AINS 21 - Chapter 1 Exam Questions And Answers Already Graded A+

A firm of computer systems consultants would most likely purchase this type of coverage to protect them in the even that they provide incorrect advice that causes financial injury to a customer? - professional liability insurance - covers professionals for errors or omissions arising out of their professional practices Affordable - the insurance company is able to charge a feasible premium - one that the insured can afford to pay. Insurance companies seek to cover only loss exposures that are economicaly feasible to insure Annuity - a type of life insurance that makes periodic payments to the recipient for a fixed period or for life in exchange for a specified premium. Arson - an intentionally staged event and constitutes insurance fraud Ie - lighting your car on fire Auto Physical Damage Coverage - protection for the loss of use of damage to a vehicle listed on the policy Benefit of insurance: Comply with legal requirements - Insurance can be used to meet the statutory and contractual requirements of insurance coverage and to provide evidence of financial resources. Ie- purchasing workers comp insurance and contractors having to show proof of insurance before a contract is granted Benefit of insurance: Efficient use of insured's resources - Insurance makes it unnecessary to set aside a large amount of money to pay for the financial consequences of loss exposures that can be insured, allows money to be used more efficiently. Insureds pay a small premium allowing people and organizations to free up additional funds. Ie - only having to pay an annual premium of $5k for 1 million in coverage. Alot of protection for a small amount of moneyBenefit of insurance: Manage cash flow uncertainty - Provides financial compensation when covered losses occur. Provides some degree of financial security and stability - can be confident they will only have to pay the deductible for a covered loss. Peace of mind Benefit of insurance: Promote Risk Control Activity -Policies may provide insureds with incentives to undertake risk control activities. Incentives such as deductible forgiveness and premium credit incentives Benefit of insurance: Providing support for insured's credit - Insurance provides loans to individuals and organizations by guaranteeing that the lender will be paid if the collateral for the loan is destroyed or damaged by an insured event, reducing the lenders uncertainty. Ie- legal interest enables the lender to repossess a car or foreclose a home if the loan is not repaid Benefit of insurance: Reduce social burden - Insurance helps to reduce the burden to society of uncompensated accident victims Benefit of insurance: Source of investment funds - The timing of the insurance companies cash flow, premiums are collected up front and claims paid at a later date enable insurance companies to invest funds in a variety of different ways Businessowners Policy (BOP) - A package policy that is complete on it's on but combines most of the property and liability coverages needed by small and medium sized businesses