BISHOP STUART UNIVERSITY

FACULTY OF BUSINESS, ECONOMICS AND GOVERNANCE

BACHELOR OF BUSINESS ADMINISTRATION
YEAR ONE
REG: 23/BSU/BBA/2837
NAME: ASINGWIRE MOSES MUHUMUZA
LECTURER’S NAME: MR. KAKUBA DENIS
FUNDAMENTALS OF INSURANCE

QUESTION: Insurance classes is something that must be understood by both the insurer
and the insured, it is important to understand general insurance and its associated classes as well
as life insurance.

Required: Discuss the different classes of insurance by enlightening the policies they are in.
Insurance is a legal agreement between two parties that is the company (insurer) and an
individual (insured) in which the company is subjected to certain risks pay a carefully assessed
premium and from which the few who actually suffer loss from the stated risk can receive
compensation to indemnify them for a loss to make good the loss suffered. It is very important
for both the company (insurer) and the insured individuals to be able to understand the different
classes of insurance and the policies associated with them. Insurance classes and their policies
include the following;

General insurance: This is an agreement between a policyholder and insurer wherein the
insurance company protects your valuable assets from fire, theft, burglary or any other
unfortunate accident. It can be classified into several classes based on the type of risk it covers,
the classes of general include;

Property Insurance. This protects your property against damage or loss due to certain perils such
as fire, theft, floods. It is designed for individuals and businesses and both business personal or
business property like furniture, electronics, equipment and tools can be covered depending on
the type of policy for example fire insurance, flood insurance and homeowners’ insurance.

Health insurance. Health insurance provides coverage for some or all your medical expenses if
individuals or families happen to get ill or injuries. Health insurance helps individuals or families
to manage healthcare costs by covering hospitalization expenses, doctor visits and other medical
services. It includes policies such as family health insurance, individual health insurance and
group health insurance provided by employers. According to Prudential Uganda, today heart
attack and cancer are the most common major illness so it is a good idea to get health insurance.

Motor Insurance. Motor insurance is a unique insurance policy meant for vehicle owners to
protect them from incurring any financial losses that may arise due to damage or theft and third-
party liabilities of the vehicle. It includes policies such as car insurance, motorcycle insurance.
According to [Link], it is mandatory that any vehicle, van or motorcycle for private or
commercial use should have Motor Third Party Insurance cover.
Liability Insurance. This provides coverage for injuries suffered by other people or damage
caused to someone else’s property. For example liability insurance may cover the hospital bills
for a back injury sustained by another motorist in a car accident that was your fault. On the other
side, liability insurance may help cover damage to your vehicle if you are in an accident where
the other driver was to blame.

Fire insurance. Fire insurance is a type of insurance policy that protects the policyholder in the
event that their home or property is destroyed or damaged in a fire. Some other specified risks
might also be covered by fire insurance such as lightning, explosions, water damage from fire
extinguishing sprinklers. Fire insurance only covers accidental damage, however insurers will
not cover property damaged by intentionally lit fires.

Travel insurance. This is a type of insurance policy that covers risks associated with travelling,
such risks may include lost luggage, flight cancellations, medical expenses and other losses that a
traveller can incur while travelling.

Life insurance: This is a class of insurance that focuses on protecting an individual, their spouse
and children from the potentially devastating financial losses that could result if something
happened to that individual. It includes the following policies;

Whole life insurance. This is where the insured person is covered for the duration of their life as
long as premiums are paid on time. It combines a death benefit with a cash value component that
grows over time. Policyholders can access the cash value through withdraws or loans during
their life time.

Variable universal life insurance. This allows the policyholder to invest the policy’s cash value
in an available separate account. It also has flexible premiums and can be designed with a level
death benefit or an increasing death benefit.

Annuity insurance. This is where the insurer provides for either a single income payment or a
series of income payments at regular intervals in exchange for a single premium or multiple
premiums paid by the annuitant for example monthly insurance payments, pension payments and
monthly home mortgage payments.
Group life insurance. This is a single contract that provides coverage to a group of people,
typically those who work for the same company. The employer owns the policy, which covers
the employees. According to Forbes Advisor, your beneficiaries will get a pay-out if you pass
away while covered by group insurance.

Accidental Death and Dismemberment (AD&D) Insurance. This insurance pays a benefit in case
of accidental death and dismemberment which might include not only the loss of a limb, sight or
hearing but also serious accidental trauma. Accidents covered by Accidental Death and
Dismemberment Insurance include: Car accidents, workplace injuries or death.

Mortgage Protection Insurance. This is a type of insurance policy that helps your family make
your monthly mortgage payments if you, the policyholder and mortgage borrower die before
your mortgage is fully paid off. Some Mortgage Protection Insurance policies will also offer
coverage for a limited time if you lose your job or become disabled after an accident. According
to Rocket Mortgage, some companies call it mortgage life insurance because most policies only
pay out when the policyholder dies.

Term life insurance. This provides coverage for a specified period. For example 10 years, 20
years. It is a contract between a policyholder and an insurance company that says if the insured
person passes away within the time period of the policy, the insurer will pay a death benefit to
the beneficiaries named on the policy.

In conclusion, it is very important for the insurer and the insured to understand general insurance
and its associated classes as well as life insurance because this reduces the confusion between the
meaning and responsibility of the insurer and insured. It also makes the insured informed and
allows them to select appropriate policies that provide enough coverage against potential risks
and losses.
References:
 Insurance and behavioural Economics by Howard C. and Stacey McMorrow
 Insurance: Concepts and Coverage by Marshall Wilson Reavis III
 Insurance Economics by P Zweifel
 Lecturer’s notes
 Google