What's insurance? Mr Owl explains how INSURANCE PROTECTS YOUR STUFF. Dr Allan Manning

Transcription

1 What's insurance? Mr Owl explains how INSURANCE PROTECTS YOUR STUFF Dr Allan Manning

2 Contents Introduction 1 How & Why Insurance Started 2 How Property Insurance Works 19 Classes of Insurance 28 How Insurance Companies Pay Claims 33 Special Insurance Words 46 Want to Learn More? 48

3 Introduction You will have seen a lot on TV about storms, floods, fires and earthquakes. Insurance is often talked about too, but what s insurance and how does it work? This book shows you how insurance protects people s stuff. Let s start with these four words: Look out for blue words as these are special words. You can look these up at the back of this book to find out their meaning. Insurance, which is a financing service that protects against loss. Premium, which is the price you pay to buy insurance protection. Loss, which is when something bad happens that leaves you worse off. Risk, which is the chance of something bad happening. 1

4 How & Why Insurance Started 5000 years ago, in ancient China, farmers would travel by raft to the big towns on the coast to sell the crops they had grown on their farms. 2

5 3 The problem was that out of every 100 rafts that set sail each year, 2 or 3 rafts were lost in the rapids.

6 This meant 98 farmers were rich and 2 lost everything and were very poor. 4

7 5 Rather than put all their harvest on a single raft and risk losing everything...

8 ...the farmers agreed to put one bag of rice or fruit on each of the 100 rafts. So when a few rafts were lost, it was only a small loss to all the farmers, not a big loss to one or two farmers. This is what insurance is all about: Spreading the risk. 6

9 Classes of Insurance There are many types of stuff and all sorts of insurance to protect it! Generally, there will be some type of insurance available for a risk when there are enough people that need protection against that risk. From your pet dog or cat to a space rocket, there is insurance to protect your stuff! 28

10 There is Home Insurance for your home and the stuff inside your home (including your bike). There is Pet Insurance for your dog or cat, in case they sick. Motor Insurance is for cars, trucks and motorbikes, and covers accident, fire or theft. 29

11 For example, Travel Insurance is great for people on holidays as it provides protection for them in case they get sick or lose their stuff! Travel Insurance will pay hospital bills if someone in the family needs hospital treatment. It will also pay if you lose your camera, but not if you lose your way!?? 30

12 Special Insurance Words Bicycle Insurance Insurance that protects you against the loss of your bicycle. Broker An expert in arranging the insurance between the insurance company and the policyholder. Business Insurance Insurance that protects against losses to your business and business income. Catastrophe A large event causing loss or damage to lots of people. Claim The policyholder s request to the insurance company for the repair or replacement of their stuff after a loss. Claims Preparer An expert employed by the policyholder to assist in having the claim paid. Contract A legal document that shows the agreement between everybody involved. Cover Details of the losses that your insurance protects and for how much. Damage Physical harm to stuff that reduces the stuff s value or usefulness. Excess Also known as the deductible, this is the amount that the policyholder pays towards the claim. Experts People that have a lot of skill, special knowledge and/or experience in a particular area. Health Insurance Insurance that protects you against loss due to injury or poor health. Home Insurance Protects against the loss of or to your home and/or the stuff inside your home. Insurance Protection against loss. Insurance Market A place where insurance companies sell insurance. Insurance Policy The contract between the insurance company and the policyholder, setting out what is and what is not insured. 46