AINS 24 Chapter 1 Questions and Answers Rated A+

AINS 24 Chapter 1 Questions and Answers Rated A+ Major roles of insurance Risk management to deal with loss exposures; transfer system of financial loss from insured to insurer; business sufficient to pay claims and provide profit; contract between insured and insurer What are risk management techniques? Loss prevention; loss reduction; risk transfer; loss avoidance Define Insurance Policy A contract that states the rights and duties of both the insured and the insurer regarding the transfer and costs of losses. Define Exposure Units Assets that are insured by an insurance company. What are the 2 insurance sectors? Property-casualty and Life-health What % of premiums are from Property-casualty insurance? 45% What do state insurance regulators review? Insurance rates, policy forms, underwriting practices, claim practices, and financial performance. What are the primary sources of revenue for insurance companies? Premiums and investment income. What costs besides loss payments do insurers incur? Loss settlement expenses, new business acquisition, taxes and fees, investment expenses, and general expenses. Name the special characteristics of insurance policies. Utmost good faith, contract of adhesion, contract of indemnity Define Utmost Good Faith An obligation to act in complete honesty and to disclose all relevant facts. Define Contract of Adhesion Any contract in which one party must either accept the agreement as written by the other party or reject it. Define Contract of Indemnity A contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of loss. If policy wording is ambiguous, who do the courts usually side with? The insured. What are the 2 approaches to structuring an insurance policy? Self-contained policy and Modular policies. Define Self-contained policy A single document that contains all of the agreements between the insured and the insurer.