Insurance Policy Selection Flashcards
What rules help in choosing the proper amount of insurance?
Insure first exposures to loss those that are most likely to cause the greatest amount of damage.
Never over expose to lose more than you can afford to lose.
Never risk great loss in exchange for a small gain.
What are Risk Management Information Systems used for?
Recording, tracking and analyzing losses,
Maintaining records of how assets are protected from loss,
Statistically analyzing past losses, and
Forecasting losses.
What are loss records for risk management information systems?
Injuries to workers,
Liability claims, and
Asset losses.
What steps are involved with statistical techniques of risk management?
Draw conclusions from loss data by making comparisons
Evaluate effectiveness of risk management program
Prepare a comprehensive report of analysis results
What to risk managers consider when determining the amount of loss exposure to retain or transfer?
Deductible or retention: the first dollars of loss that the insurance contract causes to be borne by the insured.
Policy limits: determine the maximum insurance recovery.
Select purchase selection rules that are recommended when selecting an insurance policy:
Insure first exposures to loss
Never overexpose
Never risk great loss
Be sure to cover high probability, low cost risks
Despite the difficulty in choosing the proper amount of insurance, some commonsense rules apply:
Insure first exposures to loss
Never overexpose
Never risk great loss
Risk retention is a recommended strategy for high probability, low cost risks.
The buy-sell agreement established using a wait and see approach can be designed in which of the following ways?
Any of these choices
The life insurance policies can be configured in a variety of ways:
As a cross-purchase agreement, where partners pay premiums on the policies on each other.
As an entity purchase agreement, where the company pays premiums on policies written on partner’s lives.
A hybrid combination of the two.
