Chapter 2 - C11 Principles and Practice of Insurance

Chapter 2 - Principles and Practice Summary Notes Download

Chapter 2 - Quiz View

Terms Definitions How has insurance developed over the centuries? it evolved from paying losses to preventing losses How were early insurance companies involved in fire loss prevention? they owned and operate the first fire brigades. Identify the THREE (3) major categories of insurance and give an example of each. 1. social insurance - e.g. healthcare 2. life and health insurance - e.g. life, sickness insurance 3. property and casualty insurance - e.g. all insurance not covering first 2. automobile, property. What is the difference between general insurance and property/casualty insurance? they are the same. Give examples of different classes of general insurance and explain what each class covers. automobile - liability, accident, disability Property - insures against loss or damage Liability - insurance against claims arising out of injury or death, loss or damage of others What is a multi-peril policy? when crime (theft, burglary, robbery) is added to a policy. What is an all risk policy? insure loss or damage resulting from all risks except those excluded. What does marine insurance provide? It provides both hull (the ship itself) and cargo insurance plus liability. What is a surety bond? is not insurance. A surety bond guarantees that the principal will perform the obligation or undertaking he or she has with a third party. What is the main purpose of insurance? spreading the risk of loss from one person to many Explain the TWO (2) facets of spread of risk. 1. individual - removes burden of loss from one set of shoulders and sharing it  2. insurers - balance of premiums to losses and expenses by having a good spread of risk. How do insurers spread risk? (3) 1. volume 2. diversity of type of risk 3. diversity of location What are the other functions of insurance? Security, credit, capital, unemployment, loss prevention What benefit does insurance provide to insureds, in addition to paying their claims? it provides a peace of mind, feel more certain of the future How does insurance affect the availability of credit? it allows a greater flow of credit. How does insurance provide two-fold protection? It protects the insured's interest in property and the lender's investment. How does insurance stimulate the economy? It invests heavily in bonds and other secure investments. It employs a significant part of the population. Outline some loss prevention activities in which insurers are involved. e.g. fire prevention, safe driving, fraud prevention Why can it be said that insurance is much more than a facility for paying losses? it is a vital component of an advanced technological society. those that have much, have much to lose. The economy would collapse without insurance. If insurance had not evolved along with technology, would we have the highly developed society in which we live today? No.