Question 1

1. D
2. B
3. C
4. C
5. C
6. D
7. D
8. A
9. B
10. B
11. A
12. D
13. C
14. B
15. A
16. B
17. A
18. A
19. C
20. C

Question 2

1. Ati: Underwriting risk class = High risk

 Ati is a smoker and has epilepsy which puts her at high risk for a disability claim.
 Lecturer is not a hazardous occupation and the sum assured of R150 000 is
relatively low.
 However, Ati's health conditions make her a high risk for disability cover and the
insurer may offer a higher premium or exclude certain conditions from the cover.
2. Boy: Underwriting risk class = Standard risk
 Boy is a young male who does not smoke and his proposed sum assured of R315
000 is moderate.
 However, he has high blood pressure which may lead to future health issues,
making him a standard risk for disability cover.
 Being a medical doctor, Boy's occupation may be considered as a favorable risk
factor.
3. Abo: Underwriting risk class = Decline

 Abo is a young female and a non-smoker but has had a heart attack which puts
her at high risk for disability claims.
 Being a soldier, Abo's occupation is a hazardous occupation.
 The proposed sum assured of R80 000 is relatively low, but her history of heart
attack may make her ineligible for disability cover.
4. Doli: Underwriting risk class = Low risk

 Doli is a non-smoker and the proposed sum assured of R120 000 is relatively low.
5. However, being blind, Doli may have some limitations in performing certain
activities, but it does not necessarily mean she has a high risk of a disability
claim.
 Doli's age and occupation as a pensioner may also contribute to a lower risk
classification.

6. Ela: Underwriting risk class = High risk

 Ela is a smoker and has diabetes, which puts him at high risk for a disability
claim.
 Being self-employed, Ela's occupation may not be considered as a favorable risk
factor.
 The proposed sum assured of R70 000 is relatively low, but his smoking and
diabetic conditions make him a high risk for disability cover.

Question 3
Gertrude's claim may be rejected by the insurer. Non-payment of premiums is a
material breach of the insurance contract, and failure to pay premiums can lead to a
lapse in coverage. If the policy is no longer in force due to non-payment of premiums,
any claim submitted during the lapsed period will not be paid.

Romila's claim may be accepted by the insurer. Although Romila's occupation was
incorrectly stated at the inception of the policy, this is not material to the cause of
death and the amount claimed. The insurer may investigate the error but is likely to
pay the claim if the cause of death is covered under the policy.

Ndaa's claim is under investigation, and the insurer has not made a decision yet. The
reason for the investigation is not clear from the information provided, and the claim
may be accepted or rejected depending on the findings of the investigation.

Tshepo's claim may be accepted by the insurer. The cause of death is natural, and the
claimed amount is within the policy limit. As long as the policy is in force at the time
of death, the insurer is likely to pay the claim.

Sive's claim may be rejected by the insurer. Suicide is often excluded from life
insurance policies, especially if it occurs within a certain period of the policy's
inception. The insurer will investigate whether the suicide was within the exclusion
period and whether the policy contains a suicide clause.

Tau's claim may be accepted by the insurer. The cause of death is natural, and the
claimed amount is within the policy limit. As long as the policy is in force at the time
of death, the insurer is likely to pay the claim. However, the additional information
provided is not relevant to the insurer's decision.

Question 4

4.1

Insurable interest is a fundamental concept in insurance that refers to the legal interest
that a policyholder has in the subject matter of the insurance policy. In simple terms,
it means that the policyholder has a financial or other type of interest in the insured
property or person that is being insured. This interest must exist at the time the
insurance policy is issued, and it must continue throughout the policy's term.

In insurance, the concept of insurable interest serves as a basis for determining

whether a person or entity has a right to purchase an insurance policy for a specific
property or individual. Insurable interest is essential because it ensures that only those
parties with a genuine financial stake in the subject matter of the policy can obtain
coverage. Without insurable interest, people could buy insurance policies on anything
or anyone, including strangers or unrelated parties, which could result in fraudulent
activities.

For example, if a person wants to purchase life insurance policy on someone, they
must have an insurable interest in that individual. An insurable interest may exist in
cases where the death of the insured person would cause a financial loss, such as a
business partner, a spouse, or a parent.

In addition, insurable interest applies to property insurance policies as well. To

purchase property insurance, the policyholder must have a financial interest in the
property. This interest can come from owning, leasing, or borrowing the property, or
having a financial stake in its continued existence, such as a mortgage lender or a
lienholder.

In conclusion, insurable interest is a crucial concept in the insurance industry, as it

ensures that only those with a genuine financial interest can obtain coverage.
Insurable interest serves as a protection against fraudulent activities and ensures that
insurance policies are issued and maintained for legitimate reasons.

4.2

The purpose of insurable interest is to ensure that the parties involved in an insurance
contract have a genuine financial or other type of interest in the insured property or
person. Insurable interest serves as a legal and ethical safeguard against fraudulent or
speculative activities in the insurance industry.
By requiring insurable interest, insurance companies can mitigate the risk of moral
hazard, which refers to the incentive that insured parties may have to engage in risky
behavior, knowing that they will be protected by insurance coverage. By ensuring that
the policyholder has a genuine financial stake in the insured property or person, the
insurer can minimize the risk of fraudulent claims or over-insurance.

Insurable interest also serves to prevent people from purchasing insurance policies on
the lives or property of strangers or unrelated parties, which could lead to gambling or
other illegal activities. Insurable interest helps to maintain the integrity of the
insurance industry by ensuring that policies are issued and maintained for legitimate
reasons and that claims are paid out only to those with a genuine financial loss.

In summary, the purpose of insurable interest is to protect the interests of all parties
involved in an insurance contract by ensuring that the policyholder has a legitimate
financial interest in the insured property or person and to minimize the risk of
fraudulent activities in the insurance industry.

4.3

Employers can take out insurance products on the lives of their employees to provide
financial protection to the company in the event of the employee's death. These
insurance products can help cover expenses related to the loss of the employee and
provide benefits to the employee's beneficiaries.

There are several types of insurance products that an employer can take on the life of
an employee, including:

Group life insurance: This is a type of life insurance that provides coverage to a group
of people, typically employees of a company. The employer pays the premiums, and
the coverage is based on the employee's salary or a fixed amount.

Key person insurance: This type of insurance provides coverage for a specific
employee who is crucial to the success of the business. If that employee dies, the
company receives a benefit that can be used to cover the costs of finding and training
a replacement, as well as other related expenses.
Executive bonus plan: This is a type of life insurance in which the employer pays the
premiums, but the employee owns the policy and receives the death benefit. This can
serve as a valuable benefit to the employee, as the policy's cash value can be used for
retirement savings or other financial goals.

Split-dollar life insurance: This is a type of life insurance in which the employer and
employee share the premium payments and the death benefit. This can provide the
employee with a valuable benefit and can also help the employer retain key
employees.

In conclusion, employers can take out insurance products on the lives of their
employees to provide financial protection to the company and to offer valuable
benefits to their employees. The type of insurance product chosen will depend on the
specific needs of the company and the employee.

4.4

Creditors can take out insurance products on the life of a debtor to protect themselves
from financial loss if the debtor dies before the debt is fully repaid. These insurance
products can help ensure that the creditor receives the full amount owed in the event
of the debtor's death.

The following are some insurance products that a creditor can take on the life of a
debtor:

Credit life insurance: This type of insurance is designed to pay off the outstanding
debt if the debtor dies before the loan is fully repaid. The creditor is the policy
beneficiary, and the death benefit is used to pay off the remaining debt.

Mortgage life insurance: This type of insurance is similar to credit life insurance but is
specifically designed to pay off a mortgage loan if the debtor dies. The policy's death
benefit is used to pay off the outstanding mortgage balance, and the creditor is the
policy beneficiary.
Collateral protection insurance: This type of insurance is used to protect the collateral
used to secure a loan, such as a car or a house. If the debtor dies before the loan is
fully repaid, the insurance pays the creditor the value of the collateral.

Guaranteed asset protection insurance: This type of insurance is designed to protect

the creditor if the value of the collateral used to secure the loan is less than the
outstanding debt. If the debtor dies before the loan is fully repaid, the insurance pays
the difference between the outstanding debt and the value of the collateral.

In conclusion, creditors can take out insurance products on the life of a debtor to
protect themselves from financial loss if the debtor dies before the debt is fully repaid.
The type of insurance product chosen will depend on the specific needs of the creditor
and the type of loan or debt being insured.

4.5

Insurable interest is the measure of the extent to which an individual or organization is

financially or otherwise affected by the loss of the insured property or person. The
value of the insurable interest is typically determined based on the amount of financial
loss that would be suffered in the event of the loss of the insured property or person.

In the case of property insurance, the insurable interest is typically determined by the
value of the property being insured. For example, if a homeowner takes out insurance
on their home, the insurable interest is the value of the home. The value of the
insurable interest may also include the value of any contents within the home that are
being insured.

In the case of life insurance, the insurable interest is typically based on the financial
impact that the death of the insured person would have on the policyholder. For
example, if a parent takes out life insurance on their child, the insurable interest would
be the amount of financial loss that the parent would suffer in the event of the child's
death.

The value of insurable interest may be determined through various methods such as:
Market value: This is the value of the insured property or person based on the market
price at the time of the insurance contract.

Replacement cost: This is the cost of replacing the insured property with a similar one,
including any associated costs such as labor and materials.

Actual cash value: This is the value of the insured property at the time of the loss,
taking into account its age, condition, and other factors.

In conclusion, the value of insurable interest is determined based on the financial

impact that the loss of the insured property or person would have on the policyholder.
The value can be quantified through various methods such as market value,
replacement cost, or actual cash value.