Study Commerce notes on Insurance and Assurance for O-Level. Useful for revision, homework, and exam preparation in Zimbabwe.
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This is the ZIMSEC O-Level Commerce notes. It is a free notes for revision.
INSURANCE AND ASSURANCE COMPLETE NOTES
Def.: Is the process of whereby individuals and companies pay a certain amount so as to safeguard assets in the event that uncertainties happen
Def.: It is also defined as pooling of risks, here the fortunate assist the unfortunate through indemnifying one to be restored to former position before an accident occurred.
✓ The purpose of insurance and assurance
- It is to provide cover against risks faced by people and business organisations that may cause financial losses.
- Insurance is a means by which people who suffer a financial loss are compensated by an insurance company.
- In the event of a financial loss, the fortunate people help the unfortunate people.
- The compensation is a way of restoring your property and possessions to the point where they were before the loss.
✓ The purpose of assurance is to fill the gap that occurs when a family loses a breadwinner or loved one due to death or illness.
✓ It is a way of maintaining the life styles or standards enjoyed by the family before the death of the breadwinner due to the loss of income.
Insurable and non-insurable risks
✓ We all face a variety of risks in our lives. Risks are threats that may cause loss of property, possessions or life.
We face the risk of having our homes destroyed or damaged by fire, flood r wind, accident or possessions stolen.
Non-insurable risk
There are two types of risks that Occur on a day to day basis. There is speculative risk that occur.
when there is a potential of either $\mathrm{J} \mathrm{g} \sim$ IIn or loss.
✓ Gambling is a speculative risk that may result in a win or a loss. Investing in a business is also a speculative risk because you may succeed or lose all your investment.
✓ This is a non-Insurable risk:
- Non-insurable risks are 'incalculable' risks in the sense that it IS difficult to assess or calculate the risk.
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