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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. Difference between insurance & assurance. Insurance – involves the probability of a risk

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INSURANCE

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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.


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


Principles of Insurance

  • Indemnity

  • Insurable interest

  • Utmost good faith

  • Proximate cause

  • Subrogation

  • Contribution

  • Benefits


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


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.


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