CH11Mindmap
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π‘ Insurance
5 Principles of Insurance
Insurable Interest
Must gain from an item's existence or suffer financially from its loss. You cannot insure something you have no financial interest in.
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Indemnity
A person cannot profit from insurance. They can only be compensated for the actual loss suffered β no more.
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Subrogation
After the insured is fully compensated, the rights to recover the loss transfer to the insurance company. The insurer can then pursue the third party responsible.
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Contribution
Where cover is provided by more than one insurer, each pays out in proportion to the amount of cover they provided.
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Utmost Good Faith
The applicant must disclose all material facts when applying for insurance. Failure to do so can void the policy.
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Average Clause + Underinsurance β οΈ
Average Clause
Applies when a property is underinsured and a partial loss occurs. The insured only receives the fraction that was insured.
Formula: (Value Insured Γ· Value of Item) Γ Loss = Compensation
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Formula: (Value Insured Γ· Value of Item) Γ Loss = Compensation
Underinsurance
+ Lower premiums as value insured is less than full value.
β Financial loss on any claim as the full value is not covered β average clause applies.
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β Financial loss on any claim as the full value is not covered β average clause applies.
Insurance Terms
Proposal Form
The form an applicant completes when applying for insurance. The insurer uses it to assess risk and set the premium.
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Loading / Deduction
Loading: A risk factor that increases the premium (e.g. smoker = higher health premium).
Deduction: A bonus factor that reduces the premium (e.g. no-claims bonus).
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Deduction: A bonus factor that reduces the premium (e.g. no-claims bonus).
Excess
The initial amount the insured must pay themselves on any claim before the insurer pays the rest.
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Assessor
Values the size of the claim or loss after an event has occurred β on behalf of the insurer.
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Actuary
Calculates the level of risk and sets the premium for an applicant using statistical data.
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8 Types of Business Insurance
Buildings Insurance
Covers damage to the factory or business premises e.g. from fire or flood.
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Contents Insurance
Covers damage to stock and equipment inside the premises.
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Public Liability
Covers the business if a customer is injured on the premises.
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Employer Liability
Covers the business if an employee is injured during work.
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Fidelity Guarantee
Covers the business against theft by an employee.
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Product Liability
Covers the business if a customer is injured while using one of its products.
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Key Person Insurance
Covers the business against the financial loss of losing a key member of staff.
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Goods in Transit
Covers goods that are damaged while being transported to or from the business.
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Risk Management
Risk Management
A planned approach to risks facing a business β identifying all possible risks and then taking measures to reduce them.
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Ways to Minimise Risk
Take out insurance; put safety procedures in place; install CCTV and security systems; train staff; carry out safety audits and provide safety equipment.
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πΈ Taxation
5 Business Taxes
VAT
Value Added Tax β tax on consumer spending. Businesses collect VAT on behalf of the government and pay it over. An increase adds to the price of goods.
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Corporation Tax
Tax on company profits. Ireland's standard rate is 12.5%. An increase reduces profit levels retained by the business.
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Custom Duties
Tax on imported goods from outside the EU. Increases the price of foreign goods.
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Commercial Rates
Charges paid by local businesses to the County Council for upkeep of the local area.
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Employers' PRSI
An additional social insurance cost paid by the employer on top of the employee's wage. Increases the cost of employment.
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Household Taxes
PAYE
Pay As You Earn β tax on income deducted directly from wages by the employer on behalf of Revenue.
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DIRT
Deposit Interest Retention Tax β tax on interest earned in deposit accounts.
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CGT
Capital Gains Tax β tax on the profit made from the sale of an asset.
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CAT
Capital Acquisitions Tax β tax on inheritance or gifts received.
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USC
Universal Social Charge β tax charged on total income.
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LPT
Local Property Tax β tax on the value of a house owned by an individual.
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Taxation Terms
Tax Credit
A tax allowance that reduces the amount of PAYE tax payable e.g. PAYE Credit, Personal Credit.
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Tax Band
A bracket of earnings within which a certain tax rate is applied (e.g. 20% on first β¬36,800; 40% on the balance).
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Tax Evasion
Illegally reducing how much tax you pay β e.g. under-declaring income to Revenue.
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Tax Avoidance
Legally reducing how much tax you pay β e.g. using tax loopholes or allowable deductions.
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Business vs Household Tax β 4 Key Differences
VAT Collection
Both pay VAT on purchases but only a business collects VAT on sales on behalf of the government.
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Corporation Tax
Only a company pays Corporation Tax (12.5%) on its profits. Households do not pay Corporation Tax.
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More Types of Tax
Businesses pay more types of taxation than a household β e.g. commercial rates and employer's PRSI which households do not pay.
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Scale of Taxation
Businesses pay more taxation in total than households due to the scale of their transactions and profits.
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2020 Short Q10 / 2024 SQ9
Average Clause calculation + explanation.
βΌ
Henry Winters insured his home for β¬200,000 with Allianz. The market value of the house is β¬250,000. A chimney fire caused β¬36,000 worth of damage.
(i) Calculate the amount of compensation Henry will receive. Show your workings.
(ii) Explain why Henry receives this amount.
(i) Calculate the amount of compensation Henry will receive. Show your workings.
(ii) Explain why Henry receives this amount.
βοΈ Part (i) β Average Clause Calculation
Formula: (Value Insured Γ· Value of Item) Γ Loss
= (200,000 Γ· 250,000) Γ 36,000
= 4/5 Γ 36,000
= β¬28,800 compensation
βοΈ Part (ii) β Explanation
Henry receives only β¬28,800 because the property was underinsured. The Average Clause applies β since Henry only insured 4/5 of the property's value, he only receives 4/5 of any claim. If he received the full β¬36,000, he would break the principle of Indemnity β profiting from insurance by receiving more than his proportional cover entitles him to.
π Key link: The Average Clause exists to enforce the principle of Indemnity β a person cannot profit from insurance. If the insured received the full loss despite being underinsured, they would be receiving more compensation than their cover justifies.
2025 Q6(A)
Types of insurance a hotel should have in place. (20)
βΌ
Outline the different types of insurance that The Royal Oak Hotel should have in place. (20 marks β 4 Γ 5 (2+3))
βοΈ Four Types β linked to hotel context
Public Liability: Covers the business if a customer is injured on the premises. Essential for a hotel as guests move throughout the building β a slip in the lobby or a fall by the pool could result in a compensation claim against the hotel.
Employer Liability: Covers the business if an employee is injured during the course of their work. A hotel has a large workforce β kitchen staff, cleaners and maintenance workers all face occupational hazards that could result in workplace injuries.
Buildings Insurance: Covers the hotel against damage to the premises β e.g. from fire or flood. As the building is the hotel's primary physical asset, its replacement value must be covered in full.
Contents Insurance: Covers damage to or loss of stock and equipment inside the hotel β furniture, kitchen equipment, linen and technology. A fire or theft event could destroy significant contents value.
π MS: 4 Γ 5m (2+3). The question names The Royal Oak Hotel β link each insurance type to a specific risk relevant to a hotel. Fidelity Guarantee (theft by employee), Key Person Insurance and Goods in Transit are also valid choices depending on context.
2022 Q6(B)
Explain risk management + outline ways to minimise risks. (20)
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(i) Explain the term risk management. (5 marks β 2+3)
(ii) Outline the different ways a business can minimise risks. (15 marks β 3 Γ 5 (2+3))
(ii) Outline the different ways a business can minimise risks. (15 marks β 3 Γ 5 (2+3))
βοΈ Part (i) β Risk Management
Risk Management: A planned approach to the risks facing a business β identifying all possible risks the business faces and then taking measures to reduce those risks to protect the business from financial loss or disruption.
βοΈ Part (ii) β Three Ways to Minimise Risk
Take out Insurance: The business transfers financial risk to an insurance company by paying a premium. In the event of a loss (e.g. fire, theft, injury claim), the insurer compensates the business β protecting it from major financial disruption.
Install CCTV and Security Systems: Security cameras and alarm systems deter theft and vandalism, reduce the risk of break-ins and provide evidence in the event of a claim β also reducing insurance premiums (deduction).
Train Staff: Regular health and safety training reduces the risk of workplace accidents and injuries. Well-trained staff follow correct procedures β reducing Employer Liability claims and improving overall operational safety.
π MS: 5m (2+3) + 3 Γ 5m (2+3). Other valid methods: safety procedures, safety audits, provide safety equipment. Keywords: planned approach, identifying risks, measures to reduce.
2024 Q6(B) / 2022 Q6(C)
Differences between household and business in relation to taxation. (15β20)
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Discuss the differences in managing a household and a business in relation to taxation. (15 marks β 3 Γ 5 (2+3))
βοΈ Three Key Differences
Corporation Tax: A business pays Corporation Tax at 12.5% on its profits. A household does not pay Corporation Tax β a household individual pays PAYE on their income instead at 20% or 40%.
VAT Collection: Both a business and a household pay VAT on purchases. However, only a business collects VAT on its sales and pays it over to Revenue β a household has no such obligation.
More Types of Tax: A business pays more types of taxation than a household β including Commercial Rates (to the County Council) and Employer's PRSI β which a household does not pay. Both pay CGT on asset sales and both may pay LPT on property.
π MS: 3 Γ 5m (2+3). The question specifies using headings (Corporation Tax, PAYE, CGT, LPT) β structure the answer under named headings and show the comparison directly for each one. Scale of taxation (businesses pay more in total) is a fourth valid point.
2022 Short Q12 / 2025 Q6(C)
PAYE wage calculation β step-by-step.
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Kellie Murphy earns β¬42,600 per year. Tax bands: 20% on first β¬36,800; 40% on the balance. Tax credits: Personal Credit β¬1,700 + PAYE Credit β¬1,700. Calculate Kellie's PAYE due.
βοΈ Step-by-Step Calculation
STEP 1 β Gross PAYE
First band: β¬36,800 Γ 20% = β¬7,360
Balance: β¬42,600 β β¬36,800 = β¬5,800
Higher rate: β¬5,800 Γ 40% = β¬2,320
Gross PAYE = β¬9,680
STEP 2 β Tax Credits
Personal Credit β¬1,700
PAYE Credit β¬1,700
Total Tax Credits = β¬3,400
STEP 3 β PAYE Due
Gross PAYE β Tax Credits
β¬9,680 β β¬3,400 = β¬6,280 PAYE due
π MS: (4,4,2). 4 marks for the Gross PAYE calculation (both bands correct), 4 marks for Tax Credits (both credits added), 2 marks for the final PAYE Due figure. Own figures rule applies β if a student makes an error in Step 1 but correctly applies it to Step 3, they can still earn Step 3 marks.
β οΈ Common error: The question asks for PAYE due β not take-home pay. PAYE due = Gross PAYE minus Tax Credits. Do not deduct PRSI or USC unless asked.
β οΈ Common error: The question asks for PAYE due β not take-home pay. PAYE due = Gross PAYE minus Tax Credits. Do not deduct PRSI or USC unless asked.
The following topics are identified as 2026 must-knows for Chapter 11: Insurance and Tax based on past paper frequency and the 2026 trend master sheet.
Underinsurance, Average Clause and key terms Hot
Listed as a 2026 must-know. Average Clause calculation appeared in 2024 SQ9, 2020 SQ10, 2008 SQ10. The formula (Value Insured Γ· Value of Item) Γ Loss must be memorised. Know the link to Indemnity β the Average Clause enforces it. Assessor, Actuary, Proposal Form, Excess, Loading and Deduction are all examined as short question matching terms. Past papers: 2024 SQ9, 2020 SQ10, 2021 SQ4.
Listed as a 2026 must-know. Average Clause calculation appeared in 2024 SQ9, 2020 SQ10, 2008 SQ10. The formula (Value Insured Γ· Value of Item) Γ Loss must be memorised. Know the link to Indemnity β the Average Clause enforces it. Assessor, Actuary, Proposal Form, Excess, Loading and Deduction are all examined as short question matching terms. Past papers: 2024 SQ9, 2020 SQ10, 2021 SQ4.
Types of business insurance β applied to a named business Hot
Appeared in 2025 Q6(A) (Royal Oak Hotel), 2020 Q6(C), 2012 Q5(A), 2021 ABQ(B). Know all 8 types and which risk each covers. When a business is named, link each insurance type to a specific risk relevant to that business. Past papers: 2025 Q6(A), 2021 ABQ(B), 2020 Q6(C), 2007 ABQ(B).
Appeared in 2025 Q6(A) (Royal Oak Hotel), 2020 Q6(C), 2012 Q5(A), 2021 ABQ(B). Know all 8 types and which risk each covers. When a business is named, link each insurance type to a specific risk relevant to that business. Past papers: 2025 Q6(A), 2021 ABQ(B), 2020 Q6(C), 2007 ABQ(B).
Risk Management β definition and ways to minimise Hot
Listed as a 2026 must-know. Full 20-mark question in 2022 Q6(B). Know the definition (planned approach; identify risks; take measures to reduce) and all five methods: insurance, safety procedures, CCTV/security, train staff, safety audits/equipment. Past papers: 2022 Q6(B), 2018 Q5(B), 2011 Q5(C), 2008 Q6(B).
Listed as a 2026 must-know. Full 20-mark question in 2022 Q6(B). Know the definition (planned approach; identify risks; take measures to reduce) and all five methods: insurance, safety procedures, CCTV/security, train staff, safety audits/equipment. Past papers: 2022 Q6(B), 2018 Q5(B), 2011 Q5(C), 2008 Q6(B).
Household vs Business tax differences Hot
Listed as a 2026 must-know. Appeared in 2024 Q6(B) and 2022 Q6(C) as a 15-mark question. Know the 4 key differences: Corporation Tax (business only), VAT collection (business only), more types of tax (business pays commercial rates and employer's PRSI), scale of taxation. Past papers: 2024 Q6(B), 2022 Q6(C), 2008 Q6(A).
Listed as a 2026 must-know. Appeared in 2024 Q6(B) and 2022 Q6(C) as a 15-mark question. Know the 4 key differences: Corporation Tax (business only), VAT collection (business only), more types of tax (business pays commercial rates and employer's PRSI), scale of taxation. Past papers: 2024 Q6(B), 2022 Q6(C), 2008 Q6(A).
PAYE wage calculation Hot
Listed as a 2026 must-know. Appears almost every year β 2025 Q6(C), 2023 Q7(B), 2022 SQ12, 2018 Q6(C), 2013 Q5(A). Three steps: (1) calculate Gross PAYE using two tax bands, (2) add tax credits, (3) subtract to get PAYE Due. The most common error is giving take-home pay instead of PAYE due β read the question carefully. Past papers: 2025, 2023, 2022, 2018, 2013.
Listed as a 2026 must-know. Appears almost every year β 2025 Q6(C), 2023 Q7(B), 2022 SQ12, 2018 Q6(C), 2013 Q5(A). Three steps: (1) calculate Gross PAYE using two tax bands, (2) add tax credits, (3) subtract to get PAYE Due. The most common error is giving take-home pay instead of PAYE due β read the question carefully. Past papers: 2025, 2023, 2022, 2018, 2013.
Average Clause
Formula must be shown
Show all workings β marks are awarded at each step. The formula is: (Value Insured Γ· Value of Item) Γ Loss = Compensation. Explain why the clause applies: the insured only covered a fraction of the value, so only receives that fraction of any claim β to enforce Indemnity.
(200,000 Γ· 250,000) Γ 36,000 = 4/5 Γ 36,000 = β¬28,800
PAYE Calculation
3 steps β read what is asked β οΈ
Step 1: Gross PAYE (apply 20% to first band, 40% to the balance). Step 2: Total tax credits (add all credits given). Step 3: PAYE Due = Gross PAYE β Tax Credits. The most common error is giving take-home pay instead of PAYE due β check exactly what the question asks for.
Gross PAYE: β¬7,360 + β¬2,320 = β¬9,680
Tax Credits: β¬1,700 + β¬1,700 = β¬3,400
PAYE Due: β¬9,680 β β¬3,400 = β¬6,280
Insurance Types
Match the risk to the cover
The exam matches a business risk to the correct insurance type. Learn them as pairs: customer injured on premises = Public Liability; employee injured at work = Employer Liability; theft by employee = Fidelity Guarantee; customer injured by product = Product Liability. When a business is named, explain why that risk is specific to that business.
"Public Liability β covers the hotel if a guest slips in the lobby. Essential for a hotel as customers move throughout the building constantly."