WAEC Commerce 2012 Theory — Question 4

Model answer

(a) Credit: this can be defined as the act of buying with the intention of making payment in the future. Any purchase that is not accompanied with instant payment is credit. (b) Principles of insurance: I. Insurable interest: Before any person can undertake a policy, the person must be subjected to financial loss in the case of an unfortunate event which he intends to insure against. II. Utmost good faith: This principle states that all parties to the insurance policy must disclose all relevant information that relate to the policy. III. Proximate cause: This principle states that a loss must be caused by the event that it is insured against. IV. Indemnity: this principle states that an insured is entitled to compensation in case he suffers loss from the event he insured against. V. Subrogation: states that the insurance company can take act legally on behalf of the insured after when the insurance company has compensated the insured. VI. Contribution: this is the principle that allows two or more insurance companies to come together to insure a single policy with each company contributing a ratable proportion in the case of loss.