CHAPTER 11 – INSURANCE Identifying risks A


Go to page 77 of your Activities and Accounts Book to identify any risks in the picture that might affect a family’s insurance premiums.


Read the text below and answer the questions that follow.


Claire and Jim Davy are taking out home insurance on their €350,000 house. It has locks on all the windows, is under a Neighbourhood Watch scheme and has an alarm fitted. The house is situated in a quiet rural setting. Jim Davy is at home during the day.


Gary and Lynsey O’Donnell are also taking out home insurance. They live in a city town house that is also valued at €350,000. They have no alarm or locks on the windows. Gary and Lynsey are both out at work during the day.


1. How much is each house valued at?


2. Which couple will be paying the lowest premium on their home insurance? List the possible discounts on their premium payments.


3. Which couple will be paying the highest premium on their home insurance? List the possible loadings on their premium payments.


Uninsurable Risks


In some cases, an insurance company may refuse to insure a risk because the likelihood of it taking place is too high. This is called an uninsurable risk.


For example, most home insurance policies will not cover for damage caused by flooding if the house is located near a body of water that is known to flood.


Calculating the Premium Total premium = basic premium + loadings – discounts


• Loadings are calculated as a percentage of the basic premium. • Discounts are calculated as a percentage of the basic premium plus loadings. • No claims bonuses are calculated as a percentage of the total premium.


139


PERSONAL FINANCE


A


B


C


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