Unit 10: Insurance

Question 1

What is an insurance policy?

Answer 1

Insurance is a financial arrangement that redistributes the cost of unexpected losses in advance.

Question 2

What are two parties of an insurance policy?

Answer 2

An insurance policy is signed by 2 parties: the insurer and the insured.

Question 3

What is the definition of “insurance premium”?

Answer 3

Insurance premium refers to regular payments made by the insured to the insurer.

Question 4

What is the definition of “compensation”?

Answer 4

Compensation refers to the money that the insurer has to pay to the insured in the event of a loss.

Question 5

What does the insured receive when a loss occur?

Answer 5

The insured can get compensations from the insurer when a loss actually occurs. Even if there is no loss, the insured still receive value in forms of eliminated anxiety about losses.

Question 6

Benefits to the insurer:

Answer 6

The insurer can get premium payment from the insured and usually the collected money is much more than compensation. The insurer can also lend out or invest the collected money to make more profits. By lending or investing, the insurers act as financial intermediaries, thus promoting the economic growth.

Question 7

Summary

Answer 7

There are some main ideas in Unit 10: definition of insurance, its benefits to both the insurer & the insured, and the important role of insurance in the economy.
To begin with definition of insurance, insurance is a financial arrangement that redistributes the cost of unexpected losses in advance. An insurance policy is signed by 2 parties: the insurer and the insured.
Next, the following point shows the benefit of insurance: the insured can get compensations from the insurer when a loss actually occurs. Even if there is no loss, the insured still receive value in forms of eliminated anxiety about losses. In addition, the insurer can get premium payment from the insured and usually the collected money is much more than compensation. The insurer can also lend out or invest the collected money to make more profits.
Finally, by lending or investing, the insurers act as financial intermediaries, thus promoting the economic growth.