Idaho Life Insurance (100% accurate answers)

What is insurance? correct answers Insurance is a contract in which one party (the insurance company) agrees to indemnify (make whole) the insured party against loss, damage or liability arising from an unknown event. It transfers the risk of loss from an individual or business to an insurance company. Insurance transaction correct answers Solicitation, Negotiations, Sale, Advising an individual concerning coverage or claims. Two kinds of risk correct answers Pure risk (situation that can only result in a loss or stay the same) & Speculative risk (gambiling) **Pure risk is the only type that insurance companies will accept What is the definition of hazard? What are the three kinds? correct answers -Conditions or situations that increase the probability of an insured loss occurring. -Physical, moral, morale Physical hazard correct answers Individual characteristics that increase the chances of the cause of loss (they exist because of a physical conditions, past medical history, or a condition at birth). Moral hazards correct answers Tendencies towards increased risk. They involve evaluating the character and reputation of the proposed insured (they refer to those applicants who may lie on an insurance application or have previously submitted fraudulent claims against an insurer. Morale hazards correct answers Similar to moral hazards, but arise from a state of mind that causes indifference to loss, such as carelessness. Actions taken without forethought may cause physical injuries. What is a peril? correct answers **Perils are the CAUSES of loss insured against in an insurance policy -Life insurance insures against the financial loss caused by the premature death of the insured -Health insurance insures against the medical expenses and/or loss of income caused by the insured's sickness or accidental injury -Property insurance insures against the loss of physical property or the loss of its income-producing abilities -Casualty insurance insures against the loss and/or damage of property and resulting liabilities. What is loss? correct answers Loss is the reduction, decrease or disappearance of value of the person or property insured in a policy, caused by a named peril. Insurance provides a means to transfer loss. What are the methods of handling risk? correct answers -Sharing (a group of individuals or a business with the same or similar exposure to loss shares the losses that occur within the group) -Transfer (transfer the loss so it is borne by another party, like an insurance company) **most effective way to handle risk