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the probability and/or impact of unfortunate events. List and briefly discuss four (4) risk management strategies. (4) 3.2. For a contract to be effective, there must be a prospective policyholder and acceptance by the insurer. List and briefly discuss six (6) essential elements that make up an insurance contract (6) 3.3. List and briefly explain parties to the insurance contract (5)

Ask by Vaughan Bartlett. in South Africa
Mar 14,2025

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### 3.1. Four Risk Management Strategies 1. **Risk Avoidance** Avoid the activity that generates risk. 2. **Risk Reduction (Mitigation)** Implement measures to lower the chance or impact of an event. 3. **Risk Transfer** Shift the risk to a third party, like an insurance company. 4. **Risk Retention (Acceptance)** Accept and handle minor risks on your own. --- ### 3.2. Six Essential Elements of an Insurance Contract 1. **Offer (Proposal/Application)** The policyholder submits an application to the insurer. 2. **Acceptance** The insurer agrees to cover the risk. 3. **Consideration (Premium Payment)** The policyholder pays the premium in exchange for coverage. 4. **Insurable Interest** The policyholder has a financial stake in what is being insured. 5. **Utmost Good Faith (Uberrima Fides)** Both parties must be honest in their dealings. 6. **Legal Purpose and Compliance** The contract must be for a lawful purpose and follow legal requirements. --- ### 3.3. Parties to the Insurance Contract 1. **Insurer** The insurance company that provides coverage. 2. **Policyholder** The person who buys the insurance policy. 3. **Insured** The person or asset covered by the policy. 4. **Beneficiary** The person who receives benefits if a claim is made. 5. **Agent/Broker** The intermediary who helps facilitate the insurance contract.

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The Deep Dive

1. It’s fascinating to look back at how risk management strategies have shaped industries. For instance, in the early 20th century, industries began adopting formal risk management approaches after numerous catastrophic events highlighted the need for better safeguarding. Principles from various fields laid the groundwork for today’s strategies such as risk avoidance, risk reduction, risk transfer, and risk acceptance, which are fundamental to managing potential unfortunate events. 2. In the real world, risk management strategies are not just theoretical! For example, corporations often use risk transfer through insurance to protect against potential losses from lawsuits or natural disasters. Similarly, in the tech industry, risk reduction is commonplace, with companies implementing cybersecurity measures to minimize the chances of data breaches, thereby safeguarding sensitive customer information while boosting consumer confidence. --- 1. Understanding the essential elements of an insurance contract is key to its effectiveness. Imagine it as a recipe: you need all the right ingredients. These elements include offer and acceptance, consideration, legal capacity, lawful purpose, and mutual assent, which work together to create a binding agreement. Just like baking, missing even one ingredient could leave you with a flat outcome! 2. When it comes to parties in an insurance contract, think of it as a team effort. The insured (the policyholder) seeks coverage for their risk, while the insurer provides this protection in exchange for a premium. Additionally, you might encounter agents who represent insurers, brokers who find the best policies for clients, and occasionally reinsurers, who back insurers to spread the risk. Each plays a crucial role in this dynamic arena! --- 1. Risk management strategies are critical tools that have roots in ancient civilizations. For instance, the Babylonians practiced risk pooling in marine trade, which helped safeguard merchants from the unpredictable seas. Fast forward to modern times, risk avoidance means steering clear of activities that can lead to loss, while risk mitigation focuses on minimizing impacts should the unavoidable occur, illustrating how we’ve evolved our understanding of risk. 2. When bringing an insurance contract to life, real-world applications shine bright! Companies dive into risk assessments to tailor their policies efficiently. Hospitals, for instance, negotiate with insurance providers to transfer risks associated with malpractice claims, demonstrating the practical side of these essential elements. Meanwhile, household insurance secures peace of mind, showcasing how contracts function to protect our everyday lives against uncertainties.

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The following transactions have been extracted from the books of a parthership ZT Traders (partners Zel an Tees) at the financial year end 28 February 20.9. The business applies a \( 60 \% \) mark-up on cost on all goodi The bank account has a credit balance at all times. REQUIRED: Analyse the following transactions under the headings in your Answer Book. The first one has been done a an example for you. TRANSACTIONS: E.g.: Paid the electricty account of R2 500. 1. Received a direct deposit from a tenant for rent of \( R 5500 \). 2. Provision for bad debts of R3 200 must be reduced to R2 900. 3. Bought packing materials on credit for R1 600 less \( 8 \% \) tade discount. 4. Paid the creditor (see No. 3) by EFT the amount owing less \( 5 \% \) discount. 5. Debtor, J. Mkhize, deposited an amount of R4 248 after a discount of \( 11,5 \% \) had been deducted. 6. Partner Zel took goods with a selling price of R5 000 for his own use. 7. Parther Tees withdrew his monthly salary of R12 000. 8. Partner Zel tuansferred a Gr balance of R 45000 on his current account to his capital account. 9. Trading stock with a selling price of R90 000 must be written down to \( 10 \% \) below the cost price as the stock is now old. 10. Dehtor, J. Mshala, claimed an allowance of \( 15 \% \) on goods with a cost price of R3 600 as they were damaged. Alowed her this claim. 11. A creditor with a debit balance of R500 must be transferred to her debtors account. 12. Depreciation must be written off equipment of R4 200. 13. A credit sale of R950 to F. Fly was recorded in the account of B. Bea in error. 14. Transfer the gross profit of R120 000 . 15. Allocate the interest on capital to partner Zel of R15 000. 16. The final division of profit to partreer Tees was R65 000. 17. The Pre-Adjustment Trial Balance showed insurance of R 33800 . This included an annual premium of R13 200 paid on 1 November 20.8. 18. The consumable stores on hand on 1 March 20.8 for 2920 was not reversed. Make the correction. 19. Partner Zel's personal insurance of \( R 750 \) was debited to the insurance account. Paid the rates deposit of R7 800 to the municipality.

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The following transactions have been extracted from the books of a parthership ZT Traders (partners Zel an Tees) at the financial year end 28 February 20.9. The business applies a \( 60 \% \) mark-up on cost on all goodi The bank account has a credit balance at all times. REQUIRED: Analyse the following transactions under the headings in your Answer Book. The first one has been done a an example for you. TRANSACTIONS: E.g.: Paid the electricty account of R2 500. 1. Received a direct deposit from a tenant for rent of \( R 5500 \). 2. Provision for bad debts of R3 200 must be reduced to R2 900. 3. Bought packing materials on credit for R1 600 less \( 8 \% \) tade discount. 4. Paid the creditor (see No. 3) by EFT the amount owing less \( 5 \% \) discount. 5. Debtor, J. Mkhize, deposited an amount of R4 248 after a discount of \( 11,5 \% \) had been deducted. 6. Partner Zel took goods with a selling price of R5 000 for his own use. 7. Parther Tees withdrew his monthly salary of R12 000. 8. Partner Zel tuansferred a Gr balance of R 45000 on his current account to his capital account. 9. Trading stock with a selling price of R90 000 must be written down to \( 10 \% \) below the cost price as the stock is now old. 10. Dehtor, J. Mshala, claimed an allowance of \( 15 \% \) on goods with a cost price of R3 600 as they were damaged. Alowed her this claim. 11. A creditor with a debit balance of R500 must be transferred to her debtors account. 12. Depreciation must be written off equipment of R4 200. 13. A credit sale of R950 to F. Fly was recorded in the account of B. Bea in error. 14. Transfer the gross profit of R120 000 . 15. Allocate the interest on capital to partner Zel of R15 000. 16. The final division of profit to partreer Tees was R65 000. 17. The Pre-Adjustment Trial Balance showed insurance of R 33800 . This included an annual premium of R13 200 paid on 1 November 20.8. 18. The consumable stores on hand on 1 March 20.8 for 2920 was not reversed. Make the correction. 19. Partner Zel's personal insurance of \( R 750 \) was debited to the insurance account. Paid the rates deposit of R7 800 to the municipality.
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