Household Insurance

Distinguish between

Insurance
Protection against
a loss you hope
will not happen.

Eg. car accident.

Assurance
Protection against
a loss you know
will happen.
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
of
small premiums

Ins. co. expenses

Insurance
pool/fund

Ins. co. profit

Compensation

Distinguish between

Insurable risk
Things that can be
insured.
Eg.
Houshold
insurance; fire
theft, damage.
Personal accident
for a farmer.

Non-insurable risk
Things that cannot
be insured against.
Eg.
Damage to car
used in crash
testing.
Personal accident
for a bungee
jumper.

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 neighbourss 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.

2.

3.

4.

Contact guards & ins. co.

Obtain estimates of lost/stolen
items.
Fill out claim form. (ugf)
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 cant 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