INSURANCE

1. INSURANCE I Insurance is a scheme based on probability of events occurring and the pooling of risks to restore its contributors to their prior position if the event occurs.

2. Difference between insurance & assurance Insurance – involves the probability of a risk occurring eg. getting sick Assurance – is based on a risk that is bound to occur eg. death

3. Principles of Insurance • Indemnity • Insurable interest • Utmost good faith • Proximate cause • Subrogation • Contribution • Benefits

4. Types of Insurance • Life assurance & endowment • Marine insurance • Motor Insurance • Health Insurance • Business Insurance • Fire • Burglary • Employer’s Liability • Plate Glass • Bad Debts • Goods in transit

5. Practice Question • (a)List TWO responsibilities of a government to its citizens. • (b)Government can assist business by providing them with subsidies. Governments can also assist consumers through price control measures. • Define the terms ‘subsidy’ and ‘price control’. • (c )Dave recently opened a small appliance store. He sells radios, television sets, stoves and refrigerators. Dave was advised that he should insure his business. • (i)List THREE principles upon which insurance is based. • (ii)State how the principles identified in (c)(i) above will apply to Dave’s appliance store if he insures the business. • (d)Dave is thinking of expanding his business. He approached his bank for a loan. Dave was advised that he can use his house as collateral for the loan but ONLY if the house is insured. • (i)Define the term ‘collateral’. • (ii)Explain why the bank requires that Dave’s house MUST be insured if he intends to use it as collateral for loan.