Insurance Basics - I

A Premium is ..........................

• a policyholder's request for payment for a loss

• the amount the policyholder must pay for insurance coverage

• the possibility of incurring a loss

• the profit made from insurance

True or False. Every risk you face results in a loss

• True

• False

A policyholder is

• Another term for an insurance company

• The person or company buying the insurance policy

• The amount paid for insurance coverage

True or False. To be insurable, the same type of risk must be shared by a large number of businesses or individuals.

• True

• False

The reason businesses purchase insurance is to

• make a profit

• reduce taxes

• provide financial protection

• increase sales

The ______ is an amount that the policy-holder must pay out of pocket before the insurer pays a claim. 

• endorsement

• premium

• deductible 

• annual premium

Insurance is a means of

• eliminating risk

• avoiding risk

• retaining risk

• transferring risk

The insurance company is liable to pay the claim amount only when it exceeds the

• policy limit

• premium

• risk

• deductible

A morale hazard is ?

• carelessness or irresponsibility

• creating a loss to make a claim

• condition, occupancy or use of property

• a victimless crime

For a Risk to be insurable, it must be

• financial, fundamental and pure in nature

• non-financial, fundamental and pure in nature

• non-financial, fundamental and speculative in nature

• financial, pure and particular in nature.