#1
Which of the following best describes insurance?
A contract between an individual and an insurance company
ExplanationInsurance is a contractual agreement between an individual and an insurance company.
#2
What is the purpose of the premium in insurance?
To generate profits for the insurance company
ExplanationPremiums are payments made by the insured to the insurance company to cover the risk, operational costs, and profits.
#3
What is an insurance claim?
A request made by the insured party to receive compensation for a covered loss
ExplanationAn insurance claim is a formal request by the insured party to the insurance company for compensation for a covered loss.
#4
In life insurance, what is the 'death benefit'?
The amount paid to the beneficiary upon the death of the insured
ExplanationThe death benefit is the amount paid to the designated beneficiary upon the death of the insured.
#5
What is a peril in insurance terminology?
An event or circumstance that may cause a loss covered by an insurance policy
ExplanationA peril is an event or circumstance that may cause a loss covered by an insurance policy.
#6
What is a deductible in insurance?
The amount an insured individual pays out of pocket before the insurance company pays the rest
ExplanationA deductible is the portion of a claim that the insured party must pay before the insurance company covers the remaining amount.
#7
Which type of insurance provides coverage for damage to another person's property?
Liability insurance
ExplanationLiability insurance provides coverage for damages or injuries caused to others by the insured party.
#8
What is the role of an insurance underwriter?
To assess and evaluate risks associated with insuring individuals or assets
ExplanationInsurance underwriters evaluate risks to determine the terms and conditions of insurance policies.
#9
Which of the following is NOT typically covered by a standard homeowners insurance policy?
Flood damage
ExplanationStandard homeowners insurance policies usually exclude coverage for flood damage.
#10
What is an insurance policy limit?
The maximum amount the insurance company will pay for a covered loss
ExplanationInsurance policy limit is the maximum amount an insurance company will pay for a covered loss.
#11
What is the purpose of reinsurance?
To reduce the risk exposure of primary insurers
ExplanationReinsurance is a way for primary insurers to transfer some of their risk to other insurance companies.
#12
What is the purpose of an insurance endorsement?
To add, remove, or modify coverage within an existing insurance policy
ExplanationAn insurance endorsement allows policyholders to add, remove, or modify coverage within their existing insurance policies.
#13
What does the term 'subrogation' mean in insurance?
The legal right of the insurance company to pursue a third party for reimbursement of a claim paid to the insured
ExplanationSubrogation is the legal right of the insurance company to pursue reimbursement from third parties for claims it has paid to the insured.
#14
In insurance, what is 'adverse selection'?
The tendency for high-risk individuals to seek insurance coverage more actively than low-risk individuals
ExplanationAdverse selection refers to the situation where individuals with higher risks are more likely to seek insurance coverage than those with lower risks.
#15
What is 'moral hazard' in insurance?
The tendency for individuals to increase their risk-taking behavior when they are insured
ExplanationMoral hazard refers to the increased propensity for risky behavior exhibited by individuals when they are protected by insurance against losses.