Chapter 1: Introduction to Insurance

Question 1

Insurance -

Answer 1

A contract that indemnifies another against loss, damage, or liability arising from an unknown event

Question 2

Indemnify -

Answer 2

To make a person whole by restoring that person to the same financial position that existed before the loss

Question 3

Policy -

Answer 3

A legal document referred to as a contract of insurance

Question 4

Claim -

Answer 4

A demand for payment of the insurance benefit to the person named in the policy

Question 5

Risk -

Answer 5

Uncertainty of financial loss, or the chance of loss, when more than one outcome is possible

Question 6

Pure Risk -

Answer 6

Only a chance of loss/Insurable

Question 7

Speculative Risk -

Answer 7

Both an uncertainty of loss and gain/Uninsurable

Question 8

Peril -

Answer 8

The immediate specific event causing loss and giving rise to risk/ The cause of a risk

Question 9

Hazard -

Answer 9

Any factor that gives rise to a peril.

Question 10

Physical hazard -

Answer 10

Arise from material, structural, or operational features of a risk situation

Question 11

Moral Hazard -

Answer 11

Arise from people’s habits and values

Question 12

Morale Hazard -

Answer 12

Arise out of human carelessness or irresponsibility

Question 13

Deductible -

Answer 13

The initial amount of a covered loss (or losses) that the insured must absorb before the insurer begins to pay for additional loss amounts

Question 14

Elimination period -

Answer 14

The number of days an insured must be disabled before disability income benefits become payable

Question 15

Coinsurance -

Answer 15

Within a specified coverage range, the insured and insurer will share the allowable expenses

Question 16

Property Insurance -

Answer 16

Coverage for the loss of property, buildings, equipment, stock, or contents

Question 17

Casualty Insurance -

Answer 17

Coverage for financial consequence against death, injury, disability, or damage to real or personal property.

Question 18

Life Insurance -

Answer 18

Coverage on human lives, endowments, and annuities

Question 19

Annuity -

Answer 19

Provides guaranteed income for the life of an annuitant