AINS 24 | 351 Question with 100 % Verified Solutions
| Verified& Updated 2024 | Already Passed
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.
,Define Modular policy - ✔✔A policy that consists of several different documents, none of which
by itself forms a complete policy.
What line of business is most likely to use a modular policy - ✔✔Commercial
Name the common types of personal insurance - ✔✔Home owners, Personal auto, personal
watercraft, Personal Umbrella, Life insurance, Health insurance, Annuities
Name the common types of commercial insurance - ✔✔Commercial package, Business owners,
Commercial auto, Commercial property, Commercial inland marine, Commercial crime,
Commercial general liability, Ocean marine, Professional liability, Environmental liability,
Commercial umbrella liability, Workers Comp.
What does Professional Liability insurance cover? - ✔✔Professionals such as accountants,
attorneys, or consultants for errors or omissions arising out of their professional practices.
What are the 6 characteristics of Ideally Insurable Loss Exposure? - ✔✔Pure risk, fortuitous
losses, definite and measurable, large number of exposure units, independent and not
catastrophic, affordable
What is a moral hazard? - ✔✔A scenario where an insured has control over when and whether a
loss will occur and incentive to cause a loss.
What are the 3 components for a loss exposure to be definite? - ✔✔Time, cause, and location.
, What are the 8 benefits of insurance? - ✔✔Paying for losses, Managing cash flow uncertainty,
Meeting legal requirements, Promoting risk control, Enabling efficient use of resources,
Providing support for insureds credit, Providing source of investment funds, Reducing social
burdens
What are the 4 costs of insurance? - ✔✔Premiums paid by insureds, Operating costs of insurers,
Opportunity costs, Increased losses
Explain how insurance functions as a system of both transferring and sharing the costs of losses.
- ✔✔Insured pays premium in return for a promise by the insurance company to pay for covered
losses, using pooled funds from all other insureds.
What is the mechanism through which individuals or businesses exchange the possibility of a
large loss for the certainty of much smaller, periodic payments - ✔✔Insurance policy
How does the law of large numbers help insurance companies make predictions about losses? -
✔✔As number of exposures increases, accuracy of predictions also increases.
Name 3 types of Property Casualty insurance - ✔✔Personal Auto, Home Owners, General
Commercial Liability
Identify the coverages provided by Home Owners Insurance - ✔✔Coverage for damage to home
caused by fire, wind, lightning, water damage, and other causes of loss.
