Flashcards in Basic Insurance Concepts And Principles Deck (60)
What does insurance do?
It transfers the risk of loss from and individual or business entity to an insurance company. Which in turn spreads the costs of unexpected losses to many individuals.
What is a person according to the law?
A legal entity which acts on behalf of itself, accepting legal and civil responsibility for the actions it performs and making contracts in it's own name.
What are persons according to the law?
Individual human beings, associates, organizations, corporations, partnerships, and trusts.
What is insurance?
Is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.
Is the legal agreemant, or contract, where by the two parties involved agree to the limits of the indemnification, the circumstances under which it will occur and what things of value will be exchanged by the parties to the contract.
Pays premium to insurance company.
Issues policy to policy owner
Pays benefit to beneficiary
Receives benefit upon insured's death
Is the uncertainty or chance of loss occurring.
Refers to the situations that can only result in loss or no change. There is no opportunity for financial gain.
Involves the opportunity for either loss or gain.
Is pure risk insurable?
Pure risk is the only type of risk that insurance companies are willing to accept.
The causes of loss insured against in an insurance policy.
What does life insurance insure against?
The financial loss caused by the premature death of the insured.
What does health insurance insure against?
The medical expenses and/or loss of income caused by the insured's sickness or accidental injury.
What does property insurance insure against?
Insures against the loss of physical property or the loss of its income producing abilities.
What does casualty insurance insure against?
Insures against the loss and/or damage of property and resulting liabilities.
What are hazards?
Are conditions or situations that increase the probability of an insured loss occurring.
How many hazard classifications are their?
What are hazards classified as?
Physical, moral, and morale hazards.
What is a physical hazard?
Individual characteristics that increase the chances of the case of loss.
Why do physical hazards exist?
Physical hazards exist because of a physical condition, past medical history, or a condition at birth.
What is a moral hazard?
Are tendencies towards increased risk.
What do morale hazards involve and refer to?
Involve evaluating the character and reputation of the proposed insured. It refers to those applicants who may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer.
What does a legal hazard describe?
Describes a set of legal or regulatory conditions that affect an insurer's ability to collect premiums that are commensurate with (equal to in value) the exposure to loss that the insurer must bear.
What is the basis of insurance?
Is sharing the risk among a large pool of people with similar exposure to loss. (A homogeneous group)
What does the law of large numbers state?
That the larger the number of people with a similar exposure to loss, the more predictable actual losses will be.
What are insurance rates calculated on?
Insurance rates are based on the law of large numbers. That form the basis for statistical prediction of loss.
What is loss exposure?
Is a unit of measure used to determine rates charged for insurance coverage.
What are the factors that are considered in determining life insurance rates?
The age of the insured, medical history, occupation and sex.