Module 1-A - What is Insurance Flashcards
Insurance
A financial tool that transfers risk of unexpected, catastrophic losses from one party to another
Indemnify
To restore by payment, repair or replacement
Indemnification
Reimbursement for a loss, which leaves the claimant in the same financial position that they were in before the loss
Indemnity Insurance
Insurance that indemnifies losses as opposed to liability
Agreement
Characteristic of a legal contract.
All parties must agree on the terms of the contract
Consideration
One of the four qualifications of a legally binding contract.
All parties must bring
something of value to the contract.
Contract
An agreement entered into voluntarily by two parties or more with the intention of
creating a legal obligation.
Insurance Company
Company which sells insurance policies to individuals or to other companies.
Insurance Policy
A contract wherein an insured pays premiums to an insurer in exchange for financial
protection in the event of a covered loss.
Insured
A person or entity who is covered under an insurance policy.
Insurer
The person or entity providing coverage to one or more insureds.
Loss
Bodily injury, property damage, or damage caused by the insured’s negligent acts; loss
is the the basis for an insurance claim. Loss can also mean the sum the insurer will
have to pay.
Policy Holder
Also called the “insured”, a policyholder is a person who has purchased an insurance
policy—or contract—from an insurer.
Premium
A scheduled and affordable fee, paid by the policyholder to the insurer, in return for
coverage.
Principle of Indemnity
when a loss occurs, the
insured should be restored to his or her financial condition before the loss occurred, no
better, no worse. The insured cannot profit from a loss.
