Insurance Premium

Visão Geral

Every insurance contract turns on one payment: the premium. It is the price of transferring your risk to the insurer, and it is the single thing that makes the whole promise legally binding. Pay it and the insurer is bound to pay your claim; fail to pay it and there is no contract at all. Yet the figure on your policy is not plucked from the air. It is built up, piece by piece, from the insurer's estimate of what your risk will cost.

In this lesson you will learn what a premium really is, how an underwriter decides its size, and how a bare risk cost grows into the office premium you actually pay once expenses, a margin for surprises and a profit are added on. You will rate a premium yourself from real claims figures, and you will work out what an insurer must refund when a policy ends early. These are the calculations WAEC sets almost every year.

Objetivos

  1. Define the premium and explain its function as the consideration in an insurance contract
  2. Describe the factors an underwriter considers in determining a premium
  3. Explain loading and state the reasons an insurer adds it to the basic rate
  4. Explain when a return premium becomes payable and calculate a simple return premium

Nota de Aula

A young man in Enugu buys motor insurance, pays ₦80,000, and is annoyed that his neighbour pays only ₦55,000 for what looks like the same cover. He suspects he is being overcharged. He is not. The two men present different risks, and the premium is simply the price each one's risk carries. Understand how that price is built and you understand the engine of the whole industry: an insurer that prices its premiums too low collapses when claims arrive, and one that prices them too high loses every customer to a cheaper rival. The premium is where insurance either works or fails.

Avaliação da Lição

Parabéns por concluir a lição em Insurance Premium. Agora que você explorou o conceitos e ideias-chave, é hora de colocar seu conhecimento à prova. Esta seção oferece uma variedade de práticas perguntas destinadas a reforçar sua compreensão e ajudá-lo a avaliar sua compreensão do material.

Irá encontrar uma mistura de tipos de perguntas, incluindo perguntas de escolha múltipla, perguntas de resposta curta e perguntas de redação. Cada pergunta é cuidadosamente elaborada para avaliar diferentes aspetos do seu conhecimento e competências de pensamento crítico.

Use esta secção de avaliação como uma oportunidade para reforçar a tua compreensão do tema e identificar quaisquer áreas onde possas precisar de estudo adicional. Não te deixes desencorajar pelos desafios que encontrares; em vez disso, vê-os como oportunidades de crescimento e melhoria.

  1. The premium in a contract of insurance is best described as the: A. Amount the insurer pays when a loss occurs B. Consideration paid by the insured for the cover C. Value of the property insured D. Profit made by the insurer Answer: B
  2. Which of the following is NOT a form of loading? A. Expense loading B. Profit loading C. Pure premium D. Contingency loading Answer: C
  3. A pure premium of 20,000 naira is loaded with total loadings equal to 40 per cent of the pure premium. The office premium is: A. 24,000 naira B. 28,000 naira C. 8,000 naira D. 20,400 naira Answer: B
  4. Which factor would an underwriter LEAST consider when rating a private motor policy? A. Age and experience of the driver B. Value of the vehicle C. Purpose for which the vehicle is used D. Blood group of the driver Answer: D
  5. A one-year policy carries an annual premium of 60,000 naira. The insurer cancels it after six months. The pro rata return premium is: A. 60,000 naira B. 45,000 naira C. 30,000 naira D. 15,000 naira Answer: C

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