Introducing Insurance

Question 1

Is a risk sharing pool. Sharing losses of a few people among many

Answer 1

Insurance

Question 2

1st party

Answer 2

Insured, purchaser of insurance

Question 3

2nd party

Answer 3

Insurer; insurance company

Question 4

3rd party

Answer 4

anyone who claims against the insured’s policy

Question 5

When we set up a policy is the third party involved?

Answer 5

No, only after a claim

Question 6

A principle of insurance, by which the insureds, up to the limit of the policy, are fully compensated for the actual cash value of what they have lost, so that they neither gain nor lose as a result of a loss

Answer 6

Indemnity

Question 7

The current cost of replacing an article with a similar one in the same condition

Answer 7

Actual Cash Value

Question 8

How to calculate actual cash value

Answer 8

Replacement cost - depreciation = ACV

Question 9

loss of value over time

Answer 9

Depreciation

Question 10

What provinces: Common law

Answer 10

every province - Quebec

Question 11

Anything of value

Answer 11

Consideration

Question 12

Two elements of an insurance contract

Answer 12

1. Must be a future event

2. The future event must be fortuitous

Question 13

What does fortuitous means?

Answer 13

Accidental

Question 14

a chance of loss

Answer 14

Risk

Question 15

two types of risk

Answer 15

Speculative risk,

Pure risk

Question 16

Either a chance of loss or chance of profit

Answer 16

Speculative risk

Question 17

Chance of loss and no chance of profit

Answer 17

Pure risk

Question 18

3 categories of insurable risk

Answer 18

Personal risk,
Property risk,
Liability risk

Question 19

The damage done to the property that’s insured

Answer 19

Direct loss

Question 20

A consequence of a direct loss

Answer 20

Indirect loss

Question 21

3 classes of insurance/risk

Answer 21

Personal lines insurance,
Commercial lines,
Special risks

Question 22

Ways of dealing with risks

Answer 22

Eliminate or reduce risk
Assume or retain risk
Transfer risk

Question 23

Determining a chance of loss

Answer 23

principals of probability.
# of times an event happened/# of times an event could happen

Question 24

Event which may cause a loss to occur

Answer 24

Peril

Question 25

Extended coverage of perils

Answer 25

``` Lightning Impact by aircraft or land vehicle Vandalism Explosion Riot Smoke Windstorm or hail Water/rupture/freezing Falling object ```

Question 26

What peril is always included

Answer 26

Fire

Question 27

Types of hazards

Answer 27

Physical hazard, | Moral hazard

Question 28

Relates to the condition of the property

Answer 28

Physical hazard

Question 29

Relates to the character of the person - the "human element" of the risk

Answer 29

Moral hazard

Question 30

Price per unit of insurance

Answer 30

Rate

Question 31

The amount of money an insurance company charges to provide coverage for a specific item or policy

Answer 31

Premium

Question 32

Components in choosing the correct premium

Answer 32

Size, Time period, Conditions

Question 33

The premium required to meet the losses that occur

Answer 33

Pure premium

Question 34

When you make money off the premium you collect

Answer 34

Underwriting gain

Question 35

Function of insurance

Answer 35

``` Spread of risk Aid in credit Loss prevention activities Spread of employment Aid in security Source of capital ```

Question 36

3 considerations in spread of risk

Answer 36

- Volume - Diversity of risk - Diversity of location

Question 37

Aid in security

Answer 37

It gives people peace of mind

Question 38

Loss prevention activities

Answer 38

Although the purpose of insurance is to take on risk and pay losses as they arise; ultimately insurers are primarily interested in preventing loss

Question 39

Source of capital

Answer 39

Invest large amounts into Canadian economy - bonds, stocks, and other securities

Question 40

Aid in credit

Answer 40

Must have insurance to get credit on items

Question 41

Source of employment

Answer 41

The insurance industry is a source of employment for many Canadians