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Sarah White, who was born on 17 August 1994, lives at Main Street, Dundrum, Co - Junior Cycle Business Studies - Question 6 - 2018
Question 6
Sarah White, who was born on 17 August 1994, lives at Main Street, Dundrum, Co. Dublin. She recently bought her first car after passing her driving test. She rang an... show full transcript
Worked Solution & Example Answer:Sarah White, who was born on 17 August 1994, lives at Main Street, Dundrum, Co - Junior Cycle Business Studies - Question 6 - 2018
Step 1
Explain the difference between third party and comprehensive insurance cover.
Answer
Third party insurance covers the compensation of the damage or injury caused to another person due to Sarah's negligence. For instance, if Sarah causes an accident leading to injury or damage to another party, third party insurance would cover these costs. However, it does not cover damages to Sarah's own car in an accident.
Comprehensive insurance, on the other hand, provides broader coverage. It not only covers third-party damages but also the repair or replacement of Sarah’s own vehicle in the event of an accident, theft, or damage caused by fire. This is crucial as it protects Sarah from financial loss not covered by third party insurance.
Step 2
State and explain the principles of insurance of which Sarah needs to be aware when taking out motor insurance.
Answer
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Utmost Good Faith: Sarah must disclose all relevant information truthfully when filling out her insurance application. This includes her driving history and details about her vehicle. Failing to do so can result in the insurance being void.
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Insurable Interest: Sarah must have a financial interest in the car being insured. This means she stands to lose financially if the car is damaged or destroyed. She cannot insure a car owned by someone else as she would not suffer a financial loss from its damage.
Step 3
Explain the following terms, with reference to Sarah:
Answer
a) Loadings: Loadings are extra costs added to the insurance premium due to higher perceived risk. In Sarah's case, her premium may be higher because she is a new driver at 23 years old.
b) Premium: This is the total amount of money Sarah pays to the insurance company for her coverage. It varies based on several factors including her driving experience and the type of coverage.
c) No Claims Bonus: This is a discount offered for not making a claim during a specified period. Since Sarah is a new driver and this is her first insurance policy, she would not be entitled to a no claims bonus.
Step 4
Explain the term ‘tax credit’.
Answer
A tax credit is an initiative that allows taxpayers to reduce their overall tax liability. It is provided by the Revenue Commissioners to alleviate the tax burden on individuals. For Sarah, it means that part of her income will be exempt from taxation, effectively reducing the amount she has to pay from her gross earnings.
Step 5
Step 6
Outline the purpose of each of these statutory deductions.
Answer
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PAYE: This is an income tax mechanism used to account for the income tax liability of individuals. It ensures that Sarah contributes towards government funding and services.
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PRSI: This deduction supports social welfare benefits and funds public health services. It ensures that Sarah has access to insurance coverage during times of unemployment or illness.
Step 7
If Sarah sold €870 worth of goods in a week, calculate her gross wage for that week. Show your workings.
Answer
To calculate Sarah's gross wage:
- Basic wage per week = €320
- Commission = 8% of total sales = 0.08 * €870 = €69.60
Thus, gross wage = Basic wage + Commission
Gross wage = €320 + €69.60 = €389.60