(a) Give five reasons why a life assurance policy may be taken.
(b) Describe any five insurance policies which a large department shop owner may take.
Explanation
(a) Life assurance policy may be taken for the following reasons:
(i) It is a useful way of providing for funeral and death expenses.
(ii) It is a useful way of providing for the welfare of the assured’s dependents after his death.
(iii) The life assurance policy can be used as collateral for obtaining a bank loan.
(iv) To provide for a lump sum on retirement and saving for the future.
(v) To provide for loan repayment in the event of death.
(vi) It provides for the repayment of capital on a partner’s death.
(vii) Endowment insurance makes provision for permanent disability.
(viii) Group assurance for employees would be paid out of the amount assured in the event of retirement or death of any of them.
(b) Some insurance policies which a large department shop owner may take are:
(i) Burglary and theft: This type of insurance protects losses resulting from goods stolen or damaged through breaking into the shop and those stolen by thieves.
(ii) Bad debts insurance: The insurance company will guarantee to protect the firm or business owner against bad debts.
(iii) Fire insurance: The insurance covers risks associated with fire outbreaks that may damage buildings, factories, shops and stocks.
(iv) Fidelity Guarantee: This is the type of insurance taken by firms against possible loss of money through embezzlement or misappropriation of funds by fraudulent employees.
(v) Motor Vehicle Insurance: To protect the business vehicle against risks or injuries to third parties.
(vi) Goods in transit: To cover against accidental damage or loss to goods in transit.
(vii) Consequential loss: This cover against loss of profit as a result of the destruction of business or production caused by fire.
(viii) Plate-glass insurance: To cover for replacement of plate-glass windows in the event of damage.