Fundamentals of Insurance (BC) - Self-Examination Chapter Questions and correct answers

What is the major function of insurance? - ANSWERS To allow the spread of risk. Define "Spread of Risk" - ANSWERS "The losses of the few are shared among the many" What are the 4 other functions of insurance? - ANSWERS 1. Basis of Credit System 2. Eliminates worry - Encourages Entrepreneurship 3. Loss Prevention and Loss Reduction 4. Source of Employment and Investment Capital What are the 3 types of property and casuality (general) insurance? - ANSWERS 1. Automobile 2. Property 3. Liability What are the 2 types of insurer organizations? (including the 2 subtypes) - ANSWERS 1. Private Insurers - Stock Companies - Mutual Companies 2. Government Insurers How do stock companies work? - ANSWERS The money to operate a stock company may come from private funds or via a public sale of stock. Ownership rests in the hand's of the company's shareholders whose main purpose is to derive profit from their investment.