Insurance

Part I

To insure is to make an arrangement with an insurance organisation to receive compensation for loss or injury. An insurance company, a cooperative society or the state may sell insurance. In return for the service, the insured person will be required to make regular payments of premium.

The terms of the agreement between the insurer and the insured will be contained in a contract. This contract is called the insurance policy.

Insurance is only offered to a person who has an insurable interest in whatever is being insured. He must suffer a loss before he is entitled to compensation. When a person insures his house against fire, he is said to have an insurable interest in the house.

Insurance is based on the utmost of good faith. There must be a full disclosure of all material facts by both parties. If this is not done, the contract will be void. In less serious cases, the party that is offended may, at his discretion, honour or repudiate the contract.

There are four main branches of insurance. They are marine, life, fire and accident. Other types of risk also exist and one can obtain insurance against them. Aviation insurance for travelers by air is an example.

Life insurance enables people to provide for themselves and their dependents in the event of misfortune befalling them. If they meet with an accident, the insurer will pay the hospital bills and other expenses. Should death occur, the family of the bereaved person will be given a sum of money. Life insurance offers protection. Some consider it a form of investment.

Life insurance companies offer their policy holders certain additional benefits. Loans are available at a low rate of interest. After two years most policies acquire a surrender value. The policy holder may have his policy cancelled in return for a cash settlement. Banks also accept insurance policies as security for a loan or overdraft applied for by their clients.

Vocabulary

Part II

loss regular term agreement interest to be entitled compensation risk utmost faith disclosure party void to offend discretion to honour to repudiate main branch marine accident dependent misfortune to befall to bereave protection investment

something that is taken away by an accident, misfortune etc. occurring repeatedly at fixed intervals. a condition offered or agreed to. understanding reached by two or more people. an advantage, profit. to have a right to. money given to make up for a loss, injury etc. a chance of suffering loss or injury. the most that is possible. trust. exposure. one of the participants in a legal agreement. of no legal force or effect. to hurt the feelings of. power of free decision or latitude of choice. to fulfil the terms of. to refuse to pay a claim. chief. a division of an organisation. relating to the sea. something unfortunate that happens by chance or unintentionally. relying on another for support. bad luck. to happen to. to leave sad by the removal of a person by death. keeping safe from uncertainties of the future. money in a business.

Explanations

Part III

1. Premium is the payment an insurance policy holder makes to his insurance organisation. It is paid annually although monthly, quarterly or half-yearly payments can be arranged. The premium must be paid in advance and no policy is effective if it has not been paid.

2. Insurance policy. It is a document describing the terms and conditions of an insurance contract. The document, generally called the insurance policy, will explain the risk covered, the duration of the policy, other benefits included, the name of the beneficiary and the premium payable.

3. Insurable interest. One of the conditions of the insurance policy requires that the insured person should suffer a loss before he is entitled to compensation. The policy holder is therefore said to have an insurable interest in the property or life insured.

4. Good faith. Another requirement of parties to an insurance contract is good faith. This condition requires both parties, the insurer and the insured, to make an honest and full disclosure of facts necessary for the contract. Should either party fail to do so, the other may repudiate the contract.

5. Marine, life, fire, accident insurance.

Marine insurance provides protection to the owners of ships plying the waterways of the world. The loss or damage to ships and cargo and injury or death of crew or passengers are some of the risks covered.

Life insurance protects the interests of the policy holder and his beneficiaries should the former suffer injury or meet with death.

Fire insurance is taken on properties. Should there be damage caused by fire, the owners can seek compensation.

Accident insurance covers risks faced by the policy holder in the course of his travel and work.

6. Surrender value. An insurance policy acquires a surrender value after it has been in force for at least two years. The policy holder may surrender his policy to the insurer for cancellation. He will be paid a sum of money based on the amount of the premium paid, after certain deductions.

Exercises

1. Answer the fallowing questions.

   1. Who sells insurance?

   2. What do the insured have to do?

   3. Under what circumstances is an insurance policy void?

   4. What are the four main branches of insurance?

   5. Why is life insurance necessary?

2. Give the meanings of the following words.

   1. Regular. 2. Void. 3. Discretion. 4. To repudiate. 5. Dependent.

3. Give the word that fits the description.

   1. Money is a business.

   2. Relating to the sea.

   3. Bad luck.

   4. A chance of suffering loss or injury.

   5. A condition offered or agreed to.

Conversation on insurance

Part I

Mr Robin. Why do people insure themselves?

Mr Smith. Among other things life insurance provides monetary assistance

to a family deprived of its breadwinner.

Mr Robin. How does the system work?

Mr Smith. A person must first of all buy a life insurance policy.

Mr Robin. What is an insurance policy?

Mr Smith. It is an agreement that contains the rights and obligations of the

insurer and insured.

Mr Robin. What are the rights of a person with a life insurance policy?

Mr Smith. Insurance provides for the payment of money to the beneficiaries on the death of the insured.

Mr Robin. What are the other benefits?

Mr Smith. The insured with an endowment policy is entitled to receive a lump sum payment on the maturity of the policy.

Mr Robin. What do you mean by maturity?

Mr Smith. A policy is said to mature on the expiry of the period for which the insurance is taken.

Mr Robin. Who are the beneficiaries?

Mr Smith. They are the people to whom the insurance money is paid on the

death of the insured.

Mr Robin. What does the bonus represent?

Mr Smith. It represents the earnings on the premiums paid.

Mr Robin. That is very interesting. What are the obligations of the insured?

Mr Smith. He has to pay his premium and make an honest disclosure of facts in his application for insurance.

Mr Robin. Does insurance serve any other purpose?

Mr Smith. Yes, it is an investment as well, especially for old age.

Mr Robin. Would you advise your friends to insure themselves?

Mr Smith. I would certainly do that.