Insurance Fundamentals Exam Level 1 Questions & Answers(GRADED A+)

Insurance - Answerassurance given to the insured by the insurer to lessen the financial damage suffered during an insured occurrence Peril - Answerthe cause of a financial loss (ie. fire, water, earthquake) Risk - Answerthe chance of financial loss Purpose of insurance - Answerto allow the spread of risk of few among many Indemnity - Answerrestoring the insured to the same financial position as they were in immediately prior to the loss; insurer will pay the actual amount of loss, no more no less Direct Writers - Answerproducers are employees of the insurer; paid through salary; owns customer files Independent Brokerage - Answerself employed; not employees of the insurance company they represent; paid through commission; customer files are owned by brokerage Pure Risk - Answerthe chance of financial loss with no chance of profiting from it (ie. fire loss) Speculative Risk - Answerchance of of financial loss and gain (gambling/trading never covered) Four alternatives to live with a risk - Answer1. Avoidance of risk (drive safely/follow road safety rules) 2. Controlling of risk (AEB system/ helps prevent risk) 3. Retention of risk (Avoid filing claim/pay claim from own money) 4. Transfer of risk Transfer of risk - AnswerPurchasing an insurance policy is the most popular and practical way of risk transfer Contracts - Answerlegal promise made by two or more persons or organizations which can be enforced through the court of law Five Elements required for all valid contracts - AnswerA: Agreement C: Consideration L: Legality of Object L: Legal capacity of parties Peril - Answerthe cause of a financial loss (ie. fire, water, earthquake)