What Is Insurance?

Question 1

Agreement

Answer 1

One of the four requirement of a legal biding contract. All parties involved must agree to the terms of the contract. Can also refer to a binder, which is the preliminary substance of a contract.

Question 2

Competence

Answer 2

One of the four qualifications of a legal binding contract. All parties must be competent with the necessary legal and mental capacity.

Question 3

Consideration

Answer 3

One of the four qualifications of a legally binding contract. All parties must bring something of value to the contract.

Question 4

Contract

Answer 4

An agreement entered into voluntarily by two parties of more with the intention of creating a legal obligation.

Question 5

Four Requirements of a Legal Contract

Answer 5

Agreement, Consideration, Competent Parties, Legal Purpose

Question 6

Indemnification

Answer 6

Reimbursement for a loss, which leave the claimant in the same financial position that she was in before the loss.

Question 7

Indemnify

Answer 7

To restore by payment, repair, or replacement.

Question 8

Indemnity Insurance

Answer 8

Insurance that indemnifies loss as opposed to liability.

Question 9

Insurance

Answer 9

A financial device that transfers the rust of unexpected, catastrophic losses from one party to another.

Question 10

Insurance Company

Answer 10

Company which sells insurance policies to individuals or to other companies.

Question 11

Insurance Policy

Answer 11

A contract wherein an insured pays premiums to an insurer in exchange for financial protection in the event of a covered loss.

Question 12

Insured

Answer 12

A person or entity who is covered under an insurance policy.

Question 13

Insurer

Answer 13

The person or entity providing coverage to one or more insureds.

Question 14

Loss

Answer 14

Bodily injury, property damage, or damage caused by the insured’s negligent acts; loss is the basis for an insurance claim. Loss can also mean the sum the insurer will have to pay.

Question 15

Policyholder

Answer 15

Also call the “insured” a policy holder is a person who has purchased an instance policy- or contract- from an insurer.

Question 16

Premium

Answer 16

A scheduled and affordable fee, paid by the policyholder to the insurer, in return for coverage.

Question 17

Principle of Indemnity

Answer 17

The principle behind all insurance contracts. It states that 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.

Question 18

Insurance Fraud

Answer 18

Using insurance to obtain money unlawfully. This can be done by a policyholder, or by an insurer or an insurer’s employees. There are two kinds of insurance fraud: Soft Fraud and Hard Fraud.