Insurance & Assurance Explained - Types, Premiums & More
1. Insurance
&
Assurance
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2. Learning Targets
What is Insurance?
Who buys Insurance?
Why do we need
Insurance?
Non-Insurable Risks
Principles of Insurance?
Types of Insurance
Applying for Insurance
Calculating Insurance
Premiums
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3. Insurance Assurance
• Protection against • Protection against
something that something that will
might happen happen
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4. Insurance Policy
A contract you make with an
insurance company where, in return
for a fee (Premium), the insurance
company will compensate the insured
for any loss/damage
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5. How does Insurance work?
Large no. of people who share
the same risk
Pay premium into insurance
company fund
Fund Distributed as
Compensation Admin Costs Profit
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6. Premium
Premium is the fee paid to the insurance
company for cover
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7. Excess Clause
The insured is responsible (liable) for
paying a part of the damage or loss that
is incurred. The insurance company will
compensate the rest
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8. Premium amount…
1. Degree of risk involved
The degree of risk The premium
4. The potential amount of money involved
High compensation High Premium
3. Admin Costs.
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9. in Premium
Loading: Increase in the
standard premium due to an
extra risk
E.G.
A male under the age of 25 with a provisional licence
A house located in an area that is prone to flooding
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10. in Premium
• No claims bonus: is a
reduction in premium if
insured person has not made
a claim in given period of time
OR
• House Insurance lower if
owners have alarm
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11. Compensation
• The money you get when you make a
claim on your insurance policy
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12. RISK
Insurable Risk Non Insurable Risk
Things that can be insured Things that can not be insured against
E.G House Insurance E.G Cant insure against failing an exam
Car Insurance Personal accident for a bungee jump
Medical Insurance Items that are worthless
Loss/Damage caused by natural
disaster e.g Earthquake.
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13. Non Insurable Risks
An insurance company will not offer insurance if..
3. Unable to calculate probability of risk happening
2. Not enough people seeking similar insurance
3. Potential pay out would bankrupt insurance
company
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18. People in Insurance
The insurer: The Insurance Company
The Insured: The person buying insurance
Broker: Gives advice to customer and sells
him/ her insurance
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19. People in Insurance
Actuary: Calculates the premium
Loss Adjuster/ Assessor: Calculates the value
of the loss
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20. Principals of Insurance
• Insurable Interest: In order
to insure something you
must benefit from its
existence and suffer from its
loss
E.G You can insure your house
but not your neighbours house
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21. 2. 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.
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22. 3. 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.
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23. 4. Contribution
• If a risk is insured with
two insurance companies
each will pay half of the
compensation.
• Eg: A house insured with
two ins. co.’s. for
€1,000,000
• Both will give ??
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24. 5. Subrogation
• Passes the legal right of Don’t blame
me its his
the insured over to the fault!
insurer to claim from a
third party who caused the
loss.
• Eg. Sony TV causes house
to go on fire. Ins. co. pays
compensation to insured
and then seeks their own
compensation from sony.
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25. Insurance Documents
• Proposal Form: This is the form you fill
in when you are applying for insurance
cover.
• Policy: Contract of insurance
Gives full detail of cover
Must be kept safely
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26. Cover Note: Temporary Policy
Used while waiting for actual policy
Certificate of Insurance: Proof of Insurance
E.G Car insurance disc
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27. Types of Household Insurances
PRSI
Pay Related Social Insurance
Statutory deduction from wages
You will receive an income if you are out
of work due to illness, disability,
maternity leave Ms O'Brien Chanel College
28. Medical Insurance
• In case you get sick or need
an operation
• Eg: VHI
• Voluntary Health Insurance
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29. Personal Accident Insurance
• Covers people who are injured
due to an accident.
• Lump sum payment for loss of
finger, sight, hearing etc.
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30. Income Protection Insurance
• Provides an income in
case you can’t work due
to illness.
• Will provide you with a
higher income than
PRSI only.
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31. Travel Insurance
• Provides you with
health care if you get
sick on holidays.
• If you have wallet/
passport stolen
• Miss connecting flight
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32. Loan Repayment protection Insurance
• This covers loan
repayments if you are
unable to pay due to
accident/ illness/death
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33. Motor Insurance *
Third Party, fire and theft: This is
the minimum insurance that a driver
must have on a car. The policy does
not cover you the driver or damage
done to your vehicle. It only covers
damage to third party. i.e someone
you crash into or injure
Fully Comprehensive: This covers you
and third party. More expensive.
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34. Steps in making a claim
Talk to assessor agree
on compensation
Fill out claim form
Obtain estimate of items
lost/ stolen
Contact guards and Ins. Co
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35. Life Assurance
• Not compulsory
• 3 types
• Term Policy
• Whole life assurance
• Endowment assurance College
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36. Term Policy
• Pays out a lump sum of o money if the
insured person dies before agreed date.
• Money paid to next of kin
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37. Whole Life Assurance
• Life of the person is insured.
• On the death of this person a lump sum
is paid to relative/ friend
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38. Endowment Policy
• Type of savings scheme
• Awarded a lump sum after agreed no. of years
(maturity date)
• Insured pays monthly contributions (usually over
10 year period)
• Can be ‘cashed in’ before agreed date, called
surrender value
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39. Calculating Insurance Premiums
The O’ Neill Family want to
insure their house valued at
€300 000 and there contents
that are worth €50 000
They receive the following
quote:
Insurance Premium
House €20 per €10000
Contents €4 per €1000
House alarm 10%O'Brien Chanel College
Ms Discount
40. Solution
House: €300 000
________ X €20 = €600
€1 0000
Contents: €50 000
_________ X €4= €200
€1000
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41. Total Gross Insurance Premium = €800
€ 800 @ 10% = €80
Total Net Premium Insurance = €720
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42. Example 2
Michael wants to insure his new
’12 car valued €14000. He wants
fully comprehensive insurance.
He receives the following quote:
Insurance Premium
Car €40 per €1000
Loading for 8 40%
penalty points
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43. Solution
Car: €14 000
________ X €40 = €560
€1 000
€560 @ 40% = €224
Total Net cost of Insurance Premium €784
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44. Example 3
Ciara wants to buy life
assurance. Her insurance
Broker forwarded her the
following quote from an
Insurance company.
Insurance Premium
Basic €650
Loading: 20%
Scuba diver
Discount: 10%
Non-smoker Ms O'Brien Chanel College
45. Solution
Basic Premium: €650
+ loading for scuba diving
(€650 @20%) €130
€780
-Discount for non-smoker
(€650 @10%) €65
Total Net Premium €715
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46. Average Clause
A condition included in the insurance
policy that limits the value of a claim
if you are under – insured
Formula:
Average clause = Sum insured X Loss
True value
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47. Example
• Tom bought a house that is
valued at €400000. He
decides to insure it to the
value of €200000.
• In the event of fire
damage to the house of
€50000, how much
compensation will be paid
out? Ms O'Brien Chanel College
48. Solution
Average clause = Sum insured X Loss
True value
200000 X 50000 = €25000
400000
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49. Questions: Average Clause
1. A motorbike is crashed and completely
distroyed. It was insured for €1800, but
the insurance company estimates that
its true value before the accident was
€2600.
2. A house fire ruins a carpet valued at
€750. The house contents were insured
for €3000. However the insurance
company estimates that the true value
of the contents before the fire was
€6000 Ms O'Brien Chanel College
