Principles and Concepts of Insurance Quiz

Insurance provides financial protection against various risks.

Loan insurance is not a common type of insurance but rather a specific financial product.

A premium is the cost paid by the insured to maintain insurance coverage.

Indemnity principle ensures that insurance compensates for actual loss, not more or less.

Reinsurance is insurance purchased by insurance companies to mitigate their risk exposure.

A deductible is the out-of-pocket amount the insured must pay before insurance coverage kicks in.

Professional liability insurance provides coverage for legal claims due to professional errors or negligence.

The declarations page summarizes key details of an insurance policy, including coverage limits and premiums.

Adverse selection occurs when individuals with higher risk are more likely to purchase insurance.

Subrogation allows an insurance company to recover the costs of a claim from a third party responsible for the loss.

Underwriting involves assessing risks to determine the insurability and premium rates for a policy.

Hazard refers to conditions or situations that increase the likelihood of a loss, such as poor lighting.

Waiting period is the duration during which specific benefits are not available after the policy issuance.

Coinsurance requires the insured to share a portion of the covered losses, reducing the insurer's risk exposure.