Chapter 3

Question 2

What is the most realistic way to deal with risk?

Answer 2

Transfer (individual -> insurance)

Question 3

What elements are special to insurance contracts?

Answer 3

Utmost good faith, Indemnity, and Insurable interest

Question 4

What document is used exclusively to add coverage to an insurance policy?

Answer 4

Rider

Question 5

What are the two types of risk, and which one is not insurable?

Answer 5

Speculative and Pure. Only pure is insurable, because speculative is like gambling

Question 6

What are the 4 ways we can deal with risk, and briefly explain each

Answer 6

Control: trying to reduce the risk (like safety nets, employee training, etc)

Avoid: avoiding the thing entirely (like shutting it down or smth)

Retention: payment

Transfer: transfer the financial burden onto someone else, like insurance

Question 7

What are some ways changes can be made to insurance policies?

Answer 7

Endorsement: When the insurer says a change has been made

Rider: Adding coverage on top of an existing policy, think like it rides on top

Floater: This kind u can get for things that move often, like phones or tools. They “float”