Unit 6

Question 1

Concept of insurance

Answer 1

Insurance is a contractual arrangement where an individual or entity pays premiums to an insurance company in exchange for protection or reimbursement against specified losses or risks.

Question 2

How insurance works

Answer 2

Insurance works by spreading the risk of financial loss among a large group of people. Policyholders pay premiums, and in return, the insurance company agrees to compensate them for covered losses as outlined in the policy.

Question 3

Premium

Answer 3

The amount paid by the policyholder to the insurance company to obtain coverage.

Question 4

policy

Answer 4

The amount paid by the policyholder to the insurance company to obtain coverage.

Question 5

claim

Answer 5

Claim: A request made by the policyholder to the insurance company for compensation for a covered loss.

Question 6

deductible

Answer 6

Deductible: The amount the insured must pay out of pocket before the insurance company starts paying.

Question 7

Coverage Limit

Answer 7

Coverage Limit: The maximum amount an insurance policy will pay for a covered loss.

Question 8

Exclusion

Answer 8

Exclusion: Specific situations or risks not covered by the insurance policy.

Question 9

Packaged polices

Answer 9

Packaged Policies: These are insurance policies that combine different types of coverage into a single policy, such as a homeowner’s insurance policy that includes coverage for both property damage and liability.

Question 10

Compulsory insurance

Answer 10

Compulsory Insurance: Insurance coverage required by law, such as auto insurance for drivers in many jurisdictions.

Question 11

Insurable insurance

Answer 11

Insurable Interest: The policyholder must have a financial interest in the insured item or person. This ensures that the policyholder would suffer a financial loss if the insured item or person were to experience a covered loss.

Question 12

Co-insurance

Answer 12

Co-Insurance: A cost-sharing arrangement between the insurance company and the insured, where the insured pays a percentage of covered expenses after the deductible is met, and the insurance company pays the rest.

Question 13

Co-payment

Answer 13

Co-Payment: A fixed amount that the insured must pay for certain services or medications, typically at the time of service.

Question 14

Out of pocket maximum

Answer 14

Out-of-Pocket Maximum: The maximum amount the insured is required to pay for covered expenses during a policy period. Once this limit is reached, the insurance company typically pays 100% of covered expenses.

Question 15

Beneficiary

Answer 15

Beneficiary: The person or entity designated to receive the benefits of an insurance policy in the event of the insured’s death or other covered event.

Question 16

Underwriting

Answer 16

Underwriting: The process by which an insurance company evaluates the risk of insuring a person or entity and determines the premiums to be charged.

Question 17

Coverage Level

Answer 17

Coverage Level: The extent of protection provided by an insurance policy, often determined by the types of risks covered and the limits of coverage.

Question 18

Monthly benefit maximum

Answer 18

Monthly Benefit Maximum: The maximum amount of benefits that can be received by the insured in a single month, typically applicable to disability insurance policies.

Question 19

Elimination period

Answer 19

Elimination Period: The period of time that must pass after a covered event occurs before the insurance company begins to pay benefits.

Question 20

Maximum benefit period

Answer 20

Maximum Benefit Period: The maximum length of time that benefits will be paid under an insurance policy, such as disability insurance or long-term care insurance.