WAEC Commerce 2013 Theory — Question 5

Model answer

(a) Proximate cause: This is an insurance term that states that the loss suffered must be caused by the event insured against. A person insures against fire, he will not be entitled to compensation for loss caused by erosion. (b) Surrender value: Surrender value can be defined as the cash amount offered to the policyholder by the issuing life carrier upon cancellation of the contract. (c) Contribution: This can be defined as the coming together of two or more insurance companies to insure a single policy. If the policy is huge, the insurance companies can come together to insure and make each contribution in the time of indemnity. (d) Utmost good faith: This is a term in insurance policy which states that all parties to the policy must disclose all necessary information that relate to the policy being undertaken. (e) Premium: This is the periodic amount paid by an insured to an insurance company to specify his continual interest in the policy.