Explain each of the following insurance concepts
(a) non indemnity insurance
(b) Group insurance
(c) Re-insurance
(d) Under insurance
(e) Consequential loss insurance.
Explanation
Explanation of different Insurance Concepts
(a) Non-indemnity insurance; is in the case where the insurance company cannot restore the person insured to his former position before the occurrence of the risk e.g. life assurance - no restoration of life after death or loss of limb in the case of personal accident insurance. What the insurance does is to pay compensation not restoration.
(b) Group insurance : The is the insurance where employers insure the lives of all or a group of their employees collectively under one policy. It is usually taken out for athletes, players on an outing engagement or factory workers. Any member suffering any loss is covered by the group policy.
(c) Re-insurance:- This refers to the situation where an insurer insures the whole or part of its customers risks that it had undertaken with another insurance company. This helps in case of liability on the part of the insurance company to settle claims.
(d) Under insurance:- This refers to the insurance of a property or any good for less than its real value. If a house worth ten million naira (N1000000) insured for five million naira (N5000000) is gutted by fire, the insurance company would only pay N5000000. it prevents the insurance company from charging adequate premium. it is subject to average condition where the insured is responsible for the under insured value.
(e) Consequential loss insurance:-This covers the business against loss of profit as a result of being out of business because of fire incidence. It makes up for the profit the business would have been making if the business was no disrupted it is usually taken in addition to tire insurance.