Insurance

Insurance principle Description

Proxima1e cause This is :he inilial event or cause tha1 resutts

in an accident or loss occurring. De:ermining

proxima1e cause helps to establish liability.

Indemnity The acl of placing someone who has

suffered a loss back In 1he position he or

she was in before the acciden1 occurred, for

example by providing compensation.

Utmost good fatth The principle 1ha! parties involved In

insurance must be absolutely honest in

their dealings and explanations In relation

to events and responsibilities surrounding

insurance.

Contribution Where the insured has taken out insurance

with more 1han one insurance company

for 1he same event or happening, only

one insurarce company may pay out toe

compensation. This company is likely 10 seek

proportionate contributions from the other

insurance companies with whom the insured

has taken out insurance.

Insurable interest The principle 1ha1 you can only insure

something where you stand lo make a

personal loss, such as your own car or life

and no1 someone else's car or ltte.

Types of insurance policies

The two main types of insurance are life Insurance (paid out on

the death of the Insured) and non-life insurance, of which there are

a number of types that are relevant to business. These include

the following.

• Premises insurance: 10 cover buildings 1l1at may be slruciuraliy

damaged, such as during a hurricane.

• Fire insurance: to cover fire damage.

• Employer's liability: taken out by an employer 10 cover work-related

accidents 10 employees.

• Product liability: to cover damage to users or other people that come

into contact with 1he producis of a company.

• Public liability: to cover damage to members of the public caused by

business activity.

• Motor vehicle insurance: 10 cover aocidems and other damage to a

vehicle. II also covers accidents and damage caused by the driver of

the vehicle.

• Home-based business insurance: 10 cover employers who work from

home. tt can also be used to cover employees who worl< a1 home for

an employer.

• Marine insurance: to cover loss or damage to a ship or its cargo or any

other elemen1 of a mamlme business.

• Fidelity Insurance: 10 cover an employer against losses resulting from

the dishonesty of employees.

How insurance facilitates trade

Insurance lowers the risks of carrying out business and thus gives

businesses more confidence to take part in trade. For example,

insurance can provide compensation l'1hen goods are damaged in

transit, stolen, or even not paid for. Transport firms such as airlines

and shipping lines can Insure their fleets by taking out aircraft

Insurance or marine Insurance. When trading internationally, a

company can take out freight insurance so It can claim compensation

ii a parcel or container is lost or damaged.

A. specific type of trade insurance called trade credit Insurance

encourages traders to be bolder and to export more goods.

• The exporter pays a premium 10 the insurer.

• The exporter sells goods on credit to a foreign buyer.

• The exporter wails for payment. However, tt the buyer fails to pay

wit11in a certain time period (usually 180 days) then the insurer will

compensate the exporter up lo a certain percentage of what is owed