SS2 Second Term Commerce Lesson Note – Insurance

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WEEK 6

SUBJECT: COMMERCE

CLASS: SS2

TOPIC: INSURANCE

CONTENT:

• Definition of insurance.
• History of insurance
• Basic principle of insurance

Sub-topic 1: Definition of insurance

Insurance can be defined as a method of protecting a person, a business or some other form of organization against financial loss resulting from damage to theft of personal and business assets(general insurance) and against injury and death(accident and life insurance)

Insurance can also be defined as a legal contract in which one party undertakes to indemnify another party against damage, loss or liability, resulting from the occurrence of uncontrollable events. It is one of the aids to trade that relieves businesses of some risk of being in business and releases capital in case of emergency.

There are man-made risks and natural risks. Some risks are insurable while others are not insurable. Insurance works on the principle of pooling risks. The premium (contributions) of many clients is pooled together and the losses of few clients are compensated from the pool.

Difference between insurance and assurance: At one time ‘insurance’ and ‘assurance’ had different meaning but today this difference is less important but the word ‘assurance’ is still often used in relation to life policies. Insurance is used in terms of risk that might or might not happen, while assurance is concerned with events that are inevitable

Sub- topic 2 History of insurance

Insurance started formally in Nigeria in 1921 but before then, there existed in many communities within Nigeria some form of organised social aid insurance scheme like extended family systems, age-grade group and cultural affiliations. These groups collectively pooled fund together from members and gave to the members who were in need especially those who lost a family member or property. These social clubs still exist today. However, in 1921, insurance started in Nigeria as a formal business when a branch of the Royal Exchange Assurance Company Limited was opened. In 1949,

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