PART 1: INSURANCE BASICS (Chapter 18)

What is Insurance?
You pay SMALL amount (premium) → Company pays BIG amount if something bad
happens.

Key Term Simple Meaning

Insured Person/business buying insurance

Insurer Insurance company

Premium Payment you make (monthly/yearly)

Policy The contract document

Claim Asking for money after a loss

5 Purposes of Insurance (Why have it?)

Purpose Meaning in 5 words

Risk reduction Pass risk to insurer

Compensation Get money after loss

Financial protection Stop going bankrupt

Business confidence Feel safe to invest

Investment Insurers invest premiums

5 Principles of Insurance ⭐ (EXAM HOT)
Principle Simple Rule Example

Indemnity No profit from claim Claim

19k,not
19k,not25k

Contribution Double insured = split 2 policies share the cost

Subrogation Insurer keeps recovered Stolen tractor found →

goods insurer keeps it

Insurable interest Must cry if it breaks Can't insure neighbour's car

Utmost good faith Tell the truth, no lies Disclose flood risk

Memory: I - U - I - S - C

How Insurance Works (Statistics)

Concept Simple Meaning

Pooling of risks Many pay in → few take out

Forecasting losses Using past to predict future

Fixing premiums Higher risk = higher premium

Who Does What?

Role Job Works for

Actuary Calculates premiums & risk Insurer

Loss adjuster Checks claim is fair Insurer

Assessor Helps claimant get fair pay Claimant

Non-Insurable Risks
Cannot insure because can't calculate probability:

●​ Business losses
●​ Poor management
●​ Fall in demand
●​ Change in customer tastes
●​ War, earthquakes

PART 2: TYPES OF BUSINESS INSURANCE

(Chapter 19)

Quick Reference Table

Type Covers

Premises Building + contents (stock, tools,

computers)

Theft Stolen goods, cash, equipment

Motor (Third Party) Damage to OTHER people/vehicles only
(legal minimum)

Motor (Comprehensive) Everything + your own vehicle + injury to

you

Marine Ships (hull), cargo, freight payment

Fire Fire damage (usually in premises policy)

Consequential loss Lost profits when can't trade (INDIRECT

losses)

Employers' liability Employees injured at work (often

compulsory)

Public liability Public injured on your premises

Product liability Faulty products hurt customers

Fidelity guarantee Employee theft/fraud

Credit insurance Bad debts (customer doesn't pay)

Plate glass Smashed shop windows

Most Important Distinction

Consequential Loss Insurance

Direct Loss Consequential (Indirect) Loss

Fire destroys factory Lost profits while closed

Flood damages stock Lost wages paid to staff

Covered by premises/fire Covered by CONSEQUENTIAL loss

Memory: Consequential = CONSEQUENCES of the disaster

Motor Insurance - 3 Types

Type What it covers

Third Party only Other people's damage only (cheapest)

Third Party, Fire & Theft Others + fire + theft of your vehicle

Comprehensive Everything + your vehicle + you (most

expensive)

Liability Insurance - 3 Types

Type Who can claim

Employers' liability Your employees (often legally required)

Public liability Members of public on your premises

Product liability Customers hurt by your faulty products

PART 3: GETTING INSURANCE & CLAIMS

(Chapter 20)
4 Steps to Get Insurance

QUOTE → PROPOSAL FORM → COVER NOTE → POLICY + CERTIFICATE

Step What happens

1. Quote Get price from insurer

2. Proposal form Fill application, sign declaration of truth

3. Cover note Temporary cover (max 60 days)

4. Policy + Certificate Full contract + proof of insurance

Key Documents

Document Purpose

Proposal form Application form. Must be truthful.

Cover note Temporary cover while waiting for

certificate

Certificate of insurance Legal proof you have insurance

Policy Long document with all terms &

conditions

Endorsement A CHANGE to the policy (add/remove

cover)

Exclusion Clauses
Things NOT covered by policy:

Clause What's excluded

War clause Acts of war, terrorism

Suicide clause Suicide within 2 years (life insurance)

Aviation clause Pilot dying in plane crash

Misstatement of age Lied about age on form

Main Roles in Insurance

Role Simple Job

Broker Represents YOU (the buyer). Finds best deal.

Agent Represents INSURER. Sells their policies.

Underwriter Takes the risk. Decides if insurer can profit.

Syndicate Group of underwriters sharing risk (Lloyd's of

London)

Difference: Broker works for YOU. Agent works for INSURER.

Making a Claim (When something bad happens)

5 Steps:

Step What to do
1 Tell insurer immediately

2 Fill in claim form (BE HONEST!)

3 Provide evidence (receipts, photos, police report)

4 Insurer investigates (may send loss adjuster)

5 Get compensation (if claim is valid)

What to include on claim form:

●​ Name, address, policy number

●​ Description of what happened
●​ Witness statements
●​ Photographs
●​ Receipts/invoices

QUICK REVISION CARD - INSURANCE

5 Principles (IUISC)
Indemnity = No profit​
Utmost good faith = Tell truth​
Insurable interest = Must cry if broken​
Subrogation = Insurer keeps recovered goods​
Contribution = Double insured = split payment

Key People

Person Job
Actuary Calculates premiums

Loss adjuster Checks claim (works for insurer)

Assessor Helps claimant (works for insured)

Broker Finds best deal (works for you)

Underwriter Takes the risk

Documents Flow
Proposal form → Cover note → Certificate + Policy

Claim Process
Notify → Claim form → Evidence → Investigation → Compensation

Compulsory Insurance (Often legally required)

●​ Motor (at least third party)
●​ Employers' liability (in many countries)

Non-Insurable
●​ Business losses
●​ Poor management
●​ Changes in demand/tastes