Insurance Fundamentals
This is the amount paid for coverage.
Premium
Insurance companies also earn money by doing this with the premiums they collect.
Investing
Specialty insurance covers risks that are unique, complex, or this.
Hard-to-place
The _____ is the individual or business purchasing insurance.
Insured
Insurance policies are ultimately this type of agreement.
Legal contract
This is the amount the insured pays before coverage begins.
Deductible
Insurance works because many people pay premiums, but only some people experience this.
Loss
These customized policies are often called this type of policy.
Manuscript policy
The advisor who works directly with the client.
Retail agent/broker
_____ shapes how insurance products are structured and sold.
Regulation
This is the maximum amount an insurer will pay.
Policy limit
This is the money insurance companies use to pay claims, created from collected premiums.
Risk pool / pooled funds
Specialty risks often have low frequency but ____ severity.
High
_____ is the intermediary connecting retail brokers to specialty markets.
Wholesale broker
This determines what is covered and what is not.
Policy wording
Insurance is a financial mechanism for transferring _____.
Risk
If an insurance company pays out too much money in claims compared to premiums, their _____ becomes too high.
Loss ratio
Specialty insurance relies heavily on this professional’s judgment.
Underwriter
The entity that provides capital and issues the policy.
Carrier (insurance company, insurer)
Reinsurance helps reduce this in financial performance.
Volatility
The formula for loss ratio.
Claims Paid ÷ Premium Collected
Insurers make money when premiums plus investment income exceed these two things.
Losses and expenses
Specialty insurance is often needed when a risk does not fit into the _____ insurance market.
The company that provides insurance to insurers.
Reinsurer
Small differences in policy wording can lead to major ______ outcomes.
Financial