Chapter 1 Introduction to Insurance Flashcards
Insurer
The big rich insurance company
Insured
Person covered by the policy or contract
Ed the little guy
Policy owner
Person that owns policy/contract
Beneficiary
Someone Paid when claim is submitted
Agent/producer
Does not have authority to change the policy or make promises.
Agent/producer represents/is for the insurance company
Broker
A broker licensed to sell insurance. The broker works for the insured (little guy).
Risk
Chance of loss or uncertainty of loss
Insurance company is taking over some of the risk
Speculative risk
-chance of loss in hope of gain
Insurance will not cover speculative risk
Pure risk
Chance of experiencing risks without chance of gain
Insurance will only cover pure risks
Risk avoidance / risk management techniques
Avoiding known risks
Risk management techniques
Risk reduction - risk management techniques
Being careful or prepared
Risk management techniques
Risk shifting
Getting someone else to accept the risk
E.g. Waiver of liability- hold harmless agreement
Buying Insurance
Insurance is all about risk
Buying insurance is a risk management technique
Self insuring
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
Insurance is
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