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Starting With The Name of Almighty ALLAH Who is Most

Benificial, Gracious & Most Merciful

About Me
As Salam o Alaikum to Respected
Teacher and my dear class fellows, My
name is Samia Aziz Bhatti
I am here today to deliver a
presentation on the topic of :
Insurance introduction and its
principles.

INSURANCE

Insurance protects us from


financial losses caused by such
fatal accidents

Insurance also protects us from


financial losses that may be
caused by fire as shown above.

Professional Insurance Company in Lusaka, Zambia

What Is Insurance?
Insurance is the protection
granted to an individual,
institution or indeed the
traders against financial
losses that may be caused
by of the occurrence of
risks
It is based on probabilities
the risks may or may not occur
Insurance aims at
restoring/indemnifying/compen
sating the insured should the
risk occur

Professional Insurance Company in


Lusaka.

Common Terminologies Used In Insurance


Proposer: One applying for or seeking insurance
cover.
Insured: One who is covered by an Insurance
Company
Insurer: Insurance company providing the
insurance cover
Proposal Form: Application form for insurance

Common Terminologies Used In


Insurance Cont.
Policy: A written contract of insurance between
the insurer and the insured, containing all the
terms, conditions and warranties of the insurance
cover, and as well as the amount of premium, sum
insured and the expiry date of the contract among
others.
Premium: Non-refundable small amount of money
contributed to the Insurance Company in return for
insurance cover.
Third Party: One who is affected, but not part of
the insurance contract.

The Importance Of Insurance

It protects the insured


against financial loss
by providing compensation
thereby providing traders with the confidence
to engage in big business ventures
I received my new car
from my insurer as
compensation

The Importance Of Insurance Cont.

A house bought after receiving


monetary compensation from an
Insurance company.

Life assurance provides a


family saving plan as it mostly
benefits the dependants,
should the assured die.
Insurance protects the
insured against claims from
the injury, death or damage to
property of the third parties.
It protects employers against
financial loss arising from
claims from employees who
may die or be injured while on
duty.

How Insurance Operates.


Insurance operates on the basic rule of Pooling
Of Risks.
Pooling of risks is:
when many insured persons pay premium to
the insurance company, thereby creating a
pool (piling up/collection) of funds, from which
the company pays out compensation to those
who suffer losses.

How Insurance Operates Cont.


Insurance is successful with the collection
of more premiums but the occurrence of
fewer risks
The lucky ones (the fortunate), who do not
receive anything, pay for the unfortunate.
The insured persons/institutions must not
all suffer a loss at the same time, as
there cannot be enough funds in the pool
to pay every one

Business Risks
Fire causes financial losses
in business

A risk is any danger that may cause a


financial loss. Examples include; Fire,
accident, damage to property, burglary,
theft, death, bad debts, poor or bad
management, floods, earth quakes, etc.
There are two types of risks namely;
Insurable risks and Non-Insurable risks.

Insurable Risks:
The are risks that;
can easily be assessed and
whose frequency of
occurrence can be
estimated
can have premiums fairly
calculated
have past statistical records
Examples of insurable risks
include; fire, theft, death, claims
from third parties, damage to
property, burglary, bad debts, etc

Non-Insurable Risks:
These are risks that;
can not be easily assessed and
their frequency of occurrence can
not be estimated
whose premium can not be fairly
calculated
do not have any past statistical
record of occurrence
can not be accepted to be covered
by the insurance company
Examples of Non Insurable risks
include: Bad Management, Illegal acts
such as theft, losses due to change of
fashion, natural calamities such as
earth quakes, etc.

The risk of being caught for


performing an illegal act such as
robbery is non insurable.

Principles Of Insurance
These are rules or guidelines in insurance which
must be strictly adhered to. The non-adherence to
these principles can render ones insurance contract
being declared null and void.
There are four main principles of insurance namely:
Principle of Indemnity
Principle of Proximate Cause
Principle of Insurable Interest
Principle of Utmost Good Faith (Uberrima Fides)

Principle of Indemnity

It states that should the insured suffer a


loss, he or she must be brought back to
the original (former) position without being
allowed to make profit out of it, and that
the sum insured is directly proportional to
the amount of compensation.
If you have a four year old bicycle and it is
stolen, the insurance company will only
give you the current value of the bicycle
not the cost of the bicycle when it was
new.

Rule Of Subrogation

This rule states that: Should the insured


item be damaged beyond repair, once
the insured is compensated in full, the
remains of the damaged item would now
belong to the insurance company.

Rule Of Subrogation Cont.


For example, if Miss. Samias car (which
was comprehensively insured) is
damaged beyond repair, the Insurance
can decide to buy her another car, and
thereafter assume ownership of the
damaged one.
Rule of subrogation therefore prevents
her from making profit by selling the
spare parts of the damaged vehicle.

Principle Of Proximate Cause


It states that: Should the insured suffer a
financial loss, he/she can only be compensated
if the risk insured against is the nearest or
immediate cause of the loss, and if it is not
deliberately caused by any one.
For example, if Miss. Samia insures her car
against theft, but an accident occurs, there
would be no compensation.
Proximate Cause therefore is What Caused
The Risk?

Principle Of Proximate Cause Contd.


If an item is underinsured and the insured
risk occurs then the insured will only get a
proportion of the damage that occurs.
For example a house worth Rs. 40,000, is
insured for Rs. 30,000 and a fire occurs in
the kitchen causing Rs. 10,000 damage.
As the house is only insured for of its
value. The insured will only get of the
damage. That is Rs. 7, 500.

Principle Of Insurable Interest


It states that: Only the legal owner of the property has
the right to insure a property or life, as he/she stands to
personally experience a financial if a risk occurs.

Principle Of Insurable Interest Cont.


The importance of the insurable interest is that it
prevents people who are not legal owners from
deliberately destroying the insured items in order
to claim compensation and thus make profit out
of the loss.
For example, Miss. Samia cannot insure Miss.
Sanobars car. This is because Ms. Samia has
no insurable interest in Ms. Sanobars car.
Furthermore Ms. Samia may be tempted to
deliberately destroy the car in order to claim
compensation and make profit out of the loss.

Principle Of Utmost Good Faith (Uberrima Fides)


It states that: Both the Insurance Company and
the Proposer must tell the truth without leaving
out any material facts relating to the insurance
contract.
It must be applied at the time of filling details on
the proposal form, as the Insurance Company
uses this information to assess the risk, decide
whether to accept the risk or not and be able to
fix a fair premium.
If any of the miss statement is declared from
insured, the company has the full right to deny
and to carry on the contract and the contract can
become void

Conclusion

May I were to
purchase
insurance policy
then there would
have been
compensation for
the loss occurred
due to flood.