Aids To Trade That Support Commerce: Insurance: How Enterprises Make Use Of Insurance (Copy)
Cheat Sheet: 5.3.3 How Enterprises Make Use of Insurance
Pooling of Insurance Risk
| Concept | Explanation | Example |
|---|---|---|
| Pooling of Risk | Many policyholders pay premiums into a common fund → losses of the few are covered by contributions of the many | Thousands pay car insurance, only a few make claims |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Commerce Full Scale Course
Calculation of Premiums
| Factor | Effect on Premium | Example |
|---|---|---|
| Value of Item Insured | Higher value → higher premium | Insuring a luxury car costs more |
| Risk Level | High-risk activities cost more | Factory with dangerous machinery |
| Claims History | Frequent claims = higher premium | Driver with past accidents |
| Type of Cover | Comprehensive > Third-party only | Motor insurance types |
| Duration of Policy | Longer cover = higher cost | Annual vs 6-month insurance |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Commerce Full Scale Course
Insurance Documents
| Document | Purpose | Example |
|---|---|---|
| Proposal Form | Application form giving details of risk | Business declaring warehouse details |
| Cover Note | Temporary proof of insurance until policy issued | Car dealer issuing cover note at purchase |
| Policy | Legal contract stating terms, risks covered, premium | Fire insurance policy document |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Commerce Full Scale Course
Role of an Insurance Broker
| Role | Explanation | Example |
|---|---|---|
| Advisor | Suggests suitable insurance products | Advising a small business on liability cover |
| Middleman | Links client with insurance companies | Arranging best premium for exporter |
| Claims Assistance | Helps in filing/settling claims | Broker assisting after factory fire |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Commerce Full Scale Course
Summary
| Key Idea |
|---|
| Enterprises use insurance by sharing risks, paying premiums, using legal documents (proposal, cover note, policy), and relying on brokers for expertise and claims support. |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Commerce Full Scale Course