Can be a gain, lose or neither
Pure Risk
- Insurable
- Only lose/ breakeven, NO gain
- Purpose of insurance is NOT profiting
Dealing with Risk
- Avoiding the risk
- Controlling the risk (medical checkup)
- Retaining the risk
- Transferring the risk.
Types of Personal Risk
- Premature death (unpredictable death of breadwinner)
- Outliving resources
- Poor health and Disablement
2 types of hazards
- Physical Hazards (Physical characteristics that may increase the loss)
- Moral Hazards (act of dishonesty)
Life insurance products
- Term life - death benefit given when insured die within a specific period
- Whole life - covers insured's whole lifetime and pays premium
- premium are accumulated and known as Cash values
- Endowment - pays either after insured death/ stated date
Whole life and endowment have saving elements
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Insurable Interest
- Own lIfe
- Spouse
- Child/ ward
- Another person whom one is dependent on
- Trustee & Beneficiaries
- Creditors & Debtors
- Key-person insurance (key person within office)
Principle of Indemnity
Bring the insured back to original position (no more no less)
- Prove to suffer in monetary terms
- Establish the extent & value fo his loss
- Not entitled to recover more than the amount of loss from a single loss
- Only able to claim from 1 insurer despite the number of policies bought
Only applicable to General & Health insurance and not life and personal accident insurance as we cannot price the value of human life
Able to estimate the potential loss (e.g. loss of income)
- Ability to pay premium
- Direct act by the insurer
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