Fundamentals to Insurance | 404 Questions and Answers(A+ Solution guide)

Chapter 1 - Intro List the 5 functions of insurance: - 1) Spread of risk 2) Basis of credit system 3) Eliminate worry and develop entrepreneurship 4) Loss reduction and prevention (road safety, alarms, etc.) 5) Employment opportunity Definition of insurance (3 parts) - 1) insurance provides a means of shifting ones financial responsibility from a loss to another party ii) payment will be made only in the event of the happening of a certain risk or peril iii) the amount of the payment is restricted to the amount required to indemnify the insured 5 points of insurance - 1) Shift financial responsibility for a loss 2) payment made only in the event of a loss 3) Payment restricted to amount to indemnify (no more, no less) 4) Cover loss to which object of insurance may be exposed (accidental and future) 5) Indemnify in form of money or other thing of value (rebuild/repair) 3 types of property and casualty insurance - Auto, property (home and business), and liability (injury or damage to a third party) What are the 2 major types of insurers and provide an example for each - Private (stock profit or mutual policy holder), or government (ICBC, employment insurance) What is the difference between mutual companies and stock companies? - Stock - main purpose is to derive a profit, ownerships in the hand of the company's shareholder. Money to operate comes from private funds and public sales of stockMutual - main purpose is to provide insurance at the lowest cost possible, corporation owned by policy holders, money made goes to policyholders What is known as the major function of insurance? - Spread of the losses of the few among the many Where is the definition of insurance usually found - The Insurance Act Define peril - Cause of loss Define risk - Chance of loss to which the object of insurance is exposed At what point in time is indemnity calculated? - Moments before the loss