business studies grade 12 insurance essay

Investment – Insurance Business Studies Grade 12 Study Notes

Investment – Insurance Grade 12 Business Studies Study Notes, Examination Guide Scope, Lessons, Activities and Questions and Answers for Business Studies Grade 12. Learners will be able to learn, as well as practicing answering common exam questions through interactive content, including questions and answers

Topics under Investment – Insurance

• Compulsory Insurance
• Road Accident Fund (RAF)
• Unemployment Insurance Fund (UIF)
• Non-compulsory Insurance
• Retirement Annuities
• Comparing Insurance and Assurance
• Under-Insurance and over-insurance
• Importance of Insurance to Businesses
• Principles of Insurance

Term 3: Investment – Insurance

Insurance plays a critical role in mitigating risks and safeguarding businesses from potential losses. Let’s summarise the differences between insurance and assurance, insurable and non-insurable risks, the advantages and principles of insurance, insurance concepts, compulsory and non-compulsory insurance, and types of benefits paid out by the Unemployment Insurance Fund (UIF).

Read Also Macro Environment: Business Strategies | Business Studies Grade 12 Study Notes

Insurance vs. Assurance

Insurance and assurance are often confused, but they serve different purposes.

• Insurance protects against unforeseen events , such as accidents or natural disasters, and offers financial compensation in case of loss. Examples include property insurance, health insurance, and car insurance.
• Assurance is designed to provide financial support upon the occurrence of a certain event , such as death or retirement. Examples include life assurance and pension plans.

Insurable and Non-insurable Risks

Insurable risks  are those that can be covered by an insurance policy, such as property damage, theft, or personal injury.  Non-insurable risks  are risks that cannot be covered by insurance, often due to their unpredictability or the lack of data to calculate premiums.

Examples include changes in market demand, fluctuations in exchange rates, and damage caused by war or nuclear accidents.

Advantages of Insurance for Businesses

Insurance offers several advantages for businesses, including:

• Financial protection:  Insurance compensates businesses for losses, helping them recover from unforeseen events.
• Risk management:  Insurance helps businesses manage risks by transferring them to insurance companies.
• Legal compliance:  Insurance can be a legal requirement for businesses, ensuring compliance with laws and regulations.
• Business continuity:  Insurance enables businesses to continue operating despite setbacks or losses.

Principles of Insurance for Businesses

The principles of insurance for businesses include:

• Utmost good faith:  Both parties, the insurer and the insured, must act in good faith, disclosing all relevant information.
• Indemnity:  Insurance aims to restore the insured to their financial position before the loss occurred.
• Insurable interest:  The insured must have a financial interest in the insured item or event.
• Proximate cause:  Compensation is only provided for losses directly caused by the insured risk.

Read Also PDF Download Business Studies Grade 12 May-June 2021 Past Papers and Memos

Insurance Concepts

Some essential insurance concepts include:

• Underinsurance:  When the insured value is less than the actual value of the item, resulting in partial compensation.
• Overinsurance:  When the insured value is more than the actual value of the item, potentially leading to moral hazards.
• Average clause:  A clause that reduces the claim amount if the insured item is underinsured.
• Reinstatement:  Restoring the insured item to its pre-loss condition.
• Excess:  The amount the insured must pay before the insurer covers the remaining claim.

Compulsory and Non-compulsory Insurance

Compulsory insurance  is legally required for businesses, such as Unemployment Insurance Fund (UIF), Road Accident Fund (RAF), and Compensation for Occupational Injuries and Diseases Act (COIDA) insurance.

Non-compulsory insurance  is optional and includes property insurance, liability insurance, and business interruption insurance.

Types of Compulsory Insurance

Compulsory insurance for businesses includes:

• UIF:  Provides financial assistance to workers who become unemployed or are unable to work due to illness or maternity leave.
• RAF:  Compensates victims of road accidents caused by negligent drivers.
• COIDA:  Provides compensation for employees who suffer occupational injuries or diseases.

UIF Benefits

The UIF provides various benefits, including:

• Unemployment benefits:  Financial support for workers who have become unemployed.
• Illness benefits:  Compensation for workers unable to work due to illness.
• Maternity benefits:  Financial assistance for workers on maternity leave.

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Gr12 chapter 7-Insurance

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Preview text, business studies, notes on investment: insurance, table of contents, topics pages, exam guidelines on investment: insurance 3, terms and definitions 4, meaning of insurance 5, meaning of insurance concepts 5-, differences between under-insurance and, over-insurance., differences between insurance and assurance 7, examples of short term and long term, principles of insurance 8, advantages/importance of insurance for, businesses., meaning and examples of insurable and non-, insurable risks, meaning of compulsory insurance 10, types of compulsory insurance and benefits of, differences between compulsory and non-, compulsory insurance 12, this chapter consists of 11 pages, content details for teaching, learning and assessment purposes, learners must be able to:,  define/elaborate on the meaning of insurance, non-compulsory insurance,  explain/elaborate on the meaning of non-compulsory insurance,  explain/elaborate on the meaning of the following insurance concepts:, o over-insurance, o under-insurance, o average clause, o reinstatement,  explain the differences between over and under insurance,  differentiate/distinguish between insurance and assurance. give examples.,  name/give examples of short term and long term insurance.,  name/mention/explain/ discuss the following principles of insurance:, o indemnification/indemnity, o security/certainty, o utmost good faith, o insurable interest,  apply the average clause to calculate the compensation in the case of under-insurance.,  discuss/explain the advantages/importance of insurance.,  explain the meaning of insurable and non-insurable risks.,  outline/mention/give examples of insurable and non-insurable risks, compulsory insurance,  explain/elaborate on the meaning of compulsory insurance.,  discuss/explain types of compulsory insurance e. unemployment insurance fund, (uif), road accident fund (raf)/road accident benefit scheme (rabs)/, compensation for occupational injuries and diseases fund (coida).,  explain the types of benefits paid out by the uif,  identify types of compulsory insurance from given scenarios/statements.,  explain/differentiate/distinguish between compulsory and non- compulsory insurance, and give examples.,  keep abreast of the changes in legislation from time to time e. the raf is currently, changing to the rabs (road accident beneficiary scheme)., 1 meaning of insurance,  insurance refers to cover for a possible event that may cause a specified loss/ damage.,  an agreement whereby the insurer undertakes to indemnify the insured in the event of a, specified loss/damage.,  the insured has to pay a premium for specified losses/damages covered.,  a contract between a person/business/insured requiring insurance cover and the, insurance company/insurer bearing the financial risk., 2 non-compulsory insurance, 2 the meaning of non-compulsory insurance,  non-compulsory insurance is voluntary/the insured has a choice whether to enter into an, insurance contract.,  it is not required by law, but it can provide protection for businesses and individuals.,  it is taken out in order to transfer the risk of something happening onto the insurance,  these risks include theft, damaged cars, damaged buildings/ premises/injuries on, premises etc.,  non-compulsory can be divided into:, o short-term insurance e. fire, theft etc., o long-term insurance e. retirement/death etc., 2 meaning of insurance concepts, 2.2 over insurance,  over insurance is 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., 2.2 under-insurance,  occurs when property or assets are insured for their full market value.,  the property/asset is insured for less than the current/actual value of the property/assets,  if a business is insured for an amount that is under the actual market value of goods or, service, the insured/business will only be paid out for the amount that the goods/assets, are insured for.,  the insurer usually applies the average clause to calculate the amount of money that, must be compensated to the insured if the goods/assets are under insured., 2.2 average clause,  a stipulation set by the insurer which is applicable when property/goods is under, insured/insured for less than its market value.,  the insurer will pay for insured loss/damages in proportion to the insured value.,  this means that the insured is responsible for a part of the risk that is not insured., note: the average clause applies when goods/assets are under insured., formula for calculating the average clause,  the insured amount is divided by the market value of the insured item and multiplied by, the total value/amount of the damages/loss.,  insurance companies apply the following formula to determine the amount to be paid out, to the insured:, formula: (amount insured ÷ market value) x damages, amount insured x amount of damages/loss, value of insured item, example of calculating the average clause, peter owns a thatched house valued at r100000. he insured his house with pro-cover, insurers for r800000. afire in the kitchen caused damages of r30000., 1 calculate the amount that pro-cover insurers will pay peter to cover damages. show, all calculations., 2 explain to peter the reason why he did not qualify for the full amount of damages, r800000 x r, reasons for not qualifying for the full amount of damages,  peter insured his house for less (r800 000) than the market value, (r1 000 000).,  he was underinsured so the average clause had to be activated.,  he will only receive r24 000 for damages, and not the full amount of the claim, 2.2 reinstatement,  it is a stipulation whereby the insurer may replace lost/damaged property/goods instead, of reimbursing the insured.,  this stipulation is applicable when property/goods are over insured.,  the re-instatement value will not be higher than the market value of the loss.,  insured is returned to almost the same financial position as before the loss occurred., example: a business property that has been insured for r300 000 but the market value, for the property is r200 000. if it is destroyed by fire/storm etc, the insurer will rebuild the, property instead of paying cash., note: 1 reinstatement applies when goods/assets are over-insured., 2 there is no formula for calculating over insurance. therefore you will, not be asked to calculate over insurance., 6 principles of insurance, 6 indemnification/indemnity,  usually applies to short term insurance, as the insured is compensated for specified/proven,  insurer agrees to compensate the insured for damages/losses specified in the insurance, contract, in return for premiums paid by the insured to the insurer.,  protects the insured against the specified event that may occur.,  pay-outs from insurance companies/insurer will only be made; if there is proof that the, specified event took place/if the insured can prove the amount of the loss/ damage.,  the amount of indemnification/compensation is limited to the amount of provable, loss/damage, even if the amount in the policy/insurance contract is higher.,  the insured must be placed in the same position as before the occurrence of the, loss/damage/the insured may not profit from insurance., 6 security/certainty,  applies to long-term insurance where the insurer undertakes to pay out an agreed upon, amount in the event of loss of life.,  a predetermined amount will be paid out when the insured reaches a pre-determined age/or, gets injured due to a predetermined event.,  aims to provide financial security to the insured at retirement/the dependents of the, 6 utmost good faith,  insured has to be honest in supplying details when entering in an insurance contract.,  both parties/insurer and insured must disclose all relevant facts.,  insured must disclose everything that may affect the extent of the risk.,  details/information supplied when claiming should be accurate/true., 6 insurable interest,  insured must prove that he/she will suffer a financial loss if the insured object is, damaged/lost/ceases to exist.,  an insurable interest must be expressed in financial terms.,  insured must have a legal relationship with the insured object in the contract., note: the principles of insurance form the basis of an insurance contract between, the insurer and the insured., 7 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.,  protects businesses from claims made by members of the public for damages that the, business is responsible for.,  businesses will be compensated for insurable losses, e. destruction of property through,  businesses assets, e. vehicles/equipment/buildings need to be insured against damage, and/or theft.,  businesses are protected against the loss of earnings, e. strikes by employees which, result in losses worth millions.,  life insurance can be taken on the life of partners in a partnership to prevent unexpected, loss of capital.,  should the services of key personnel be lost due to accidents/death, the proceeds of an, insurance policy can be paid out to the business/beneficiaries.,  replacement costs for damaged machinery/equipment are very high, therefore insurance, can reduce/cover such costs., 8 meaning of insurable and non-insurable risks, 8 meaning of insurable risks,  these risks are insured by insurance companies.,  insurance companies decide on the likelihood of an event and then decide if they want, to insure the risk, 8 meaning of non-insurable risks,  these risks are not insured by insurance companies as insurance cost/risks are too, high/remains the responsibility of the business.,  the insurance company cannot calculate the profitability of the risk and therefore they, cannot work out a premium that the business must pay., 8 examples of insurable and non- insurable risks, insurable risks non-insurable risks,  fidelity insurance,  money in transit, disaster/storms/wind/rain/hail,  damage to/loss of assets/vehicles/, equipment/buildings/premises,  injuries on premises,  nuclear weapons/war,  changes in fashion,  improvement/changes in technology,  irrecoverable debts,  financial loss due to bad management,  possible failure of a business,  shoplifting during business hours,  loss of income if stock is not received in, time/time that elapses between the, ordering and delivery of goods., maternity benefits,  pregnant employees receive these benefits for up to 4 consecutive months.,  if an employee had a miscarriage, she can 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., dependants' benefits,  dependants may apply for these benefits if the breadwinner, who has contributed to uif,  the spouse of the deceased may claim, whether he/she is employed or not., note: do not confuse the benefits of uif with types of leaves, 9.2 road accident fund (raf)/road accident benefit scheme (rabs),  raf/rabs insures road-users against the negligence of other road users.,  the raf/rabs provides compulsory cover for all road users in south africa, which, include south african businesses.,  drivers of business vehicles are indemnified against claims by persons injured in vehicle,  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.,  the next of kin of workers/ breadwinners who are injured/killed in road accidents, may, claim directly from raf/rabs.,  injured parties and negligent drivers are both covered by raf/rabs.,  the injured party will be compensated, irrespective of whether the negligent driver is, rich/poor/insured/uninsured.,  rabs aims to provide a benefit scheme that is reasonable/equitable/affordable/, sustainable, etc.,  rabs aims to simplify/speed up the claims process as victims of road accidents no, longer have to prove who caused the accident.,  rabs enables road accident victims speedy access to medical care as delays due to, the investigation into accidents has been minimised., note: you will be awarded a mark if you write the word “third party” instead of, 9.1 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 contribution payable is reviewed every few years according to the risk associated, with that type of work.,  all employers are obliged to register with the compensation fund so that employees may, be compensated for accidents and diseases sustained in the workplace.,  the fund covers employers for any legal claim that workers may bring against them.,  employers are required to report all accidents within 7 days and occupational diseases, within 14 days to the compensation commissioner.,  employers are responsible for contributing towards the fund and may not claim money, back from employees/deduct contributions from wages.,  in the event of the death of an employee as a result of a work related accident/ disease,, his/her dependant(s) will receive financial support.,  employees do not have to contribute towards this fund.,  employees receive medical assistance provided there is no other party/medical fund, 10 differences between compulsory and non-compulsory insurance, compulsory insurance non-compulsory insurance, required by law/there are legal obligations, for it to be taken out and paid for., is voluntary/the insured has a choice whether to, enter into an insurance contract., it is regulated by government and does not, require insurance contracts/brokers, insured will enter into a legal insurance contract, with the insurer, who may be represented by an, insurance broker., payment is in the form of a levy/contribution, paid into a common fund from which benefits, may be claimed under certain conditions., monthly/annual payments/premiums that must, be paid in order to enjoy cover for a nominated, uif, raf and compensation fund/coida, short term insurance/multi-peril insurance, (theft, fire, etc.) long term insurance/life.

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Business Studies Grade 12 Essays Questions and Answers for paper 2

On this page, you will find Business Studies Grade 12 Essays Questions and Answers for paper 2. Memos are in a pdf format.

List of Business Studies Grade 12 Essays Questions and Answers

Question 1: business ventures.

Peter and Teko are partners in P & T Consultancy. They are considering investing their surplus funds in the RSA retail savings bonds/Government retail bonds and also in preference shares of companies listed on the JSE.

• Keeping the above scenario in mind, write an essay on investments and forms of ownership in which you include the following aspects:
• Outline the functions of the JSE.
• Describe FOUR types of preference shares.
• Evaluate the impact of the RSA retail savings bonds/Government retail bonds on investors.
• Legislation

Question 2: Ethics and Professionalism

According to the King Code principles, businesses are expected to conduct their operations in an ethical and professional manner. Many businesses develop strategies to address unethical business practices remain competitive and sustainable.

Write an essay on ethics and professionalism in which you address the following aspects:

• Elaborate on the meaning of ethical behaviour.
• Unfair advertising
• Pricing of goods in rural areas
• Taxation/Tax evasion
• Advise businesses on how they could apply accountability and transparency as King Code principles for good corporate governance.
• Suggest ways in which professional, responsible, ethical and effective business practice should be conducted.

Question 3: Essay on human rights, inclusivity and environmental issues

Businesses are required to respect the economic rights and safety of their employees in the workplace. The health and safety representatives play an important role in protecting the workplace environment. Adherence to human rights enables businesses to deal with diversity in the workplace.

Write an essay on human rights, inclusivity and environmental issues in which you include the following aspects:

• Outline the economic rights of employees in the workplace.
• Explain the roles of the health and safety representatives in protecting the workplace environment.
• Discuss the benefits of diversity in the workplace.

Question 4: Forms of Ownership and Investment

The criteria for the success or failure of private companies are more appealing than that of partnerships. Many partnerships convert to private companies so that they can benefit from these criteria. Some businesses consider the investment factors before investing in fixed deposits.

Write an essay on forms of ownership and investment in which you include the following aspects:

• Outline the disadvantages of a partnership.
• Discuss FOUR factors that should be considered when making investment decisions.
• Advise businesses on the impact of fixed deposits as a form of investment.

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Questions and Answers for Business Studies Grade 12

Browse a list of Business Studies Questions and Answers:

• Explain the purpose of the Consumer Protection Act
• Impact of consumer Protection Act on the marketing function
• Analyse the impact of the Consumer Protection Act on ACM
• Which Act compels businesses to display the prices of all goods and services
• Provide Six types of diversification strategy with examples
• How does the National Credit Act assist or help consumers with the fair treatment
• Name any TWO types of integration strategies

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