Household Insurance
Distinguish between
Insurance Assurance
Protection against a Protection against a
loss you hope will loss you know will
not happen. happen.
Eg. car accident. 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 Ins. co. expenses
of Insurance
small premiums Ins. co. profit
pool/fund
Compensation
Distinguish between
Insurable risk Non-insurable risk
Things that can be Things that cannot
insured. be insured against.
Eg.
Eg.
Damage to car used
Houshold insurance; in crash testing.
fire theft, damage. Personal accident for
Personal accident for a bungee jumper.
a farmer.
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
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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
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Older, smoker, risky job
Discount
Younger, non-smoker,
low risk job