QUESTION 1
(i) Give a broad definition of an insurance contract.
(ii) Acquiring appropriate insurance cover is necessary part of successful dealing planning. Doing it well will save you money and help safeguard your commerce. Grant the reasons why businesses purchase insurance and the dissimilar type of insurance policies that may be contracted by businesses.
QUESTION 2
(i) Tell any four of the following terms:
1) Strategic Risk
2) An insurance Broker or intermediary
3) Grace Period
4) Hedging
5) Operational risk
(ii) Classify the terms "loss adjustor" and "loss assessor" in insurance.
(iii) Elucidate the concept of "utmost good faith" in insurance contracts.
QUESTION 3
(i) Describe and express three type of life insurance policy.
(ii) Family unit find life insurance to be an significant tool in an estate plan.
Give explanation how life insurance can help families finish their financial objectives.
QUESTION 4
(i) Deenoo is a Canandian based corporation, it has ordered DM 625,000 of merchandise from a German supplier and the payment is due on the 30th of November 2010. Presume that Deenoo may buy option contracts with a strike price of CAD 0.60/DM and the expiration date is 30th of November 2010 and selling at a premium of CAD 0.0107. Each call option gives the holder the right to purchase DM 125,000.
Required:
a) (1).How many call alternatives contracts must be purchased by Deenoo in order to hedge beside the currency risk of the payment of DM 625,000 on the 30th of November 2010?
(2).How much will be paid to purchase the agreement?
b) (1).Assume that on the 30th of November 2010, the blemish rate is CAD 0.625/DM. Will the call option be implemented or not?
(2).How much would it cost Deenoo to pay for its supply?
(3).How much will Deenoo save by exercising the options contracts?
c) (1).Believe that on the 30th of November 2010, the spot rate is CAD 0.570/DM. Will the call option be exercised?
(2).How much will the merchandise cost Deenoo?
(ii) Most of us tend not to pay sufficient attention to the details of a life insurance policy until somebody dies or until we are in
dire need of some cash. Define fully the following revisions usually set out in a life insurance policy contract:
• Misstatement of Age clause
• The incontestable clause
• The Entire contract clause
QUESTION 5
(i) Insurance is purchased to guard against losses, and a major source of loss, especially in this controversial society, is legal liability.
Give a inclusive definition of Legal Liability using a case from the industry.
(ii) Characterize the three general classes of legal wrongs from which legal liability usually arise.
(iii) Demonstrate with the use of outline the risk management process and explain fully the last three steps of the said process.