Chapter 1 Flashcards
Indemnification/Indemnity is
Making whole
Insurance
Transfers risk
A stock company is referred to as
Non-participating company
A company that has purchased a fire policy on its building has decreased its
risk with respect to a loss
A risk management technique which transfers risk is
insurance
Which of the following is considered to be a “participating” Insurer
a.
a government insurer
b.
a mutual insurer
c.
a fraternal insurer
d.
a stock insurer
a mutual insurer because the policyholders participate in the profits
Which best demonstrates indemnification?
a.
An Insured demands a new car when the old car is destroyed
b.
After a fire, a homeowner is paid retail prices for personal property as well as the cost of rebuilding the structure
c.
After a car wreck, an injured person is paid for medical expenses and vehicle damages
d.
After a loss, an Insured collects from both her insurance and another person’s insurance
After a car wreck, an injured person is paid for medical expenses and vehicle damages
Each of the following involves pure risk EXCEPT:
a.
loss in the stock market
b.
drought
c.
bodily injury
d.
flood
loss in the stock market
The Law of large Numbers allows insurers to:
predict losses accurately
Uncertainty of loss is:
Risk
The National Association of Insurance Commissioners (NAIC):
Advises the state insurance commissioners
Insurance covers:
Pure risk
To avoid the concentration of insurance risks, an insurer should:
Spread the risk
The primary concept behind insurance is
Transfer of risk
The Lutheran-run insurance companies are examples of:
fraternal benefit insurers
The Law of Large Numbers:
Is used to determine premiums based on historical loss figures
A unique point about this type of insurance company is that it is run by someone known as an “attorney in fact” (not an attorney at law which is a lawyer
reciprocal insurer
Uncertainty of future outcomes is:
Risk
The chance of a windstorm causing a loss to one’s property is:
risk
Note: A windstorm is a peril. The chance of a windstorm occurring is a risk.
Each of the following is generally considered to be an insurable risk EXCEPT:
a.
accidental
b.
measurable
c.
economic
d.
catastrophic
catastrophic
Risk is the:
uncertainty or chance of loss
Which is true regarding insurance companies?
a.
Stock companies and mutuals both pay dividends to the policy holders.
b.
Mutuals are owned by the policy holders, have the management members chosen by the policy holders, and pay dividends to the policy holders.
c.
Stock companies are owned by the policy holders but mutuals are owned by the stock holders.
d.
Stock companies are managed by the policy owners.
Mutuals are owned by the policy holders, have the management members chosen by the policy holders, and pay dividends to the policy holders.
The transfer of pure risk is:
Insurance
Restoring the Insured to the financial condition prior to a loss is:
Indemnification
