#1
What is the primary purpose of insurance?
To provide financial protection against risks
ExplanationFinancial safeguard against unforeseen events
#2
What is the concept of 'indemnity' in insurance?
Providing compensation for the actual loss suffered
ExplanationCompensating for the real financial loss
#3
What is the purpose of a 'rider' in an insurance policy?
To add extra coverage to a basic policy
ExplanationSupplementing basic insurance with additional coverage
#4
What is the 'policyholder's equity' in insurance?
The financial interest of the policyholder in the insurance company
ExplanationFinancial stake of the policyholder in the insurer
#5
What is the purpose of 'experience rating' in insurance?
To adjust premiums based on the policyholder's loss experience
ExplanationPremium adjustments based on historical loss data
#6
What is risk management in the context of insurance?
Transferring risks to another party
ExplanationShifting potential losses to a third party
#7
Which of the following is a fundamental principle of insurance?
Utmost good faith
ExplanationCore principle emphasizing honesty and transparency
#8
What is the purpose of a deductible in an insurance policy?
To discourage small claims
ExplanationEncouraging policyholders to avoid minor claims
#9
What does the term 'subrogation' mean in insurance?
The right of the insurer to pursue third-party claims
ExplanationInsurer's right to go after third-party liabilities
#10
What does the term 'loss ratio' represent in insurance?
The ratio of losses incurred to premiums earned
ExplanationProportion of losses to earned premiums
#11
What is the purpose of 'coinsurance' in property insurance?
To share the risk between the insured and the insurer
ExplanationRisk-sharing arrangement between insurer and policyholder
#12
What does the term 'underwriting' mean in insurance?
Assessing and accepting risks
ExplanationEvaluation and acceptance of insurance risks
#13
In insurance, what is 'reinsurance' used for?
To transfer a portion of risk to another insurer
ExplanationRisk sharing with other insurance companies
#14
What is the key purpose of an insurance policy's 'exclusion clause'?
To limit the scope of coverage by excluding certain risks
ExplanationRestricting coverage for specific risks
#15
In insurance, what is the role of an 'actuary'?
To assess and manage risks using mathematical and statistical methods
ExplanationRisk evaluation through mathematical analysis
#16
What is the significance of the 'waiting period' in insurance policies?
To limit coverage for certain conditions for a specific period
ExplanationTemporal restriction on coverage for specific conditions
#17
What is the purpose of 'risk retention' in risk management?
To assume and retain a portion of the risk
ExplanationTaking on and keeping a share of the risk