Household Insurance
Distinguish between
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Insurance
Protection against a
loss you hope will
not happen.
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Eg. car accident.
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Assurance
Protection against a
loss you know will
happen.

Eg. death.
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Two reasons for
adequate insurance
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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

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Insurable risk
Things that can be
insured.
Eg.
Houshold insurance;
fire theft, damage.
Personal accident
for a farmer.

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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
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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
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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.

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Eg. was it fire or theft or flood?
ie. what actually happened?
This helps the insurer decide if compensation
is due.
Insurance Terms
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Compensation:
Is the money you get when you make a
claim.
Principles of insurance
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Insurable Interest
Utmost Good Faith
Indemnity
Contribution
Subrogation
Insurable Interest

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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

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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

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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
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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

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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
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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

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SUM INSURED x CLAIM = COMPENSATION
ACTUAL VALUE
EXAMPLE 1.
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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
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200,000 x 10,000 = 8,000
250,000
Documents used in insurance
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Proposal Form
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Application form for insurance
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Policy
Contract of insurance
Gives full details of cover
Must be filled away safely
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Cover Note
Temporary policy
Used in car insurance, while you
are waiting for insuracne disc

Certificate of Insurance
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Proof of insurance

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Claim Form
Form you fill out when a loss
occurrs and you want
compensation
People in insurance
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Broker
Gives advice on insurance
Sells insurance on behalf of lots
of companies.
Eg:

Agent
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Sell insurance for only one co.
Eg: FBD, Quinn Direct……..
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Actuary
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Calculates insurance premiums
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Loss Adjuster
Calculates the value of the loss
Works for the insurance co.
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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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Loading
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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

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Money taken off premium for a
lower risk
Eg: In house insurance you get
a discount for having an alarm
No Claims Bonus

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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

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The date you must have your
premium paid by.
Eg : 1/10/08
Days of Grace

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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

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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

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In case you get sick or need an
operation
Eg: VHI
Voluntary Health Insurance
Personal Accident

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Covers people who are injured
due to an accident.
Lump sum payment for loss of
finger, sight, hearing etc.
Salary Protection

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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