CHAPTER 8 INSURANCE AND ASSURANCE

2 R. Delaney Insurance and assurance An insurance policy is a contract between an insured person and an insurance company that gives the insured person protection against the occurrence of a risk that might happen. An assurance policy gives protection against the occurrence of something that will happen.

3 R. Delaney Obtaining Insurance 1.Apply directly to an insurance company. 2.Apply to an insurance agent who is employed by one insurance company and sells policies on behalf of that company. The agent receives commission on each policy sold. 3.Apply to an insurance broker who is a self employed individual (or company) and sells policies on behalf of many different insurance companies. The broker should be able to advise customers about the best policies for their needs.

4 R. Delaney The Premium The premium is the price paid for the insurance cover The size (value) of the premium depends on: 1. The degree of risk involved 2. The potential sum of money involved 3. The administration costs of the insurance company A no-claims bonus is a reduction in the standard premium if the insured person has not made a claim against the policy for a given period of time.

5 R. Delaney Principles Of An Insurance Or An Assurance Contract 1.The principle of utmost good faith 2.The principle of insurable interest 3.The principle of indemnity 4.The principle of contribution 5.The principle of subrogation

6 R. Delaney Applying For An Insurance or Assurance Policy 1.The person applying for a policy fills out a Proposal Form. 2.If the application is accepted the actuary will calculate the premium. 3.The insurance company will issue a Cover Note once the first premium is received. 4.Finally, the insurance company will issue the Insurance Policy.

7 R. Delaney Making a Claim 1.The insured person fills out a Claim Form giving details of the loss, and its estimated value. The Gardaí may have to be informed of the loss. 2.The insurance company will then send out an assessor or a loss adjuster to calculate the value of the loss. 3.Finally, if the claimant is properly insured, the insurance company will indemnify him or her.

8 R. Delaney The Average Clause The average clause is a condition included in insurance policies that limits the value of a claim if you are under- insured. If you insure your house for only two thirds of its value you will only receive two thirds of the value of any damage to the house. Example: Your house is worth €300,000 but you only insure it for €200,000 (i.e. 2/3 of its value) A fire causes €60,000 worth of damage to it. You will only receive €40,000 (2/3 of €60,000) from the insurance company

9 R. Delaney Household Insurance Household insurance policies are usually classified under four headings: each of these also have subheadings shown on the following slides. 1.Personal insurance 2.Property insurance 3.Life assurance 4.Motor insurance

10 R. Delaney Personal insurance 1.Personal accident insurance 2.Private medical health insurance 3.Income protection insurance 4.Travel insurance 5.PRSI / USC 6.Loan repayment protection insurance “Lloyds building in London”

11 R. Delaney Property insurance, Life Assurance and Motor Insurance Property Insurance Policies 1.Building insurance 2.Contents insurance 3.All risks insurance Life Assurance Policies 1.A term policy 2.A whole life policy 3.An endowment policy Motor Insurance Policies 1.Third party policy 2.Third party fire and theft policy 3.Fully comprehensive policy “Couple nervously awaiting an insurance quotation”

12 R. Delaney Non-Insurable Risks An insurance company will refuse insurance if a risk has any or all of the following characteristics: 1.An actuary, due to lack of statistics, cannot calculate the probability of the risk occurring. 2.There are not enough people seeking similar insurance to share the risk. 3.The loss is imminently inevitable (bound to happen soon). 4.The damage is gradual, e.g. depreciation of an asset. 5.The occurrence of the risk would be catastrophic for the insurance company.