Understanding Insurance Basics

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Which of the following best explains how insurance helps reduce financial risk? Options: It guarantees you won’t experience accidents or emergencies., It transfers some or all of the financial burden to the insurance company., It provides immediate cash for all expenses., It eliminates the need to save for emergencies.

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It transfers some or all of the financial burden to the insurance company.

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How does insurance benefit families during unexpected medical emergencies?

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By covering part of the costs, reducing the financial strain.

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Why is insurance considered a tool for transferring risk?

Back

Because the insured pays less money than the potential cost of a loss.

Front

Which of the following situations shows the importance of insurance? A person without insurance pays out-of-pocket for a minor expense. A family avoids losing their savings after a major accident thanks to insurance. A person decides not to buy insurance because they’ve never had an accident. A family saves money by not purchasing homeowner's insurance.

Back

A family avoids losing their savings after a major accident thanks to insurance.

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How does having insurance for your car protect you after an accident?

Back

It helps cover repair costs and liability for damages caused to others.

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What is the difference between a premium and a deductible?

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The premium is paid regularly; the deductible is paid only after a claim.

Front

If your car insurance policy has a $500 deductible, what does that mean?

Back

You must pay $500 before the insurance covers the rest of the cost.

Front

What is the purpose of a co-pay in health insurance?

Back

It’s a fixed amount you pay for specific services like doctor visits.

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Back

Front

Why might someone choose a higher deductible on their insurance policy?

Back

To reduce the premium they pay regularly.