CXC CSEC

Alleyne-Franklin
Notes prepared by Lori-Rae
Principles of Business
Insurance & Assurance
Prepared by: Lori-Rae Alleyne-Franklin

These notes are to be used in conjunction with a textbook

and other resources.
 Insurance vs Assurance

Notes prepared by Lori-Rae

Alleyne-Franklin
 Insurance vs Assurance

Notes prepared by Lori-Rae

Alleyne-Franklin
Insurance
• Unexpected events occur and they occur when
persons usually are unable to afford to restore
their losses themselves. Insurance provides
compensation for some of these events.

Alleyne-Franklin
Notes prepared by Lori-Rae
• Insurance covers the individual for specific
incidents and accidents that could happen while
assurance is a policy covering an event that will
definitely happen.

• Insurance is a form of protection.

Insurable Risk
• Risks are either insurable or non-insurable.
Insurance companies will only insure against
risks that can be calculated.

Notes prepared by Lori-Rae Alleyne-Franklin

• Statistics, probability and charts along with other
data is used by actuaries to calculate risks.

• There must be a large number of similar persons

requiring insurance for that risk otherwise the
main principle of insurance which is pooling of
risks could not work.
Insurance Terms
• Insurer: - a person or company that insures someone or
something.
• Insured: - covered by insurance.
• Policyholder: - a person or group in whose name an
insurance policy is held.

Alleyne-Franklin
Notes prepared by Lori-Rae
• Insurance policy: - person or group in whose name an
insurance policy is held.
• Premium:- an amount to be paid for a contract of
insurance.
• Claim:- is a formal request by a policyholder to
an insurance company for coverage or compensation
for a covered loss or policy event.
Principles of Insurance
1. Utmost good faith

2. Insurable interest

3. Proximate cause

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Notes prepared by Lori-Rae
4. Indemnity

5. Subrogation

6. Contribution

7. Average clause
Utmost good faith
• The insured must give all the relevant information
about the thing or person being insured.

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Insurable interest
• An insurance company will insure against a risk only if you
would suffer if the thing insured against happens.

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Notes prepared by Lori-Rae
Proximate cause
• A claim will only be honoured if the loss suffered is as a direct
result of the insured risk happening.

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Notes prepared by Lori-Rae
Indemnity
• Compensation for losses sustained.

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Notes prepared by Lori-Rae
Subrogation
• This is an aspect of indemnity. The insurer takes the
place of the insured. It means that if your car was
completely wrecked in an accident then the insurance
company would compensate you and keep the
wrecked car.

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Notes prepared by Lori-Rae
Contribution
• The insurers come together to compensate the insured to
ensure that no profit is made by the insured.

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Average clause

• The insured will be compensated in the same proportion or

ratio that he is insured at today’s value.

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Notes prepared by Lori-Rae
 Types of policies

Notes prepared by Lori-Rae

Alleyne-Franklin
Categories of insurance
• Life insurance
• Life Insurance is different from other insurance in the sense that, here,
the subject matter of insurance is the life of a human being.
• The insurer will be paid the fixed amount of insurance at the time of
death or at the expiry of a certain period.
• At present, life insurance enjoys maximum scope because life is the

Alleyne-Franklin
Notes prepared by Lori-Rae
most important property of an individual.
• This insurance provides protection to the family at the premature
death or gives an adequate amount at the old age when earning
capacities are reduced.
• Under personal insurance, a payment is made at the accident.
• Whole life policies
• Term policies
• Endowment policies
• Special policies
Categories of insurance
• Non life insurance
• Auto insurance, Disaster insurance (fire, flood, earthquake, etc.),
Aviation insurance and Property insurance.
• Consequential loss policy: Indemnify the owner for loss of profits he
would have earned if the business was still operating.
• Minimum legal cover
• Third party cover

Alleyne-Franklin
Notes prepared by Lori-Rae
• Comprehensive
• Marine insurance
• Hull insurance
• Cargo insurance
• Freight insurance
• Shipowner’s insurance
• Health insurance.
• Personal accident insurance: accident caused by a variety of risks.
• Travel insurance.
• Credit insurance.
• Mortgage insurance.
Role of insurance
• Insurance companies encourage industry by taking on many of
the risks of firms
• Insurance companies allow us to enjoy an improved standard
of living because they allow us to get a wider range of goods
and services

Alleyne-Franklin
Notes prepared by Lori-Rae
• Traders would not send goods across miles if they were not
assured that they would be compensated for losses intransit.
• Insurance provides coverage against personal risks which
individuals would not be able to manage.
• Insurance companies provide a source of capital – institutional
investors
• Insurance provides contributions to the Balance of Payments
(BOP) due to earnings from invisible trade.
 Homework 1/2

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Alleyne-Franklin
 Homework 2/2

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Alleyne-Franklin
The End
Read more:
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Difference Between Insurance and Assurance | Difference
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Alleyne-Franklin
Notes prepared by Lori-Rae
http://attaaminalahayah.blogspot.com/2014/12/principles-in-
insurance.html
https://www.iedunote.com/types-of-insurance
https://www.lifeinsurance.org/blog/what-is-non-life-insurance