Level 1 Insurance Fundamentals Exam Questions & Answers 100% Accurate!!

Insurance - ANSWER-assurance given to the insured by the insurer to lessen the financial damage suffered during an insured occurrence Peril - ANSWER-the cause of a financial loss (ie. fire, water, earthquake) Risk - ANSWER-the chance of financial loss Purpose of insurance - ANSWER-to allow the spread of risk of few among many Indemnity - 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 - ANSWER-producers are employees of the insurer; paid through salary; owns customer files Independent Brokerage - ANSWER-self employed; not employees of the insurance company they represent; paid through commission; customer files are owned by brokerage Pure Risk - ANSWER-the chance of financial loss with no chance of profiting from it (ie. fire loss) Speculative Risk - ANSWER-chance of of financial loss and gain (gambling/trading never covered) Four alternatives to live with a risk - 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 - ANSWER-Purchasing an insurance policy is the most popular and practical way of risk transfer Contracts - 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 - ANSWER-A: Agreement C: Consideration