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Read the information supplied and answer the questions which follow - Leaving Cert Business - Question 6 A - 2015
Question 6 A
Read the information supplied and answer the questions which follow. PRIVATE MOTOR INSURANCE PROPOSAL FORM DECLARATION I/We declare to the best of my/our knowledg... show full transcript
Worked Solution & Example Answer:Read the information supplied and answer the questions which follow - Leaving Cert Business - Question 6 A - 2015
Step 1
Outline the function of an insurance proposal form.
Answer
Insurance proposal forms serve as the primary document for individuals seeking insurance coverage. They provide insurers with critical details about the applicant and the risks they wish to insure. This information enables the insurance company to assess the risk associated with the application and calculate the appropriate premium. Essentially, the proposal form acts as a basis for evaluating the applicant's eligibility for coverage and the terms of the insurance policy.
Step 2
Explain the principle of insurance referred to in the extract from the above private motor insurance proposal form.
Answer
The principle of utmost good faith, referred to as 'uberrima fides', requires that all material facts related to the insurance risk must be fully disclosed by the applicant. If the person applying for insurance fails to reveal important information, it may invalidate the insurance contract. The insurer relies on this principle to fairly assess the risk and determine premium rates; if the information is withheld, the insurer may view the contract as void.
Step 3
Outline two other principles of insurance that apply to insurance contracts.
Answer
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Indemnity: This principle ensures that an insured person cannot profit from an insurance claim. The goal is to restore the insured to the financial position they were in before the loss occurred, without resulting in any gain. Hence, claims are typically limited to the actual loss suffered.
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Insurable Interest: This principle mandates that the insured must have a legitimate interest in the subject matter of the insurance policy. In the event of loss or damage, the insured must stand to suffer a financial loss. This principle prevents individuals from taking out policies on items they do not own or have no vested interest in.