Insurance Quiz & Flashcards

Coinsurance is the percentage of costs shared by the insured and insurer after the deductible is met.

Moral hazard occurs when being insured leads to riskier behavior due to reduced consequences.

Business interruption insurance covers income loss during temporary shutdowns due to covered events.

Reinsurance spreads risk among insurers, reducing potential loss for the primary insurer.

Deductibles lower premiums but require the insured to pay initial out-of-pocket costs before coverage.

Legal defense costs are not part of life insurance; they pertain to liability coverage.

Insurable interest ensures the policyholder benefits from the item’s preservation, validating the contract.

Subrogation lets insurers recover costs from third parties responsible for causing a loss.

Actuaries use statistical methods to assess risk and set appropriate policy pricing.

Policy limits are the maximum payouts under an insurance policy for a covered loss.

Named peril covers specific listed risks, while all-risk covers all risks except those excluded.

Adverse selection occurs when higher risk individuals are more inclined to buy insurance, impacting insurer costs.

Indemnity ensures the insured is reimbursed up to the actual value of the loss, not gaining profit.

Umbrella insurance offers extra liability coverage beyond the limits of primary policies like home or auto insurance.

Critical illness insurance provides a lump-sum payment upon diagnosis of specified serious illnesses.

Collision coverage pays for damage to the insured's car from collisions, regardless of fault.

A grace period provides additional time for premium payment without forfeiting insurance coverage.

Proof of loss is essential to substantiate the claim with details and extent of damages for reimbursement.

A policyholder is the individual or entity that owns and benefits from the insurance policy.

Premiums are set based on risk assessment, coverage limits, and the insured's profile and history.

Marine insurance is tailored for covering losses or damages related to maritime operations.

A no-claims bonus rewards policyholders with reduced premiums for not filing claims over a specified period.

The insured's favorite color is irrelevant; underwriting focuses on health, credit, and occupation.

Replacement cost refers to the expense of replacing an item without accounting for depreciation.

Insurance brokers advise clients on finding policies that best meet their needs from various insurers.

Comprehensive auto insurance covers non-collision events such as theft, vandalism, and natural disasters.

A hazard is a condition like a slippery floor that increases the likelihood of a peril, such as a fall.

Liability insurance covers legal costs and damages if the insured is found responsible for injury or damage to others.

Term life insurance provides coverage for a designated period, unlike whole life insurance which is for a lifetime.

Risk management involves assessing and prioritizing risks to minimize their impact, critical for effective insurance operations.

Whole life insurance offers lifetime coverage with a cash value savings component, unlike term life insurance.

Travel insurance covers unexpected travel-related events like cancellations and medical emergencies.

Failure to disclose relevant information can result in policy cancellation due to misrepresentation.

Self-insurance involves allocating funds to cover potential losses without buying insurance policies.

A rider is an optional add-on to an insurance policy that modifies or extends the standard coverage.

Actual cash value considers depreciation, while replacement cost covers the expense to replace an item without depreciation.

Claims adjusters investigate claims to assess the extent of the insurer's liability and determine appropriate settlements.

Renewing a policy ensures continuous coverage and allows for the reassessment of terms and premium adjustments.

An endowment policy pays a lump sum upon the insured's death or at the policy's term end, whichever comes first.

Insurance fraud involves intentional deception to gain an unjust benefit from an insurance policy or process.

High-deductible health plans often come with lower monthly premiums, appealing to those who do not anticipate frequent claims.

Exclusions are specific scenarios or conditions that the insurance policy does not cover.

Marine insurance is tailored to cover losses or damages related to shipping and maritime operations.

Group insurance plans typically offer lower premiums and broader coverage compared to individual policies.

A beneficiary is the person or entity designated to receive the death benefit from a life insurance policy.

Collision coverage pays for damage to the insured's car resulting from an accident, regardless of who is at fault.

Underwriting involves assessing risk to decide whether to offer insurance coverage to a potential policyholder.

Travel insurance covers unexpected events during travel, such as trip cancellations and medical emergencies.

Premiums are periodic payments made to maintain active insurance coverage and avoid policy cancellation.