Page 164 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 8: Insurance Planning

Insurance: Insurance is a contract by which the insurer (Insurer Company) in consideration of Notes
the payment of a sum (premium) agrees to pay a specified sum to the insured (the person or
party insuring against the risk) in the event of some untoward happening taking place.
Insured: The party who insured his risk with the insurer.
Insurer: The party agreeing to pay for the losses of the insured.
Premium: The amount payable by the insured as consideration, to the insurer.

Riders: Riders are add-ons to the basic insurance policy to supplement the cover provided.
Salvage Charges: It is the reward paid under maritime law to the Salver for saving or helping to
save property at sea or life.

Sum Assured: The amount payable when the specified event occurs.
Term: The period during which the event must occur for the Sum Assured to become payable.
Time Policy: This policy is designed to give cover for some specified period of time, say, for
example 1st Jan, 2003 to noon, 1st Jan, 2004.
Vehicle Insurance: Vehicle insurance is the insurance which consumers can purchase for cars,
trucks, and other vehicles.

8.11 Review Questions

1. What is insurance?
2. What is general insurance?
3. Why should one insure?
4. Who should buy general insurance?

5. What kinds of policies are there?
6. What is the periodicity of premium payments?
7. Why do different people have different premiums?

8. What are the different types of policies available in case of life insurance?
9. What are the various types of risks covered in life insurance? Discuss.
10. What are the various types of risks covered in general insurance?

Answers: Self Assessment

1. Speculative 2. Fortuitous
3. death and damage 4. certainty

5. pure 6. True
7. True 8. False
9. True 10. False

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