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BONGANI GENERAL DEALER (BGD)  Bongani General Dealer's stock is not insured. As an insurance broker, BGD requested your advice on insurance. You completed a quotation on the cost of insurance for BGD's stock. The monthly premium is quoted at R2 800 on a total value of goods amounting to R2 800 000.

  1. Identify the type of insurance that BGD needs and give ONE reason why it is beneficial to the business. 
  2. Name and explain the type of insurance that Bongani should consider to protect his dependants when he dies.
  3. Define the following insurance concepts: 
    A. Average clause
    B. Reinstatement
in Grade 12 by Master (866k points) | 1.2k views

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1. Non-compulsory insurance/Short-term insurance.

Reasons for/Benefits of short-term insurance:

  • Short-term insurance protects BGD against possible losses that it may suffer as a result of fire, burglary, theft, storm damage√√, etc.
  • If BGD insured their stock, they will be indemnified for stock losses by the insurance company.

2. Long-term insurance.


  • Endowment/Retirement Annuities will guarantee Bongani a lump sum when he reaches a certain age/retires.
  • A monthly payment is made to an insurance company with the expectancy of receiving a pre-determined amount on a date in the future/to cover long-term risk.
  • Life insurance/Assurance policy pays out a lump sum after a person dies.
  • Lump sum may be used to provide security for dependants or settle long-term debt, e.g. mortgage bond.

3. Insurance concepts

A- Average clause:

  • It is a stipulation set by the insurer that is applicable when property/goods are underinsured/insured for less than its market value.
  • The insurer will pay for insured loss/damages in proportion to the insured value

B- Re-instatement:

  •  It is a stipulation whereby the insurer may replace lost/damaged property/ goods instead of reimbursing.
  • 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.

by Master (866k points)
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