Insurance World

Car insurance takes a significant portion out of a lot of people’s incomes, but for younger drivers it can be beyond reach on a low income. Under normal circumstances a new driving licence is a clean one, with penalty points for motoring offences not making an appearance until after at least a little time on the road. These two facts make motorcycle ownership a much more attractive proposition for impecunious young people.

There is however a noteworthy exception to this. It is only relatively recently that mini motorbikes have made an appearance, and their use has been taken up avidly by juveniles, but already legislation has had to be amended to deal with their illegal use. This is resulting in the motorbikes being confiscated and in some cases crushed; and their owners being prosecuted.

There would appear to be little point in prosecuting a juvenile as a result of a motoring offence, but the authorities have decided to use the law to enable them to deal with offenders in a fairly unique way. Even though the offenders are usually children, who are several years from being old enough to hold a driving licence, they are hit with penalty points. These are placed on record, and when a first licence is applied for the penalty is applied and the licence endorsed.

The offences being committed which give rise to these penalties are usually based on laws relating to vehicle use. It is illegal to use any vehicle unless the driver has a licence and the vehicle is taxed and insured; if these requirements are not met then use is only permitted on private land and is subject to the land owner giving permission.

The problem is that the majority of mini motorbikes are used on public land, pavements and roads, and it is doubtful if the (usually) youthful riders are aware that any offence is being committed. It is however even more doubtful if the riders have contributed to the cost of the motorbike in any way. So the machines have mostly been bought by parents who should be aware of the law and should show a greater sense of responsibility.

A number of accidents have already occurred when riders have collided with pedestrians, road users and miscellaneous obstructions. Make no mistake – these machines may be small, but modern engine design has ensured that they are capable of speeds which are out of all proportion to their size. Both riders and their victims have ended up in hospital, and in some cases in intensive care as a result of their injuries.

Bad enough if the damage ended there, with an injured child or pedestrian, distraught parents and a costly motorbike confiscated and crushed, but the delayed effect can also be traumatic. It is likely that all parties to the accident will have forgotten about the other penalty until the young person applies for their first licence on reaching qualifying age.

If the licence is granted it will carry the record of the forgotten penalty points. O.K. so where’s the problem, you may ask. A licence was wanted and has been issued. The problem lies in the next requirement which is insurance. Every company approached for a quotation will ask about the driver’s record, and when they learn that the licence has penalty points on it their interest will fade rapidly.

There will be an instant and fairly savage mark up in the premiums to be paid. This is likely to vary according to the severity of the offence, from a relatively mild but still pricey cost increase for minor offences to swingeing increases for more serious offences such as dangerous driving. Any mention of a drink driving offence will make insurance almost impossible to obtain due to the prohibitive cost, assuming that cover is not refused outright.

An insurance company spokeswoman has given some examples of actual costs. A youthful male Fiesta driver with a penalty free licence is quoted as facing comprehensive insurance payments of around Ј37 per week, but the same lad with a dangerous driving conviction has to find almost Ј48 per week. This is a 29% increase and is a considerable sum to pay out every week.

Note that whilst a young female driver in the same position would pay the same 29% increase for a dangerous driving conviction, the relevant figures in her case would be under Ј24 per week on a clean licence or over Ј30 per week with the conviction. This is because of the higher accident risk for young males.

So generous parents need to consider carefully. They could be doing their offspring no favours in the long term by splashing out on a mini motorbike for them before they obtain a licence and can then ride legally.

The study of the human history and civilization reveals a universal desire for security, and it indicates that the need for security has been one of the most powerful motivating forces in the material and cultural growth.

Early societes relied on family and tribe cohesiveness for their security. With economic progress, however, this security source weakens. Insurance, in some form, has been a universal response to societies’ request for security.

Life insurers sell today policies that permit policyowners the felxibility of deciding the amount of the premium he or she would like to pay. Whole life policies are examples of such flexible plans because they are a function of the amount of the policyowner’s past and present premium payments.

Subject to company rules regarding minimums and maximums, the policyowner may pay whatever premium during a policy year that she or he wishes. An amount to cover the insurer’s expenses and mortality charges is subtracted from the cash value and a penalty for early policy termination, called a surrender charge, may be assessed against the policy’s cash value.

Many life insurance policies have cash values. Conceptually, all life insurance policy cash values can be derived in the same way and all evolve for the same basic reason: prefunding of future mortality charges. As a practical matter, however, policies are usually viewed in different ways.

The savings element is considered a by-product of the level premium method of payment. With universal life and some other newer forms of life insurance policies, the savings element is usually considered to be a more independent part of the policy, specifically designed to build a savings fund from which mortality and expense charges are withdrawn.

Economists and marketing personnel tend to view a level-premium whole life contract as a divisible contract providing financial protection to the policyowner’s beneficiaries, with other contract benefits available, including cash surrender and loan values. A policyowner may discontinue the insurance and surrender the policy for its cash values.

Alternatively, a policyowner may borrow from the insurer an amount up to the cash value, at a contractually stated rate of interest, using the cash value as collateral.

The distinguishing features of universal life policies are:

1- their flexibility
2- their transparency.

These policies are flexible in that they permit policyowners, within limits, to increase or decrease premium payments as they wish also to increase or decrease the policy face amount.

The transparency means that the three elements of life insurance ( mortality, interest, expenses ) are identified and disclosed to the customers.
The savings component of the life insurance policies is a direct function of the premium payments made by policyowners.