Basic Insurance Principles

Question 1

What is Insurance?

Answer 1

A form of risk management to protect against the financial risk of loss (claim)

Question 2

What is General Liability (GL) insurance?

Answer 2

Insurance that covers claims resulting in bodily injury to others, property damage, personal injury, and advertising injury.

Question 3

Explain GL policy limits.

Answer 3

They have a maximum limit per occurrence. Umbrella liability policies also may be purchased to cover payments from a claim or lawsuit that might exceed the limits of their standard GL policy.

Question 4

What are the two major components of GL coverage?

Answer 4

Products Liability & Complete Operations Liability.

Question 5

By law what insurance must an employer carry?

Answer 5

Workers’ Compensation (WC)

Question 6

What does WC insurance cover?

Answer 6

Injured workers, however, the injuries must be the result of an accident and arise out of the course of employment duties.

Question 7

What are the three benefit components of WC insurance?

Answer 7

1. Medical Expense - payment for cost of medical treatment
2. Compensation Expense - payment of a portion of the injured worker’s wages if he/she lost time away from work. This may be either a temporary or permanent disability.
3. Rehabilitation Expense - payment to re-train the injured worker in a new occupation if the injuries sustained are severe enough preventing the employee from returning to work in the same capacity as he/she was at the time of the injury.

Question 8

Do premium rates vary?

Answer 8

Yes. Premium rates will vary for different classifications depending on the exposure to risk.