Chapter 1 Introduction to Insurance Flashcards

1
Q

Insurer

A

The big rich insurance company

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2
Q

Insured

A

Person covered by the policy or contract

Ed the little guy

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3
Q

Policy owner

A

Person that owns policy/contract

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4
Q

Beneficiary

A

Someone Paid when claim is submitted

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5
Q

Agent/producer

A

Does not have authority to change the policy or make promises.
Agent/producer represents/is for the insurance company

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6
Q

Broker

A

A broker licensed to sell insurance. The broker works for the insured (little guy).

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7
Q

Risk

A

Chance of loss or uncertainty of loss

Insurance company is taking over some of the risk

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8
Q

Speculative risk

A

-chance of loss in hope of gain

Insurance will not cover speculative risk

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9
Q

Pure risk

A

Chance of experiencing risks without chance of gain

Insurance will only cover pure risks

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10
Q

Risk avoidance / risk management techniques

A

Avoiding known risks

Risk management techniques

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11
Q

Risk reduction - risk management techniques

A

Being careful or prepared

Risk management techniques

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12
Q

Risk shifting

A

Getting someone else to accept the risk

E.g. Waiver of liability- hold harmless agreement

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13
Q

Buying Insurance

A

Insurance is all about risk

Buying insurance is a risk management technique

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14
Q

Self insuring

A
A Risk management technique
Retaining the risk - self insure 
Save the insurance premiums
Determine how many claims they will have 
Set the money aside a fund
Use the pool of money to cover claims
Which is a risk management technique
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15
Q

Insurance is

A

Ins is a contract
Insurer agrees to protect an insured against injury, damage, liability resulting arising from some future event

Insurance is a transfer of risk
of some portion (deductibles) It could be all of the policy owners risk to the insurance company, or defined and limited risk to an insurance company,

Insurance is a social device
Individuals by paying premium transfer a defined but limited portion of the risk to the insurance company
Insurance is a mechanism for sharing/spreading risk among a large number of policy owners

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16
Q

Limited portion

A

Each policy has a maximum amount it will pay - the limit of liability

17
Q

Insurance is

A

Ins is a mechanism for sharing risks for a large number of policy owners
Sharing or spreading the risks