CHAPTER 7
INVESTMENT INSURANCE
INSURANCE
MEANING
- Is the short-term cover or insurance taken out in the event that something may occur (natural disasters/
theft)
- contract is taken out and a monthly premium is paid incase an event happens
- Insurance company pays out to cover costs of the loss
- A contract between a person/business/insured requiring insurance cover and the insurance
company/insurer bearing the financial risk
ADVANTAGES/IMPORTANCE OF INSURANCE FOR BUSINESSES
→ Transfers the risk from the business/insured to an insurance company/insurer.
→ Transfer of risk is subject to the terms and conditions of the insurance contract.
→ Protects businesses against dishonest employees.
→ Protects businesses against losses due to death of a debtor.
→ Protects the business against theft/loss of stock and/or damages caused by natural disasters such as floods,
storm damage, etc.
COMPULSORY INSURANCE
• Is a legal or minimum requirement set up by the government against consequences of risks (loss of
employment) (accident at work) (injury while driving)
• Compulsory insurance is intended to safeguard the welfare of everyone concerned.
• It is regulated by Government and does not require insurance contracts/brokers.
• Payment is in the form of a levy/contribution paid into a common fund from which benefits may be claimed
under certain conditions
TYPES OF COMPULSORY INSURANCE
1) UNEMPLOYMENT INSURANCE FUND (UIF)
- The UIF provides benefits to workers who have been working and become unemployed for various reasons.
- Employees contribute 1% of their basic wage to UIF.
- Businesses contribute 1% of basic wages towards UIF, therefore reducing the expense of providing UIF
benefits themselves.
- All employees who work at least 24 hours per month are required to be registered for UIF/contribute to the
UIF.
- The business cannot be held responsible for unemployment cover as the UIF pays out to contributors
directly/dependents of deceased contributors.
BENEFITS OF UIF
Unemployment benefits
→ Unemployed employees may only claim, if they contributed to UIF.
→ Unemployed employees enjoy these benefits until the allocated funds are exhausted.
→ If a worker voluntarily terminates his/her contract, he/she may not claim.
→ No tax is payable on unemployment benefits.
Illness benefits/ Sickness/ Disability
→ Employees may receive these benefits if they are unable to work for more than 14 days without
receiving a salary/part of the salary.
→ Employees may not claim these benefits if they refuse medical treatment.
, Maternity benefits
→ Pregnant employees receive these benefits for up to 4 consecutive months.
→ If an employee had a miscarriage, she could claim for up to six weeks/42 days.
Adoption benefits
→ Employees may receive these benefits if they adopt a child younger than two years.
→ Employees who take unpaid leave/may receive part of their salary while caring for the child at home.
→ Only one parent/partner may claim.
Dependents’ benefits
→ Dependents may apply for these benefits if the breadwinner, who has contributed to UIF dies.
→ The spouse of the deceased may claim, whether he/she is employed or not.
2) ROAD ACCIDENT FUND (RAF)/ROAD ACCIDENT BENEFIT SCHEME (RABS)
- RAF/RABS insures road-users against the negligence of other road users.
- RAF/RABS is funded by a levy on the sale of fuel/diesel/petrol.
- The amount that can be claimed for loss of income is limited by legislation.
- Injured parties and negligent drivers are both covered by RAF/RABS.
- RABS enables road accident victims’ speedy access to medical care as delays due to the investigation into
accidents has been minimized.
3) COMPENSATION FUND/COMPENSATION FOR OCCUPATIONAL INJURIES AND DISEASES/COIDA
- The fund covers occupational diseases and workplace injuries.
- Compensates employees for injuries and diseases incurred at work.
- Compensation paid is determined by the degree of disablement.
- The fund covers employers for any legal claim that workers may bring against them.
- Employees do not have to contribute towards this fund.
NON-COMPULSORY INSURANCE
• Is an optional and voluntary cover taken out in order to transfer the risk of something happening over to
the insurance company (theft) (damage to cars) (natural disaster claims)
• It is not required by law, but it can provide protection for businesses and individuals.
- Short term insurance (fire and theft)
- Long term insurance (retirement and death)
INSURANCE CONCEPTS
OVERINSURANCE
→ When the item is insured for more than the actual market value
→ Businesses will not receive a pay-out larger than the value of the loss at market value.
→ This means that the extra money paid for the premiums will not be paid out to the insurer if there is a claim
for a loss.
→ REINSTATMENT:
o is the stipulation whereby the insurer may replace lost/ damaged goods instead of reimbursing the
insured
o This stipulation is applicable when property/goods are over insured.
o The re-instatement value will not be higher than the market value of the loss.
o Insured is returned to almost the same financial position as before the loss occurred
INVESTMENT INSURANCE
INSURANCE
MEANING
- Is the short-term cover or insurance taken out in the event that something may occur (natural disasters/
theft)
- contract is taken out and a monthly premium is paid incase an event happens
- Insurance company pays out to cover costs of the loss
- A contract between a person/business/insured requiring insurance cover and the insurance
company/insurer bearing the financial risk
ADVANTAGES/IMPORTANCE OF INSURANCE FOR BUSINESSES
→ Transfers the risk from the business/insured to an insurance company/insurer.
→ Transfer of risk is subject to the terms and conditions of the insurance contract.
→ Protects businesses against dishonest employees.
→ Protects businesses against losses due to death of a debtor.
→ Protects the business against theft/loss of stock and/or damages caused by natural disasters such as floods,
storm damage, etc.
COMPULSORY INSURANCE
• Is a legal or minimum requirement set up by the government against consequences of risks (loss of
employment) (accident at work) (injury while driving)
• Compulsory insurance is intended to safeguard the welfare of everyone concerned.
• It is regulated by Government and does not require insurance contracts/brokers.
• Payment is in the form of a levy/contribution paid into a common fund from which benefits may be claimed
under certain conditions
TYPES OF COMPULSORY INSURANCE
1) UNEMPLOYMENT INSURANCE FUND (UIF)
- The UIF provides benefits to workers who have been working and become unemployed for various reasons.
- Employees contribute 1% of their basic wage to UIF.
- Businesses contribute 1% of basic wages towards UIF, therefore reducing the expense of providing UIF
benefits themselves.
- All employees who work at least 24 hours per month are required to be registered for UIF/contribute to the
UIF.
- The business cannot be held responsible for unemployment cover as the UIF pays out to contributors
directly/dependents of deceased contributors.
BENEFITS OF UIF
Unemployment benefits
→ Unemployed employees may only claim, if they contributed to UIF.
→ Unemployed employees enjoy these benefits until the allocated funds are exhausted.
→ If a worker voluntarily terminates his/her contract, he/she may not claim.
→ No tax is payable on unemployment benefits.
Illness benefits/ Sickness/ Disability
→ Employees may receive these benefits if they are unable to work for more than 14 days without
receiving a salary/part of the salary.
→ Employees may not claim these benefits if they refuse medical treatment.
, Maternity benefits
→ Pregnant employees receive these benefits for up to 4 consecutive months.
→ If an employee had a miscarriage, she could claim for up to six weeks/42 days.
Adoption benefits
→ Employees may receive these benefits if they adopt a child younger than two years.
→ Employees who take unpaid leave/may receive part of their salary while caring for the child at home.
→ Only one parent/partner may claim.
Dependents’ benefits
→ Dependents may apply for these benefits if the breadwinner, who has contributed to UIF dies.
→ The spouse of the deceased may claim, whether he/she is employed or not.
2) ROAD ACCIDENT FUND (RAF)/ROAD ACCIDENT BENEFIT SCHEME (RABS)
- RAF/RABS insures road-users against the negligence of other road users.
- RAF/RABS is funded by a levy on the sale of fuel/diesel/petrol.
- The amount that can be claimed for loss of income is limited by legislation.
- Injured parties and negligent drivers are both covered by RAF/RABS.
- RABS enables road accident victims’ speedy access to medical care as delays due to the investigation into
accidents has been minimized.
3) COMPENSATION FUND/COMPENSATION FOR OCCUPATIONAL INJURIES AND DISEASES/COIDA
- The fund covers occupational diseases and workplace injuries.
- Compensates employees for injuries and diseases incurred at work.
- Compensation paid is determined by the degree of disablement.
- The fund covers employers for any legal claim that workers may bring against them.
- Employees do not have to contribute towards this fund.
NON-COMPULSORY INSURANCE
• Is an optional and voluntary cover taken out in order to transfer the risk of something happening over to
the insurance company (theft) (damage to cars) (natural disaster claims)
• It is not required by law, but it can provide protection for businesses and individuals.
- Short term insurance (fire and theft)
- Long term insurance (retirement and death)
INSURANCE CONCEPTS
OVERINSURANCE
→ When the item is insured for more than the actual market value
→ Businesses will not receive a pay-out larger than the value of the loss at market value.
→ This means that the extra money paid for the premiums will not be paid out to the insurer if there is a claim
for a loss.
→ REINSTATMENT:
o is the stipulation whereby the insurer may replace lost/ damaged goods instead of reimbursing the
insured
o This stipulation is applicable when property/goods are over insured.
o The re-instatement value will not be higher than the market value of the loss.
o Insured is returned to almost the same financial position as before the loss occurred
