Comprehensive summary of Insurance (Chapter 9), adapted from the Consumo Publishers Business Studies Grade 12 Textbook. Easy to understand with clear headings and sub-headings, diagrams and tables, and important terms highlighted in bold.
INSURANCE & ASSURANCE AS RISK MANAGEMENT
TOOLS FOR INDIVIDUALS AND BUSINESSES:
• Insurance = IN case something happens.
o May/may not take place, in order to manage risk IN case, the insured
wants to be Indemnified (placed in same position as before accident).
• AS sure as we’re living, we will retire after work/or death.
o Can manage risk of loved ones being without income if we die/risk of
being unable to maintain decent SOL after retirement = Assurance.
Taking out in/assurance = insured pays monthly premium to transfer risk to
insurer.
INSURABLE & NON-INSURABLE RISKS
Some risks = uninsurable/too expensive to insure = unaffordable to ensure against.
• War & associated risks
o Insurance companies regard it as a risk government should manage.
• Bad debt
o Is insurance available for bad debt = almost affordable.
• Business risks (price fluctuations due to time intervals.)
o Not covered by traditional insurance policy.
o Business may decide to hedge against such risks.
• Trading inventory becoming obsolete/outdated due to fashion changes
• Technology changes/improvements made to machinery & production
processes.
o Cannot take out insurance against machines becoming outdated.
o Leasing is an option to prevent this.
• Committing an illegal act (penalty imposed for traffic offence)
• Climate changes
o Some insurers consider risk of natural disasters too high.
o Some areas have becoming too high of a risk to insure.
, Kayla Humphries
TYPES OF INSURANCE
Compulsory insurance:
Unemployment Insurance Fund (UIF)
• Changed by Unemployment Insurance Amendment Bill
• Gives short-term relief to workers when they are unemployed/unable to
work because of death/illness. Provides relief to dependants of deceased
employee who has contributed to the fund.
• Contributions made by employer & employee. 1% of gross salary deducted
from employees salary, equal amount contributed to employer responsible for
paying it to SARS.
o Ceiling amount (limit for calculating contributions) = R12712
• Following people excluded from UIF insurance
o Employees working less than 24 hours a month.
o Employees who earn commission only.
• Civil servants/foreigners working in country previously excluded, now some
foreigners covered by UIF. Employees on learnerships also included.
• Domestic workers included, employer must ensure they register with
Department of Labour.
• Following rules apply regarding claims:
o 66% of monthly salary for maternity benefits if she’s paid at least 4
years to UIF.
o Max claim period for some losing job/retrenched = 365 days.
o Worker not at work for 7 days because of illness, and not paid by
employer, can claim from UIF.
o Any UIF benefits still owed to person that has died will not be stopped,
will be paid to his/her dependants.
Compensation for Occupational
Injuries and Diseases Act (COIDA)
• Previously known as Workmen’s Compensation Fund.
• If employee injured at work/becomes sick/disabled as a result of his/her job,
person entitled to claim from COIDA. Possible for family/dependants of
breadwinner to claim if they die because of work related accident etc.
• Every employer registers with Compensation fund and pays annual fee
based on employee’s earnings and risks associated with job.
• Employer must ensure that certain minimum safety criteria on premises are
met & all equipment is in good working condition = to reduce risk of possible
injury/death.
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