WELCOME
TO THE
PRESENTATION
BY
KINGFREY HAMWENDE
FROM
MUOYO SECONDARY SCHOOL
1
Specific objectives for the presentation will be
to;
i. Define insurance
ii. Explain the purpose of Insurance
iii. Explain the principles of Insurance
iv. Explain the Insurable and non Insurance
risks
v. Explain the types of Insurance covers
2
Examination questions
Questions from this topic comes as follows:
Section A: Q 17
Section B: Q 9
Section C:Q 5 (b)
3
INSURANCE
WHAT IS INSURANCE?
i. An aid to trade that helps individuals or
businesses to transfer their risks to the
insurance company.
4
Purpose of insurance
It reduces the risk of financial loss by
giving indemnity i.e. giving security to the
insured.
It allows businessmen and businesswomen
to enter into large-scale contract, which
might otherwise be avoided for fear of loss.
It is also a means of saving for some people.
To pool the risks of many insured persons
and spread the financial losses of the
unfortunate few over the fortunate many.
5
This is when people with similar
POOLING OF RISKS
risks pay into a common fund a
premium.
There by creating a pool of
resources
It is from this pool that the less
fortunate are compensated from
In this way, the burden is made
lighter than it would have been if
done alone
6
Cont.
The funds in a pool must be sufficient to
cover compensation, administration cases
and leave some profits for the insurance
company.
Even giving out loans
For the principle of pooling of risks to work,
the insured persons must not suffer losses all
at the same time.
If they all suffer the loss at once, they can be
no enough funds in the insurance pool to pay
everyone.
7
Principles of insurance
There are the basic ‘rules’ of insurance which
are applied to ensure that the policy is
effective and it is not prone (open) to abuse
There are rules that govern insurance
The following are the principles of insurance;
i. Utmost good faith
ii. Indemnity
iii. Insurable interest
8
1. Utmost Good faith
The principle states that ‘Both the insured and
insurer must reveal every relevant and material
facts relating to the policy being undertaken’.
It demands that both must be truthful and
honesty
The insured must fill in the proposal form by
telling the truth without leaving out any
material facts.
Like people planning to get married
9
WHY SHOULD THE INSURED REVEAL ALL
MATERIAL FACTS ?
For the insurance company to;
i. Assess the risk
ii. Decide whether or not to accept the risk
iii. Determine a fair premium.
Any breach to the principle of utmost good
faith, the contract maybe declared null and
void
10
2. Indemnify
This principal states that the policy holder
must be restored/compensated to his or her
former financial position without making
profits out of a loss
There should be no gain or loss but the
insured be restored to his/her financial
position immediately before the loss
occurred.
No profit is made out of the loss
Except life assurance, all policies are
covered under indemnity
11
Cont.
Therefore ,the insured must not over insure
or under insure with a view of making some
gain
If they do, the insurance company may use
contribution or subrogation as way of
restoring the insured to the original
position.
i. Contribution: applies if the policy holder
insured with more than one insurance
12
Cont.
In this case, insurance companies contribute
proportional amounts to make up for the
loss.
ii. Subrogation :applies if the insured is fully
compensated/Indemnified for the loss E.g. in
the case of a vehicle stolen or damaged, the
damaged (scrap vehicle) or recovered
property belongs to the insurance company.
13
3.insurable interest
It states that ‘only the person who
stands to lose financially if the risk
insured against occurs ,has the legal
right to insure the property or life’
That is, the person must own the
property if s/he has to insure it.
It prevents people who are not owners
of the item from insuring the property 14
Insurable and Non-insurable Risks
Insurable Risks Non-insurable Risks
Risks that can be insured Cannot be insured against
against Impossible to assess
They can be assessed Fair premium cannot be
Premium can be calculated from past records
Not insured by a lot of
calculated from past
records people
Beyond the financial
Insured by a large
capabilities of the insurance
number of people
company
Risks within the financial earthquakes.,
capabilities of the insurer floods,business losses,loss
Fire,theft,accident etc due change of fashion
15
Steps involved in taking out insurance
cover
The person seeking insurance cover
approaches the insurance broker
obtains and completes the proposal
form
It gives details of the risk to be
covered against and details of the
applicant.
The proposal form must be filled in
utmost good faith.
16
Cont..
The proposal form is important to
the insured because;
It enables the insurance company
assess the risk and decide whether
or not to accept the risks and fix/set
premium and
finally issue the insurance policy,
setting the terms of the contract (it
forms the basis of the contract).
17
Proposal Form
PAGE 1 PAGE 2
18
Procedure involved in making a claim
Inform the police immediately the loss
occurs/happens
Notify the insurance company of the loss
as soon as it happens(possible)
Notify the insurance company if the object
was insured with the other insurance
company
Complete the claim form giving full
details of the loss suffered
Insurance company employees (assessors)
19
Cont..
They assess and determine the amount
of financial loss suffered
In order to arrive at a fair and
reasonable amount of compensation,
the client signs an agreement of loss
form to bind him to accept the
amount of compensation arrived at
The insurance company settles the
claim by paying money Or by paying in
kind,
The remains of the object are 20
TYPES OF INSURANCE COVERS
1. Life Assurance
Life assurance policy covers the following:
a) Whole life policy : a person assures his/her life for a certain sum
of money which will be paid to his/her dependants after his/her
death.
The assured pays premium for his/her entire working life until
death
a) Endowment/Term policy : the assured is covered for certain
period of time e.g 5 years.
It provides compensation in money (sum assured) either at
maturity date or death of the assured
2. Fire Insurance
a) Ordinary fire insurance :Provides protection to a wide range of
property
b) Consequential Loss: this is the loss of profit suffered as result
21
Cont..
3. Accidental Insurance
This branch of insurance covers a wide range of Insurance policies
and includes the following:
a) Motor Vehicle Insurance: mandatory by law
Third party motor insurance : third party provides compensation
only to third parties
for death or body injury caused to them damage to their property.
Third party, fire and theft motor insurance :Third parties for death
or body injuries caused to them and their property.
The insured’s own vehicle
for accidental damage to the vehicle,
injury to the driver, loss of the vehicle by fire, theft
i. Full comprehensive
b) Employer’s Liability Insurance
compensation of employees for deaths, diseases etc Suffered
whilst at work
22
Cont..
c) Public Liability: business owners and
manufacturers against claims by members of
the public for deaths, accidents etc
4. Marine Insurance
Marine Insurance Covers losses or damage to
property and life caused by sea risks.
The main types of marine insurance are;
a) Hull Insurance
b) Cargo Insurance
c) Ship Owners Liability Insurance
d) Freight Insurance
23
Examination Sample Questions (2020
Internal)
Section A
17.Which one of the following does not belong
to household risks?
A. Damage to furniture caused by rain
B. Embezzlement(Answer)
C. Loss of furniture due to fire
D. Theft of furniture
24
Section B
Q 9.Describe Whole life assurance
Answer
Premiums are paid through out the person’s
life
Sum assured is payable only upon death of
the assured
Sum assured is paid to the beneficiaries
Paid either in instalments or as a lump sum
25
Section C
Q 5 (b) Discuss the features of utmost
Goodfaith in insurance
Answer:
-Demands honesty
-Demand faithfulness
-from both the insured and the insurer
-Every relevant and material facts
-Relating to the policy
-being undertaken must be stated
-The insured must fill in the proposal form
26
Cont.
-Giving out the truth in full
-Enables the insurer to assess the risk
-and decide whether or not to accept the risk
-and determine the premium
-the insurer honours promises
-and obligations in the contract
-The contract may be declared null and void
-if utmost good faith if violated
27
THANK YOU
TWALUMBA
TWATOTELA
LWITUMEZI
ZIKOMO
TWASANTA
28
