Basics of insurance
This term describes the transfer of risk from one party to another in exchange for a premium
What is insurance?
The individual or business that holds an insurance policy.
Who is the insured?
The type of risk that involves only the possibility of a loss, not a gain.
What is pure risk?
The act of reducing the likelihood or impact of a risk, such as installing smoke detectors.
What is risk reduction?
The principle that ensures the insured is restored to the same financial position before the loss.
What is the principle of indemnity?
The process by which insurers evaluate the risk of applicants to determine premiums.
What is underwriting
The individual or company that provides insurance coverage.
Who is the insurer?
The type of risk that involves the possibility of both loss and gain, such as gambling.
What is speculative risk?
The strategy of retaining risk and paying for losses out of pocket.
What is risk retention?
The principle requiring both parties to disclose all material facts.
What is the principle of utmost good faith?
This term refers to the monetary compensation paid to an insured party after a covered loss.
What is indemnity?
The legally binding contract that outlines the terms and coverage of insurance.
What is a policy?
The risk management strategy where an individual chooses not to take an action that could cause loss.
What is risk avoidance?
Transferring the financial burden of a risk to another entity, such as an insurance company.
What is risk transfer?
This principle ensures compensation is only paid for actual losses, preventing the insured from profiting.
What is the principle of indemnity?
This type of insurance covers individuals for financial losses due to premature death.
What is life insurance?
The amount paid by the insured to the insurer in exchange for coverage.
What is a premium?
This insurance type covers damage to a policyholder's home and belongings.
What is property insurance?
Insurance that provides coverage for injuries and damage caused to others in an accident.
What is liability insurance?
The fixed amount the insured must pay out-of-pocket before the insurer covers the remaining loss.
What is a deductible?