Chpt. 9 Insurance Flashcards
What is Insurance?
It offers financial protection against possible loss.
Puts insured person back in same financial position they were in before the loss occurred.
What does an insurance policy do?
Set out details of the types of losses covered and the amount of compensation to be paid
What is Compensation?
A financial payment made to an insured person if they suffer an insured loss
What is Compensation?
A financial payment made to an insured person if they suffer an insured loss
What’s a premium?
The amount paid by the insured person to an insurer in return for providing insurance cover for a particular risk
Name 5 Factors that affect the Insurance Premium
1) Age
2) Gender
3) City living in
4) Driving History
5) Car type
Name the 5 Principals of Insurance
1) Insurable Interest
2) Utmost good faith
3) Indemnity
4) Subrogation
5) Contribution
Explain Insurable Interest
To insure something, you must benefit from its existence and suffer financially from its loss
Explain Utmost Good Faith
When applying for insurance you must answer all questions truthfully and reveal all material facts when completing your proposal form or claim form
Can’t hide any info
Explain Indemnity
A profit cannot be made from insurance
Total compensation paid cannot be greater than the replacement value of the item.
Explain Subrogation
Once an insured company has paid compensation for any insured item, the right of ownership of that item passes to the insurance company.
Explain Contribution
When the same risk is insured with more than one insurer, both companies will split the cost of the claim between them.
What is the role of an insurance broker?
Helps households and individuals find the best insurance policy and price
Brokers represent multiple insurance companies, allowing them to offer a wide range of policies.
Paid a commission by insurance company for each policy sold
How are insurance brokers compensated?
They are paid a commission by the insurance company for each policy sold.
What is an Agent?
An agent sells policies on behalf of only one insurance company.
