UNIT 5 Insurance


Write It! Scenario


What types of insurance would you recommend for each of the following scenarios?


Type of insurance


Peter and Mark bought a house. Gerard is a 30-year-old man with diabetes.


Mary wants to start driving and her mum will teach her.


Rachel is travelling to Thailand and is concerned about her backpack.


3 Benefits and Drawbacks of Insurance Benefits/Rewards/Advantages


1. Compensation: Insurance protects the consumer by providing them with money (compensation) to replace/repair any damaged property and puts them back into the same or similar financial position as before the loss occurred.


2. Regular income: Insurance policies such as income protection allows the household to continue to pay their bills even when someone in the household is sick and unable to work.


3. Employment: Insurance companies provide a lot of people with employment. Drawbacks/Challenges/Disadvantages


1. High costs: Insurance premiums can be a very large expense for the household. Also, if the risk does not occur or they never claim on their insurance, they do not get a refund.


2. Non-insurable risks: Not all risks can be insured against. For example, you cannot insure yourself against failing your exams or an entrepreneur cannot insure themselves against their business failing. These are known as non-insurable risks.


3. Fraud: Insurance fraud occurs when people do not tell the truth when taking out insurance or claim compensation to which they are not entitled. This causes the price of insurance to increase for everyone.


4 Calculating Costs of Insurance


We previously mentioned that there are costs involved in taking out insurance for a household. We need to be able to calculate the following:


1. Premiums for insurance 2. Compensation for a claim


Checklist


You will need:  A calculator.


93


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