Insurance Fundamentals Level 1 Exam with 100% Correct Answers 2023

Insurance Fundamentals Level 1 Exam with 100% Correct Answers 2023 Insurance - Correct Answer-assurance given to the insured by the insurer to lessen the financial damage suffered during an insured occurrence Peril - Correct Answer-the cause of a financial loss (ie. fire, water, earthquake) Risk - Correct Answer-the chance of financial loss Purpose of insurance - Correct Answer-to allow the spread of risk of few among many Indemnity - Correct Answer-restoring 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 - Correct Answer-producers are employees of the insurer; paid through salary; owns customer files Independent Brokerage - Correct Answer-self employed; not employees of the insurance company they represent; paid through commission; customer files are owned by brokerage Pure Risk - Correct Answer-the chance of financial loss with no chance of profiting from it (ie. fire loss) Speculative Risk - Correct Answer-chance of of financial loss and gain (gambling/trading never covered) Four alternatives to live with a risk - Correct Answer-1. 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 - Correct Answer-Purchasing an insurance policy is the most popular and practical way of risk transfer Contracts - Correct Answer-legal 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 - Correct Answer-A: Agreement C: Consideration L: Legality of Object L: Legal capacity of parties G: Genuine Intention Agreement - Correct Answer-When both parties agree on a particular point Consideration - Correct Answer-an exchange of something of value between the parties to a contract (Premium is required for claim) Legality of Object - Correct Answer-an object for which a contract is written should be a legal object Legal capacity of parties - Correct Answer-all parties to a contract should have legal capacity to enter into a contract Who lacks legal capacity? - Correct Answer-a) Minors: under the age of 19 b) Insane or senile person c) Persons under the influence of alcohol or drugs d) Trade name: corporation are separate legal entities e) Genuine Intention: no influence or violence is used on either party to enter into a contract Trade name - Correct Answer-name used to operate a business; when trade name is used for business, any contract entered must identify owner's legal names