What is the major function of insurance? - to allow the spread of risk What are the five important functions of insurance? - 1) insurance is the shifting of financial responsibility for a loss 2) payment will be made only in the event of an insured risk 3) the amount of payment is restricted to...
Fundamentals of Insurance BC
What is the major function of insurance? Correct Answer: to allow the spread of risk
What are the five important functions of insurance? Correct Answer: 1) insurance is the shifting
of financial responsibility for a loss
2) payment will be made only in the event of an insured risk
3) the amount of payment is restricted to the amount required to indemnify the insured
4) insurance covers losses the object may be exposed to
5) the indemnity can be in the form of money or repair/replacement
What are the three main types of insurance included in broad insurance (property and casualty)
Correct Answer: Auto insurance
property insurance
liability insurance
(Also known as general insurance)
Identify the two major types of insurers Correct Answer: 1) private insurers
2)government insurers
define how stock companies work compared to mutual companies Correct Answer: Stock
companies exist to turn a profit
Mutual companies exist to provide lower insurance rates for its policy holders
What type of insurance involves government insurers Correct Answer: Mandatory auto
insurance, such as ICBC
identify the two methods of distributing insurance and how the differentiate Correct Answer:
Direct Writing System
-represent products provided by one company exclusively
Independent brokerage
-represent more than one insurance company
Chapter 2 Correct Answer:
Define the 3 categories of risk Correct Answer: Personal
Property
Liability
Identify the 4 options for dealing with risk Correct Answer: 1) avoidance of risk
2) controlling of risk
3) retention of risk
4) transfer of risk
, What are the two types of risk? Which is insurable? Correct Answer: 1) Pure Risk
2) speculative risk
Only Pure risk is insurable as there is no chance for financial gain
Define an insurance contract Correct Answer: an agreement between two or more parties which
is enforceable by law
What are the five elements required to be present in all contracts Correct Answer: 1) agreement;
an offer made, and accepted
2) consideration; exchange of value between parties
3) legal capacity to contract
4) legality of object; cannot breach laws
5) genuine intention between parties
What are the three elements exclusively required in an insurance contract Correct Answer: 1)
Insurable interest
2) Utmost good faith
3) Indemnity
Define endorsements or riders on insurance policies Correct Answer: acknowledges a change in
the terms of the contract
Define Floaters Correct Answer: Used to provide coverage for property having a high degree of
mobility
Insurance is fiduciary in nature, define fiduciary Correct Answer: Means to hold financial trust
with a person or organization
define the role of the federal government Correct Answer: Provides licensing only to companies
who can meet strict financial standards, these companies are monitored constantly to ensure
financial stability
define the role of the provincial government Correct Answer: licensing insurers, establishing
premium levels, supervising terms and conditions of provincial contracts
Define solvency Correct Answer: when insurers are meeting financial obligations they are
considered solvent
What are the fiduciary responsibilities of insurance companies and insurance brokers Correct
Answer: Unearned premiums are held in trust to refund insureds in the event the policy is
cancelled prior to expiring
The insurance act determines when a contract takes affect. what time does coverage commence
at? Correct Answer: 12:01 am (midnight) at the address of the named insured
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