INSURANCES CH3.7 CONSUMER MATHEMATICS💸💸💰💰🤑🤑🫰

• Risk


  The possibility of a disaster that cannot be avoided
• Risk


  • Risk is unpredictable
  • Risk involves loss
• Risk


  • Road accident that injures driver and passengers
  • Damage of property in a fire
  • Getting injured in a football game
• Insurance


  To transfer risks from individual to insurance organizations
• Insurance contract


  A contract signed between the insurance company and the insurance owner
• Policyholder


  Pays a premium
• Insurance company


  Pays compensation for any loss incurred
• Principle of indemnity

  Insurance companies will pay compensation to policyholders in the occurrence of a loss insured for an amount not exceeding the loss incurred, subject to the sum insured
• Insurance cannot prevent a loss from occurring but can help to reduce financial burden borne by a policyholder in the occurrence of losses or accidents
• Buying an adequate sum of insurance removes the uncertainty of financial loss in the occurrence of the loss insured
• Life insurance


  Guarantees the payment of a stated amount of monetary benefits to the policyholder upon the death of the insured, or under other circumstances specified in the contract
• General insurance


  Provides coverage against any loss or damage incurred, apart from the risks covered by life insurance
• The coverage period for most general insurance policies is one year or less than a year. The premiums are paid once only when you need the coverage of the policy
• Types of motor insurance policies


  • Third party
  • Third party, fire & theft
  • Comprehensive
• Motor insurance policies


  • Liability to third party due to injury and death
  • Loss of property suffered by third party
  • Loss to own vehicle due to accidental fire or theft
  • Loss and damage to own vehicle due to accident
• A comprehensive policy provides a thorough protection compared to the other three policies
• The similarity on these policies is to give a protection excluding the claims by the driver and passengers such as injury and death
• Fire insurance


  Provides coverage against any loss or damage incurred, apart from the risks covered by life insurance
• Medical and health insurance


  Covers medical expenses such as hospitalization and surgery costs
• Personal accident insurance


  Provides coverage against any loss or damage incurred, apart from the risks covered by life insurance
• Travel insurance


  Provides coverage against any loss or damage incurred, apart from the risks covered by life insurance
• Group insurance


  Provide coverage to a group of individuals, typically employees in a company or pupils in school and students in educational institutions
• Travel insurance premiums


  • Factors: Destination, duration of travel and number of people insured
  • Reason: A longer travel period increases the probability of loss to the policyholder while abroad
• Shahir's work as a photographer requires him to visit many countries in Europe within a year


  Shahir should buy annual premium travel insurance for countries in Europe as it is more economical than buying insurance for 11 to 18 days per trip
• Premium rate for life insurance


  • Increases with increasing age because the life expectancy of each person decreases with age
  • Higher for smokers because the probability of a smoker being exposed to illness is higher than that of a non-smoker who lives a healthy lifestyle
• Life insurance premium calculations


  • Mr Guan, 39 years old, healthy and non-smoker, policy worth RM100,000: Annual premium RM2.49 per RM1,000 face value
  • Madam Shapuva, 36 years old, healthy and non-smoker, policy worth RM250,000 with critical illness coverage: Annual basic premium + Annual additional premium for critical illness
• Motor insurance premium


  • Depends on engine capacity of vehicle
  • Third party policy premium is 75% of comprehensive policy's basic premium
  • Depends on engine capacity and market value of vehicle
• Motor insurance premium rates


  • Rates for different engine capacities in Peninsular Malaysia and Sabah/Sarawak for comprehensive and third party policies
• Calculating comprehensive motor insurance premium


  1. For Peninsular Malaysia: Rate for first RM1,000 + RM26 for each RM1,000 or part thereof on value exceeding first RM1,000

  2. For Sabah and Sarawak: Rate for first RM1,000 + RM20.30 for each RM1,000 or part thereof on value exceeding first RM1,000
• Calculating motor insurance premiums


  • Encik Ramli's Proton Exora 1.6 in Peninsular Malaysia: Comprehensive policy, third party fire and theft policy, third party policy
• The premiums payable may differ from the actual value of the premiums that the insurance company may charge. There are additional charges which are payable by the policyholder such as commission to the agent, service tax and stamp duty
• There are several provisions in the insurance contract that may cause the policyholder to receive compensation less than the actual loss and hence have to bear part of the loss
• Age of vehicle


  5 years
• Engine capacity


  1 600 cc
• Calculating gross premium for comprehensive policy

  1. The first RM1000 = RM305.50

  2. RM26 x 59 (each RM1000 balance) = RM1 534

  3. Basic premium = (a) + (b) = RM1 839.50

  4. NCD 25% = RM459.88

  5. Gross premium = (c) - (d) = RM1 379.62
• The premiums payable may differ from the actual value of the premiums that the insurance company may charge. There are additional charges which are payable by the policyholder such as commission to the agent, service tax and stamp duty.
• Calculating gross premium for third party, fire and theft policy

  1. Basic premium = RM1379.63

  2. NCD 25% = RM344.91

  3. Gross premium = (a) - (b) = RM1034.72
• Calculating gross premium for third party policy


  1. Basic premium = RM135.00

  2. NCD 25% = RM33.75

  3. Gross premium = (a) - (b) = RM101.25
• Deductible


  Provision in the insurance contract that may cause the policyholder to receive compensation less than the actual loss and hence have to bear part of the loss
• Losses suffered by Madam Suhaila


  • RM2 800 in March
  • RM250 in July
  • RM400 in August