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C81 - 1 > Introducing Insurance > Flashcards

Introducing Insurance Flashcards

1
Q

Is a risk sharing pool. Sharing losses of a few people among many

A

Insurance

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2
Q

1st party

A

Insured, purchaser of insurance

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3
Q

2nd party

A

Insurer; insurance company

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4
Q

3rd party

A

anyone who claims against the insured’s policy

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5
Q

When we set up a policy is the third party involved?

A

No, only after a claim

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6
Q

A principle of insurance, by which the insureds, up to the limit of the policy, are fully compensated for the actual cash value of what they have lost, so that they neither gain nor lose as a result of a loss

A

Indemnity

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7
Q

The current cost of replacing an article with a similar one in the same condition

A

Actual Cash Value

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8
Q

How to calculate actual cash value

A

Replacement cost - depreciation = ACV

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9
Q

loss of value over time

A

Depreciation

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10
Q

What provinces: Common law

A

every province - Quebec

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11
Q

Anything of value

A

Consideration

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12
Q

Two elements of an insurance contract

A
  1. Must be a future event

2. The future event must be fortuitous

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13
Q

What does fortuitous means?

A

Accidental

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14
Q

a chance of loss

A

Risk

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15
Q

two types of risk

A

Speculative risk,

Pure risk

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16
Q

Either a chance of loss or chance of profit

A

Speculative risk

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17
Q

Chance of loss and no chance of profit

A

Pure risk

18
Q

3 categories of insurable risk

A

Personal risk,
Property risk,
Liability risk

19
Q

The damage done to the property that’s insured

A

Direct loss

20
Q

A consequence of a direct loss

A

Indirect loss

21
Q

3 classes of insurance/risk

A

Personal lines insurance,
Commercial lines,
Special risks

22
Q

Ways of dealing with risks

A

Eliminate or reduce risk
Assume or retain risk
Transfer risk

23
Q

Determining a chance of loss

A 
principals of probability.
# of times an event happened/# of times an event could happen
24
Q

Event which may cause a loss to occur

A

Peril

25
Q

Extended coverage of perils

A 
Lightning
Impact by aircraft or land vehicle
Vandalism
Explosion
Riot
Smoke
Windstorm or hail
Water/rupture/freezing
Falling object
26
Q

What peril is always included

A

Fire

27
Q

Types of hazards

A

Physical hazard,

Moral hazard

28
Q

Relates to the condition of the property

A

Physical hazard

29
Q

Relates to the character of the person - the “human element” of the risk

A

Moral hazard

30
Q

Price per unit of insurance

A

Rate

31
Q

The amount of money an insurance company charges to provide coverage for a specific item or policy

A

Premium

32
Q

Components in choosing the correct premium

A

Size,
Time period,
Conditions

33
Q

The premium required to meet the losses that occur

A

Pure premium

34
Q

When you make money off the premium you collect

A

Underwriting gain

35
Q

Function of insurance

A 
Spread of risk
Aid in credit
Loss prevention activities
Spread of employment
Aid in security
Source of capital
36
Q

3 considerations in spread of risk

A
  • Volume
  • Diversity of risk
  • Diversity of location
37
Q

Aid in security

A

It gives people peace of mind

38
Q

Loss prevention activities

A

Although the purpose of insurance is to take on risk and pay losses as they arise; ultimately insurers are primarily interested in preventing loss

39
Q

Source of capital

A

Invest large amounts into Canadian economy - bonds, stocks, and other securities

40
Q

Aid in credit

A

Must have insurance to get credit on items

41
Q

Source of employment

A

The insurance industry is a source of employment for many Canadians

C81 - 1 (1 decks)

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