#1
What is the primary purpose of insurance?
To transfer risk from individuals to the insurance company
ExplanationRisk transfer from individuals to insurer
#2
What does 'premium' refer to in insurance?
The amount of money paid for an insurance policy
ExplanationCost of insurance policy
#3
What is the purpose of a deductible in an insurance policy?
To share the cost of covered expenses between the insured and the insurer
ExplanationCost sharing between insured and insurer
#4
What does the term 'policyholder' refer to in insurance?
The person or entity that owns the insurance policy
ExplanationOwner of insurance policy
#5
What is the principle of indemnity in insurance?
Insurers must compensate for the actual value of the loss suffered
ExplanationCompensation for actual loss value
#6
What is 'subrogation' in the context of insurance?
The process of one party stepping into the shoes of another party for the purpose of pursuing recovery or enforcing rights
ExplanationTransfer of rights for recovery/enforcement
#7
What is 'underinsurance' in the context of insurance?
The act of purchasing insurance coverage that is insufficient to cover potential losses
ExplanationInadequate insurance coverage
#8
What is 'catastrophic risk' in insurance?
The risk of large-scale events that can cause significant losses
ExplanationRisk of significant losses from large-scale events
#9
What does 'policy term' refer to in insurance?
The period during which the insured is covered by the policy
ExplanationCoverage period under the policy
#10
What is 'insurable risk' in insurance?
A risk that is covered by insurance policies
ExplanationRisk covered by insurance policies
#11
Which of the following best describes 'underwriting' in insurance?
The process of evaluating risks and deciding whether to accept or reject applications for insurance
ExplanationRisk evaluation and policy acceptance/rejection
#12
What is 'moral hazard' in insurance?
The risk of loss due to intentional actions
ExplanationRisk from intentional actions
#13
In insurance, what is the purpose of an actuary?
To assess and calculate risks associated with insurance policies
ExplanationRisk assessment and calculation
#14
What is the difference between 'whole life' and 'term life' insurance policies?
Whole life policies have a cash value component, while term life policies do not
ExplanationCash value component in whole life policies
#15
What is the purpose of a 'rider' in an insurance policy?
To modify or add coverage to the policy
ExplanationModification or addition of coverage
#16
What is 'adverse selection' in insurance?
The tendency of high-risk individuals to seek insurance at standard rates
ExplanationHigh-risk individuals seeking standard rates
#17
What is 'deductible' in an insurance policy?
The maximum amount the insured must pay out of pocket before the insurance company starts paying
ExplanationMaximum out-of-pocket payment before insurer pays
#18
What is 'insurable interest' in insurance?
The interest of the insured in the property or person being insured
ExplanationInsured's interest in insured property/person
#19
What is the purpose of 'endorsements' in insurance policies?
To extend or restrict coverage under the policy
ExplanationExtension or restriction of coverage
#20
What is 'residual value' in insurance?
The value of the insured property after deducting depreciation
ExplanationValue of property after depreciation
#21
What is 'reinsurance' in the insurance industry?
Insurance purchased by insurance companies to protect themselves against large losses
ExplanationInsurance for insurers against major losses
#22
What is the 'exclusion' clause in an insurance policy?
A clause that specifies the types of losses or risks that are not covered by the policy
ExplanationSpecification of non-covered risks
#23
What is 'coinsurance' in insurance?
A provision where the insured agrees to share a percentage of the covered losses
ExplanationAgreement to share covered losses
#24
What is 'aggregate limit' in insurance?
The total amount the insurer will pay for all claims during a policy period
ExplanationTotal claim payment limit during policy period
#25
What is 'waiting period' in insurance?
The period of time an insured must wait before coverage begins for certain conditions
ExplanationTime before coverage starts for certain conditions