Insurance
Overview
Every commercial transaction carries risk. A warehouse could flood, stock could be stolen in transit, or a customer could be injured on your premises. Insurance exists so that businesses and individuals can transfer these financial risks to a specialist company in exchange for a regular payment, freeing them to trade with confidence rather than fear.
In this lesson you will explore why insurance is considered an essential aid to trade, learn the principles that underpin every policy, distinguish insurable from non-insurable risks, and walk through the process of effecting cover and making a claim. These concepts appear frequently in the Edexcel Commerce examination and are central to understanding how modern commerce manages uncertainty.
Objectives
- Understand purposes of insurance: risk reduction, compensation, financial protection, business confidence, investment
- Understand insurance principles: indemnity, contribution, subrogation, insurable interest, utmost good faith; the statistical basis of insurance (pooling of risks, forecasting losses, fixing premiums, compensating for loss); the role of actuaries and assessors; non-insurable risks
- Understand insurance business risks: premises, theft, motor, marine, fire, consequential loss, employers' liability, public liability, product liability, fidelity guarantee, credit insurance, plate glass
- Understand effecting insurance cover and renewal: main documents (proposal form, cover note, policy), the purpose of an endorsement, reasons for inclusion of clauses, main roles (insurance brokers and agents, underwriters and syndicates)
- Understand effecting a claim: making a claim including the claim form
Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on Insurance. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- Which principle of insurance prevents a policyholder from making a profit on a claim? A) Subrogation B) Contribution C) Indemnity D) Utmost good faith Answer: C
- Which of the following is a NON-insurable risk? A) Fire damage to a warehouse B) Theft of cash from a shop C) A fall in demand due to changing fashion D) Injury to an employee at work Answer: C
- What is the role of an actuary in insurance? A) To sell policies to customers B) To investigate claims after a loss C) To analyse risk data and calculate premiums D) To repair damaged property Answer: C
- A cover note is best described as: A) The final insurance contract B) A temporary document providing immediate protection C) An amendment to an existing policy D) A form used to make a claim Answer: B
- Under the principle of subrogation, after paying a claim the insurer: A) Cancels the policy immediately B) Increases the premium automatically C) Takes over the policyholder's right to recover the loss from the responsible party D) Requires the policyholder to pay back half the claim Answer: C
Available on the Green Bridge App
Download the Green Bridge CBT app on your phone or computer to access full lesson notes, practice questions, and more.
Available on the Green Bridge App
Download the Green Bridge CBT app on your phone or computer to access full lesson notes, practice questions, and more.
Recommended Books
Practice Mock Questions
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