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AINS 101- Chapter 1
Why Do We Have Insurance?
| Question | Answer |
|---|---|
| What is risk? | the uncertainty of outcomes that can be both positive or negative |
| What is transferring of risk? | the act of transferring the financial consequences of unanticipated events to an insurer. |
| What is pooling? | all the insured shares the costs of each other's losses. |
| What are the benefits if insurance? | paying for losses, managing cash flow, complying with legal requirements and promoting risk control activities |
| What are the common types of personal insurance? | property insurance, liability insurance, life insurance and health insurance |
| What are the common types of personal property casualty insurance? | homeowners, personal auto, and personal umbrella. |
| What are the common types of commercial property casualty insurance? | commercial property, commercial crime, commercial general liability, commercial a and auto, worker's compensation and commercial umbrella |
| What is property insurance? | it protects an insureds assets by covering the costs of repairing or replacing property that is damaged, lost, or destroyed |
| What is liability insurance? | it provides payments for injury to others or damge to others property which the insured is legally responsible. also covers the cost to defend the insured against lawsuits. |
| What is life insurance? | it replaces the income earning potential lost through death. It helps to pay expenses related to an insured death |
| What is health insurance? | it protects individuals and families from financial losses caused by sickness and accidents |
| What is homeowners insurance? | it provides protection when people homes/ belongings are damaged, destroyed, or stolen and liability coverage for situations like family dog biting a guest |
| What is personal auto insurance? | if the insured is at fault in an accident provides coverage for damage to another person's auto or for bodily injury; can provide coverage to the insured auto not wear and tear |
| What is personal umbrella insurance? | it provides additional protection for people with a high potential for large liability losses. |
| What is commercial property insurance? | it covers damage to buildings or their contents that results from fire, vandalism, and other causes of loss |
| What is commercial crime insurance? | it protects against losses from theft of business property and money, including employee theft. |
| What is commercial general liability insurance? | it protects a business against its legal liability to others for bodily injuries and property damage. |
| What is commercial auto insurance? | it covers liability for bodily and property damage caused by the use of the business auto and also damage to the business own auto when they are in an accident. |
| What is workers compensation insurance? | it covers legally required benefits that businesses are required to pay their employees for job related injuries or illnesses. |
| What is commercial umbrella insurance? | it provides additional liability limits beyond those provided by other commercial policies, protecting a business in the event of a large liability loss. |
| What are stock insurers? | their objective is to earn a profit and they attract stockholders by the expectation of investment returns, |
| What are mutual insurers? | they share profits and pay dividends to policyholders as a return of a portion of premiums paid. |
| What are surplus lines insurers? | they provide insurance coverages that are unavailable in the standard market. |
| What is reinsurance? | it allows a primary insurer to transfer some loss exposures to another insurer. |
| What is reciprocal insurance exchanges? | it is where each member is both an insured and insurer |
| What are captive insurers? | they are formed to cover the loss exposures of specific organizations. |
| What are the two basic forms of ownership private insurers can be classified by? | Proprietary insurers and Cooperative insurers |
| What is proprietary insurers? | they earn a profit for their owners |
| What is cooperative insurers? | provide insurance at a minimum cost to their owners , who are the policyholders |
| What are the roles of government insurnce? | is to fill unmet insurance needs, to ensure that any government required insurance like auto is available at a reasonable price, to accomplish social goals and reduce risk to society |
| How can risk be classified? | it can be classified as pure or speculative risk |
| What is pure risk? | is risk of loss or no loss and no gain |
| What is speculative risk? | is risk of loss, or gain |
| What are the (4) four risk quadrants? | they are hazard risk, operational risk, financial risk and strategic risk |
| What is hazard risks ? | comes from property, liability, or personnel loss exposures. eg: electrical fault causing fire | Pure Risk |
| What is operational risk? | comes from people, processes systems, or controls |eg: employee makes an error when processing payments Pure risk |
| What is financial risk? | comes from the effect of market forces on financial assets or liabilities. eg: taking a loan to fund a business, buying stocks etc.| Speculative risk |
| What is strategic risk? | comes from trends in the economy and society eg: launching a new product line | Speculative risk |
| What are the (3) emerging technologies in insurance? | Artificial intelligence(AI), Sensors, and Computer vision |
| What is Artificial intelligence (AI)in insurance? | thinking systems that makes decisions |
| What are Sensors in insurance? | are devices that collects real world data that can detect and send alerts in real time. |
| What is computer vision in insurance? | is computers seeing and understanding images and used for automated checkout lanes, medical images, and automotive safety |
Created by:
Neisha-03