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Insurance for Dummies
- 1. INSURANCE FOR DUMMIES People insure things that are of value to them and would cost a lot of money to replace if they were stolen or damaged in some way
- 4. DEFINITION The act, system, or business of insuring property, life, one's person, etc., against loss or harm arising in specified contingencies, as fire, accident, death, disablement, or the like, in consideration of a payment proportionate to the risk involved.
- 5. ADEQUATE INSURANCE SHOULD Cover all possible risk Be enough to cover the loss that might occur i.e. if a house is worth $500,000 it should be insured for $500,000 and not for less
- 6. THE RULES OF INSURANCE Insurable Interest People can only insure something where they benefit from having the item and it would cost you money to replace it if it was robbed or stolen, i.e. your house Your House Neighbors House
- 7. Utmost good faith Answer all questions truthfully and provide all relevant information to the insurance company. i.e. Insurance companies may refuse to pay a claim for a house fire, because it was not told that the roof was thatched.
- 8. Indemnity This rule states you should not make a profit from insurance.
- 10. The Principle of Contribution If a risk is insured by two or more insurance companies, any compensation payable will be shared between the companies i.e. cameral stolen on holidays - house and holiday insurance policy.
- 11. The Principle of Subrogation Insurers, who pay out full compensation for an item which they have insured, are entitled to take possession of the item and sue a third party.
- 12. Average Clause Besides the five principles there is another important rule in insurance, called the average clause. This states that if something is insured for only a proportion of its value, for example, half of its value, the insurer is only liable for the same proportion of the loss, i.e. half, when a claim is made.
- 13. GETTING THE INSURANCE INFORMATION YOU NEED Calculate the value of the item you wish to insure Complete the proposal form Multiple individual insurance agents will contact you with a quote Compare the best rates and coverage for your needs