WAEC 2024 Insurance Obj & Essay Answers

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INSURANCE -OBJ
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INSURANCE ESSAY
(1a)
(i)Utmost Good Faith (Uberrima Fides): This principle requires both the insured (Mr. Jamiu) and the insurer (Living Insurance Company Limited) to act with utmost good faith and disclose all material facts related to the insurance contract.
(ii)Indemnity: This principle aims to restore the insured to their pre-loss financial position. The insurer will compensate the insured for the loss or damage, but not exceed the insured’s actual loss or the policy limit.

(1bi)
the negligence of Mr. Jamiu and his house help, Moji, which led to the gas explosion.

(1bii)
The sum insured ($N 4,590,000$) will affect the amount of claim payable. If the sum insured is less than the actual value of the property, the insured may not be fully compensated for the loss.

(1c)
(i) Premium payable:
Premium = Sum Insured x Rate
= $N 4,590,000$ x 0.35%
= $N 16,065$
Less 5% Long Term Agreement discount:
= $N 16,065$ x 0.05
= $N 803.25$
Premium payable = $N 16,065$ – $N 803.25$ = $N 15,261.75$

(1cii)
The amount payable is the amount of damage, which is $N 500,000$. However, since the sum insured is $N 4,590,000$, which is greater than the damage amount, the insurer will pay the full amount of $N 500,000$.

(3a)
(i) Insurance company (Insurer): An insurance company is an organization that assumes the risk and provides financial protection to policyholders in exchange for premiums.
(ii) Insurance buyer (Policyholder): An individual or entity that purchases an insurance policy to transfer their risk to the insurer.
(iii) Insurance intermediaries (Broker/Agent): Intermediaries connect policyholders with insurers, facilitating the purchase and sale of insurance policies.

(3b)
(i)Perils of the Sea (e.g., shipwreck, collision, sinking): Covers damages or losses caused by sea-related events.
(ii)Fire and Explosion: Covers damages or losses caused by fire or explosion on board the vessel or in the cargo.
(iii)Theft, Pilferage, and Non-Delivery: Covers losses due to theft, pilferage (partial theft), or non-delivery of cargo.

(4a)
(i)Facts already known to the insurer: If the insurer already has knowledge of a particular fact, the proposer is not required to disclose it.
(ii)Facts that reduce the risk: If a fact would actually reduce the risk or premium, the proposer is not required to disclose it.
(iii)Facts that are irrelevant: If a fact is not relevant to the risk or premium, the proposer is not required to disclose it.

(4b)
(i)Risk Transfer: Insurance transfers the risk from the policyholder to the insurer, providing financial protection against unforeseen events.
(ii)Risk Pooling: Insurance allows for risk pooling, where the premiums from many policyholders are combined to cover the losses of a few, spreading the risk and making it more manageable.
(ii)Risk Reduction: Insurance encourages risk reduction by providing incentives for policyholders to take precautions and mitigate potential losses, such as installing security systems or maintaining property.

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(5a)
(i)Ordinary Endowment Policy: Provides a lump sum payment at the end of the policy term or on death.
(ii)Endowment with Profits Policy: Pays a bonus in addition to the sum assured, based on the insurer’s profits.
(iii)Unit-Linked Endowment Policy: Invests premiums in a fund, and the payout is based on the unit value.
(iv)Low-Cost Endowment Policy: Has lower premiums and lower returns, designed for long-term savings.
(v)Flexible Endowment Policy: Allows flexibility in premium payments, sum assured, or policy term.

(5b)
(i)Age: The younger the policyholder, the lower the premium.
(ii)Sum Assured: The higher the sum assured, the higher the premium.
(iii)Policy Term: Longer policy terms result in higher premiums.
(iv)Interest Rate: The higher the interest rate, the lower the premium.
(v)Risk Profile: Policyholders with a higher risk profile (e.g., smokers or those with health conditions) pay higher premiums.

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(6a)
(i)Flexibility: Facultative reinsurance allows the insurer to select specific risks to cede to the reinsurer, providing flexibility in risk management.
(ii)Customization: Facultative reinsurance can be tailored to meet the specific needs of the insurer, allowing for customization of coverage and terms.
(iii)Cost-effectiveness: Facultative reinsurance can be more cost-effective than treaty reinsurance, as the insurer only pays for the specific risks ceded to the reinsurers.

(6b)
(i) Hazard: A hazard is a situation or condition that increases the likelihood of a loss or damage. Example: A house located in a flood-prone area has a hazard (flood risk) that may lead to damage or loss.
(ii) (Not mentioned in the question, but I’ll answer it anyway!) Premium: The premium is the amount paid by the policyholder to purchase an insurance policy. Example: Mr. X pays an annual premium of $1,000 to maintain his health insurance policy.
(iii) Subject matter of insurance: The subject matter of insurance refers to the specific item, property, or risk being insured. Example: In a fire insurance policy, the subject matter of insurance is the building or property being protected against fire damage.

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(7a)
Engineering insurance refers to a type of insurance that covers risks related to engineering projects, construction, and infrastructure development. It provides financial protection against damages, losses, and liabilities arising from engineering-related activities.

(7b)
(i) Excess: In insurance, excess refers to the amount of money that the policyholder must pay out of pocket before the insurance coverage kicks in. It is also known as a deductible.
(ii) Warranty: A warranty is a condition or promise in an insurance policy that must be fulfilled by the policyholder. If the warranty is not met, the insurer may void the policy or refuse to pay claims.

(7c)
(i)Construction All Risks (CAR) insurance: Covers damages to buildings, structures, and projects during construction, including materials, equipment, and labor.
(ii)Machinery Breakdown Insurance (MBI): Covers damages to machinery and equipment due to sudden and unforeseen events, such as mechanical failure or electrical breakdown.
(iii)Electronic Equipment Insurance (EEI): Covers damages to electronic equipment, such as computers, servers, and other electronic devices, due to various risks, including mechanical failure, electrical failure, and software corruption.