(a) Explain each of the following insurance terms: (i) consequential loss (ii) cover note (b) State four advantages of re-Insurance to a businessman

(a) Explanation of insurance terms

• (i) Consequential loss: This is the indirect loss of profit or income that a business suffers as a result of an insured event, rather than the direct physical damage itself. For example, when a factory is destroyed by fire, the loss of profit during the period the business is unable to operate is a consequential loss. It can be covered by a consequential loss (loss of profit) policy.
• (ii) Cover note: A cover note is a temporary document issued by an insurer to the insured as proof that a contract of insurance is in force, pending the preparation and issue of the full policy document. It gives the insured immediate protection while the formalities of the policy are being completed.

(b) Four advantages of re-insurance to a businessman

1. It gives the businessman greater security, because the insurer he deals with is itself protected and is therefore more able to pay large claims.
2. It makes it possible for very large or high-value risks to be insured, since the risk is spread among several insurers.
3. It increases the businessman's confidence that his claim will be settled in full even where the loss is very large.
4. It promotes the stability of insurance companies, ensuring that the businessman's insurer will not easily collapse after paying a heavy claim.