Summary INSURANCE: IEB-Ready Business Studies Notes

Chapter‌‌9‌-‌‌I‌ nsurance‌‌
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1. Insurance‌‌and‌‌Assurance‌‌as‌‌risk‌‌management‌ ‌
- IN‌surance‌ ‌
- Incase‌‌something‌‌happens‌‌(eg.‌‌fire‌‌or‌‌flood)‌ ‌
- These‌‌events‌‌may‌‌not‌‌take‌‌place,‌‌but‌‌in‌‌order‌‌to‌‌manage‌‌the‌‌risk‌‌incase‌‌they‌‌do‌‌
occur‌‌and‌‌the‌‌insured‌‌wants‌‌to‌‌be‌I‌N‌demnified‌‌(p‌ laced‌‌in‌‌the‌‌same‌‌financial‌‌
position‌‌as‌‌they‌‌were‌‌before‌‌the‌‌incident‌)‌ ‌
- AS‌urance‌‌ ‌
- We‌‌will‌‌all‌‌retire‌‌from‌‌working,‌‌however‌‌-‌‌death‌‌may‌‌come‌‌first‌ ‌
- Assurance‌‌manages‌‌the‌‌risk‌‌of‌‌our‌‌loved‌‌ones‌‌of‌‌being‌‌without‌‌income‌‌if‌‌the‌‌
assured‌‌person‌‌dies‌‌ ‌
- Decreases‌‌the‌‌risk‌‌of‌‌being‌‌unable‌‌to‌‌maintain‌‌a‌‌decent‌‌standard‌‌of‌‌living‌‌after‌‌
retirement‌‌ ‌
- By‌‌taking‌‌out‌‌insurance‌‌or‌‌assurance‌‌the‌‌insured‌‌individual‌‌or‌‌business‌‌pays‌‌a‌‌monthly‌‌
premium‌‌to‌‌transfer‌‌the‌‌risk‌‌to‌‌the‌‌insurer‌ ‌
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1.1‌‌Insurable‌‌and‌‌non-insurable‌‌risks‌ ‌
- Some‌‌risks‌‌are‌‌uninsurable‌‌and‌‌some‌‌are‌‌expensive‌‌to‌‌insure:‌ ‌
- War‌‌and‌‌associated‌‌risks‌‌are‌‌generally‌‌uninsurable‌‌as‌‌insurance‌‌companies‌‌
regard‌‌it‌‌is‌‌a‌‌risk‌‌that‌‌should‌‌be‌‌managed‌‌and‌‌prevented‌‌by‌‌the‌‌government‌‌ ‌
- Bad‌‌debt‌‌(however‌‌there‌‌is‌‌an‌‌insurance‌‌against‌‌it‌‌but‌‌it‌‌extremely‌‌
expensive)‌ ‌
- Business‌‌risks‌‌(however‌‌can‌‌hedge‌‌against‌‌such‌‌risks)‌ ‌
- Eg.‌‌pierce‌‌fluctuations‌ ‌
- If‌‌trading‌‌inventory‌‌becomes‌‌obsolete‌‌or‌‌outdated‌‌due‌‌to‌‌changes‌‌in‌‌
fashion‌ ‌
- Technology‌‌changes‌‌ ‌
- Constant‌‌improvements‌‌made‌‌to‌‌machinery‌‌and‌‌production‌‌
process‌‌where‌‌no‌‌insurance‌‌protects‌‌you‌‌against‌‌technology‌‌
becoming‌‌outdated‌ ‌
- However‌‌Leasing‌‌is‌‌an‌‌option‌‌to‌‌prevent‌‌being‌‌stuck‌‌with‌‌outdated‌‌
equipment‌ ‌
- Insurance‌‌against‌‌committing‌‌an‌‌illegal‌‌act‌‌ ‌
- Risk‌‌due‌‌to‌‌climate‌‌change,‌‌some‌‌insurance‌‌companies‌‌consider‌‌the‌‌risk‌‌
of‌‌natural‌‌disasters‌‌too‌‌high‌‌to‌‌insure‌ ‌
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, 1.2‌‌Types‌‌of‌‌Insurance‌ ‌
1.2.1‌‌Compulsory‌‌Insurance‌ ‌
A. Unemployment‌‌Insurance‌‌Fund‌‌(UIF)‌ ‌
- Unemployment‌‌Insurance‌‌Amendment‌‌Bill‌‌of‌‌2017‌‌‌changes‌‌issues‌‌that‌‌
were‌‌covered‌‌in‌‌the‌2 ‌ 013‌‌Unemployment‌‌Insurance‌‌Act‌ ‌
- Short-term‌‌relief‌‌towards‌‌when‌‌they‌‌are‌‌unemployed‌‌or‌‌unable‌‌to‌‌work‌‌
due‌‌to‌‌maternity‌‌leave‌‌or‌‌illness‌ ‌
- Provides‌‌relief‌‌to‌‌dependents‌‌of‌‌a‌‌deceased‌‌employee‌‌who‌‌contributed‌‌to‌‌
the‌‌fund‌ ‌
- Contributions‌‌are‌‌made‌‌by‌‌both‌‌the‌‌employer‌‌and‌‌the‌‌employee‌‌ ‌
- 1%‌‌of‌‌the‌‌gross‌‌salary‌‌is‌‌deducted‌‌and‌‌an‌‌equal‌‌amount‌‌is‌‌
contributed‌‌by‌‌the‌‌employer‌‌who‌‌is‌‌responsible‌‌to‌‌pay‌‌to‌‌SARS‌ ‌
- Limit‌‌amount‌‌(Ceiling‌‌Amount‌‌2017)‌‌is‌‌R14‌‌872‌‌per‌‌month‌ ‌
- Following‌‌employees‌‌are‌‌excluded‌‌from‌‌UIF‌‌insurance:‌ ‌
- Work‌‌less‌‌than‌‌24‌‌hours‌‌a‌‌month‌ ‌
- Earn‌‌commission‌‌only‌ ‌
- Work‌‌for‌‌the‌‌National‌‌or‌‌Provincial‌‌Government‌ ‌
- Foreigners‌‌who‌‌work‌‌in‌‌the‌‌country‌‌were‌‌excluded,‌‌but‌‌now‌‌are‌‌covered‌‌ ‌
- Employees‌‌on‌‌learnerships‌‌are‌‌also‌‌covered‌ ‌
- Domestic‌‌workers‌‌are‌‌also‌‌covered‌‌in‌‌UIF‌‌and‌‌the‌‌employer‌‌must‌‌ensure‌‌
they‌‌register‌‌with‌‌the‌‌Department‌‌of‌‌Labour‌ ‌
- Following‌‌rules‌‌apply‌‌when‌‌making‌‌a‌‌claim:‌ ‌
- 66%‌‌of‌‌salary‌‌for‌‌maternity‌‌benefits‌‌if‌‌she‌‌has‌‌contributed‌‌at‌‌least‌‌
4‌‌years‌‌to‌‌UIF‌ ‌
- If‌‌a‌‌person‌‌has‌‌been‌‌retrenched‌‌or‌‌lost‌‌a‌‌job‌‌the‌‌maximum‌‌claim‌‌
period‌‌is‌‌365‌‌days‌‌provided‌‌they’ve‌‌worked‌‌for‌‌4‌‌years‌ ‌
- If‌‌they‌‌are‌‌not‌‌at‌‌work‌‌due‌‌to‌‌illness‌‌for‌‌7‌‌days,‌‌and‌‌is‌‌not‌‌paid‌‌by‌‌
the‌‌employer‌‌-‌‌UIF‌‌benefits‌‌can‌‌be‌‌claimed‌ ‌
- UIF‌‌benefits‌‌that‌‌are‌‌owed‌‌to‌‌a‌‌deceased‌‌person,‌‌will‌‌still‌‌be‌‌paid‌
to‌‌their‌‌dependents‌‌ ‌
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B. Compensation‌‌for‌‌Occupational‌‌Injuries‌‌and‌‌Diseases‌‌Act‌‌(COIDA)‌‌ ‌
- Also‌‌known‌‌as‌W ‌ orkmen’s‌‌Compensation‌‌Fund‌ ‌
- If‌‌an‌‌employee‌‌is‌‌injured‌‌at‌‌work‌‌or‌‌becomes‌‌sick‌‌or‌‌disabled‌‌as‌‌a‌‌result‌‌
of‌‌their‌‌job,‌‌they‌‌are‌‌entitled‌‌to‌‌claim‌‌compensation‌‌from‌‌COIDA‌ ‌
- Also‌‌possible‌‌for‌‌dependents‌‌of‌‌a‌‌breadwinner‌‌to‌‌claim‌‌if‌‌they‌‌have‌‌died‌‌
from‌‌a‌‌work-related‌‌accident‌‌or‌‌disease‌ ‌
- Employer‌‌has‌‌to‌‌register‌‌with‌‌Compensation‌‌Fund‌‌and‌‌pays‌‌an‌‌annual‌‌
fee‌‌based‌‌on‌‌the‌‌employee’s‌‌earnings‌‌and‌‌the‌‌fee‌‌associated‌‌with‌‌the‌‌
risk‌‌of‌‌the‌‌job‌ ‌
- Employer‌‌has‌‌to‌‌ensure‌‌certain‌‌minimum‌‌safety‌‌criteria‌‌on‌‌the‌‌premises‌‌
are‌‌met‌‌and‌‌all‌‌equipment‌‌is‌‌in‌‌good‌‌working‌‌condition‌‌to‌‌reduce‌‌the‌‌risk‌ ‌
- Amount‌‌of‌‌compensation‌‌is‌‌calculated‌‌as‌‌a‌‌percentage‌‌of‌‌the‌‌salary‌‌they‌‌
were‌‌earning‌‌at‌‌the‌‌time‌ ‌