Banking, insurance and warehousing

Commerce · WAEC and JAMB · SS2 and SS3

The three services that carry most of the aids-to-trade marks. Insurance principles in particular are examined almost every year.

What you need to know

Commercial banks accept deposits, lend, transfer funds, provide safe custody and foreign exchange.
Current account: cheque book, no interest, suits traders. Savings account: interest, limited withdrawals.
Cheque crossings: general crossing must be paid into an account; "Account Payee Only" restricts it to the named payee.
Principles of insurance: utmost good faith, insurable interest, indemnity, subrogation, contribution, proximate cause.
Life and personal accident policies are NOT contracts of indemnity, because a life cannot be valued.
Insurance pools risk; it does not prevent loss. Only insurable risks are covered.
Warehousing bridges production and consumption, steadies prices, allows bulk breaking and grading.
A bonded warehouse holds imported goods under customs control until duty is paid.

Insurable interest: A financial stake in the subject matter, so that its loss would cause you loss. Required for a valid policy.
Subrogation: The insurer taking over the insured's rights against a third party after paying a claim.
Contribution: Where several insurers cover the same risk, each pays a proportionate share of the claim.
Proximate cause: The dominant and effective cause of a loss, which determines whether the policy responds.

A house insured with two companies for N4m and N6m is destroyed, with a loss of N5m. How much does each pay?

Answer: N2 million and N3 million; the insured receives N5 million in total, not N10 million

Indemnity means you are restored to your former position, never better off. Insuring an item twice does not let you claim twice.

Insurance questions reward the exact principle name. "Indemnity" earns the mark; "you only get what you lost" usually does not.