Insurance

INSURANCE POLICIES
LIFE INSURANCE
Three types of insurance policies:
❖ Term policy
❖ A whole life/ permanent policy
❖ Endowment policy
Term policy:
This policy pays out if death occurs during the length of the policy. Most term policy is taken
out for a period of between one and thirty years. The policy entitles the beneficiary to a sum
of money when the policyholder dies.
Beneficiary – the person who is benefitting and receiving the estate after the insured person
dies.
A whole life / permanent policy:

This policy pays out whenever a person dies, regardless of how long they live. The sum of
money and the premiums will stay the same.
An endowment policy:
This policy pays out a lump sum of money after a specific term, or on death of the
policyholder. Some endowment policies are also paid out if the person is critically ill.
Term policy VS Endowment policy

With the term policy, the beneficiary is only entitled to receive the money after the policy
reaches maturity, whereas the endowment policy allows for the money to be taken from it
before maturity is reached.
With a whole life policy money cannot be taken from it until after the insured person dies no
matter how long they live.
>When making large investments (e.g. mortgage) one of the terms is that you must have life
insurance. This is because if you die, the institution will be able to get the money they are
owed from the insurance company.
NON LIFE INSURANCE POLICIES
There are many types of non-life insurance policies that are relevant to business, which
involve an insurance contract. The size of the premiums will depend on the likelihood of the
risk and the possible amount of compensation that the insurance company may need to pay
out.
Building, fire and equipment insurance
These are important if a business does not want to have to close down for an extended
period of time in the event something occurs. The compensation from an insurance claim will
enable a business to repair, rebuild or buy new equipment.
E.g. if you're renting a building, would you take out an insurance policy on the building?
No because the property is not yours, but your belongings are inside the building, so you can
take out equipment insurance policy and insure the contents of the building from fire flood
etc.
> Usually insurance companies do not insure against ‘acts of god’ or natural disasters.
Product liability insurance

This policy will cover a company against harm resulting from the use of one of its products,
providing the company has complied with all the relevant legislation relating to the
development and production of that product.
Businesses in manufacturing are often advised to take out this type of insurance. This is
because the products can be tested, but there is always a small chance that the product can
go against the odds and someone can have a bad reaction to it. However, if a product that
does not follow the guidelines is produced, then you will be liable.
Fidelity insurance
This policy will cover a company against harm resulting from dishonesty or fraud committed
by any of the employees.
Vehicle insurance
This policy insures company vehicles and their drivers against damage caused by accidents
while on company business. The company will be able to make a claim provided that the
vehicles are properly serviced and used, and provided that drivers are suitably trained, and
the company has checked that they are competent.
Two variations to vehicle insurance:
❖ Comprehensive insurance
Where the insurance company will compensate the business once they are involved
in any type of accident. So if there was an accident and the driver was found at fault,
the person would be compensated. If the driver is not found at fault, he would be
compensated, but the insurance company would reclaim the money they spent from
the insurance company whose client was at fault.
The premiums are more expensive.

❖ Third party insurance
In this type of insurance policy, the insurance company will compensate for damages
that occurred by the policyholder.
E.g. If Naadirah and Hayley were to get into a car accident, Naadirah insurance
company would have to compensate for Hayley and Naadirah would end up having
to find her own funds to pay for the damages for her car.
E.g. if a person got into a car accident, the insurance company would repair the car of the
other person, but the policyholders' car would remain damaged (sad :( )]
Marine/aviation insurance
This policy insures the cargo, freight, aeroplanes etc. any and all elements relating to
marine/aviation business.
Employers liability insurance

This policy covers accidents to employees on company premises or while going about
company business. In order for claims to be covered by employees, the business must
ensure that health and safety measures and adequate training of employees are in place.
Public liability insurance

This policy covers accidents or injury caused to the public where the company has done
everything in its power to prevent this from happening.
Cyberattacks and digital risk insurance

Cyberattacks on company data have become one of the major causes of business loss in
recent years. A business is able to take out insurance against such risks, and will be covered
provided it has in place the checks required by the insurance company, such as building
firewalls and hiring specialists to protect them against hackers.
INSURANCE FACILITATES TRADE
The main advantage of insurance to a business or person is that it reduces the risk that they
are taking.
Trade credit insurance helps to reduce the risk when engaging in international trade
How trade credit insurance works:

❖ The exporter pays a premium.
❖ The exporter then sells goods on credit to a foreign buyer.
❖ The exporter waits on payments from the buyer under the terms of the transaction.
However, if the buyer fails to pay up within a set period of time, then the insurance
will compensate the exporter up to 75% of what is owed.
The benefits of trade credit insurance:
❖ A country sells more exports, earning more foreign currency
❖ Exporters face less exposure to risk
❖ Exporters will make a return on their exports
❖ The earnings of exporters are more predictable.

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INSURANCE POLICIES

A whole life / permanent policy:

Term policy VS Endowment policy

NON LIFE INSURANCE POLICIES

Product liability insurance

Two variations to vehicle insurance:

The premiums are more expensive.

Employers liability insurance

Public liability insurance

Cyberattacks and digital risk insurance

INSURANCE FACILITATES TRADE

How trade credit insurance works:

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