FIN533 Chapter 5: Risk Management and Life Insurance
30 Questions
264 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the primary purpose of an insurance company?

  • To assume financial responsibility for losses from an insured risk (correct)
  • To provide a platform for risk-taking entrepreneurs
  • To offer investment opportunities to policyholders
  • To provide financial gains to policyholders

What is the concept of insurance based on?

  • A large group of people paying premiums into a fund to help those who suffer a hardship (correct)
  • A private investment scheme that generates returns for investors
  • A small group of people pooling their resources to mitigate risk
  • A government program that provides financial assistance to those in need

What is the term for the financial interest that a person has in the subject matter of an insurance policy?

  • Financial loss
  • Risk management
  • Insurable interest (correct)
  • Insurance premium

What is the primary benefit of purchasing an insurance policy?

<p>Protection against possible financial loss and peace of mind (D)</p> Signup and view all the answers

What is the term for the periodic payment made by a policyholder to an insurance company?

<p>Insurance premium (A)</p> Signup and view all the answers

What is the primary purpose of an insurance pool?

<p>To help those who suffer a hardship from an insured risk (B)</p> Signup and view all the answers

What is the primary purpose of paying premium payments in life insurance?

<p>To receive a lump sum known as a death benefit after death (A)</p> Signup and view all the answers

What is the main difference between general insurance and life insurance?

<p>General insurance is a non-life insurance product, while life insurance covers life (A)</p> Signup and view all the answers

What is the typical duration of a general insurance policy?

<p>One year (C)</p> Signup and view all the answers

What is the main benefit of having a whole life insurance policy?

<p>It provides life-long protection with a savings plan (D)</p> Signup and view all the answers

What is the primary reason for having life insurance according to the text?

<p>To ensure that immediate family has some financial support after the insured demise (B)</p> Signup and view all the answers

What is the main difference between term insurance and endowment insurance?

<p>Term insurance is for a limited period, while endowment insurance is for life (C)</p> Signup and view all the answers

What is the primary purpose of an annuity contract?

<p>To protect and grow your money, and then provide a stream of income during retirement (D)</p> Signup and view all the answers

What happens to an annuity when you're ready to start receiving retirement income?

<p>It is turned into a steady stream of income payments (B)</p> Signup and view all the answers

What is the main benefit of having a medical and health insurance policy?

<p>It ensures that you don't have to worry about the cost of seeking treatment during emergencies (D)</p> Signup and view all the answers

What type of insurance policy is designed to provide an income stream while undergoing treatment?

<p>Hospital income insurance (A)</p> Signup and view all the answers

What is a common feature of medical and health insurance policies?

<p>Certain exclusions, just like other insurance policies (D)</p> Signup and view all the answers

What is the primary difference between an annuity and a medical and health insurance policy?

<p>An annuity provides a stream of income during retirement, while a medical and health insurance policy provides coverage for medical expenses (B)</p> Signup and view all the answers

What type of damages is covered by a motor insurance policy?

<p>Third party bodily injury and death, third party property loss or damage (A)</p> Signup and view all the answers

What is the time period for which death and total permanent disablement are covered after the occurrence of the accident?

<p>365 days (B)</p> Signup and view all the answers

What is the condition for reimbursement of a lost passport?

<p>The loss must be reported to the police within 24 hours (C)</p> Signup and view all the answers

What is covered under hospitalization and medical expenses in travel insurance?

<p>Hospitalization, hospital or surgical expenses, outpatient medical expenses, and daily allowances up to a maximum number of days (D)</p> Signup and view all the answers

What is the purpose of repatriation in travel insurance?

<p>To return the remains of the insured to their home country (A)</p> Signup and view all the answers

What type of loss is covered under accidental loss or damage to your baggage?

<p>Accidental loss or damage to your baggage, clothing, personal effects, and even money (A)</p> Signup and view all the answers

What is the primary reason for reimbursement of expenses incurred due to loss of travel or accommodation?

<p>Cancellation of the journey (B)</p> Signup and view all the answers

What is the maximum time period for which daily payments can be made in case of hijacking?

<p>More than 12 hours (B)</p> Signup and view all the answers

Which of the following is NOT an exclusion in Travel Insurance?

<p>Earthquake (D)</p> Signup and view all the answers

What is the principle of Takaful based on?

<p>Islamic law (D)</p> Signup and view all the answers

What is the role of policyholders in Takaful?

<p>They cooperate among themselves for their common good (B)</p> Signup and view all the answers

What is the benefit of the community pooling system in Takaful?

<p>Losses are divided and liabilities spread (D)</p> Signup and view all the answers

Flashcards

What is insurance?

Insurance is protection against possible financial loss, providing peace of mind. It involves an insurance company assuming financial responsibility for losses from an insured risk in exchange for periodic premium payments.

Explain the concept of insurance.

A group of people pay premiums into a central fund. When someone in the group faces a hardship, they receive funds from the pool to help ease the burden.

What is insurable interest?

The person purchasing insurance must have a genuine interest in the subject matter of the insurance. This ensures that the insured has a valid reason to seek coverage.

What is a death benefit in insurance?

Insurance companies pay a lump sum to beneficiaries after the death of the insured in exchange for regular premium payments.

Signup and view all the flashcards

Differentiate between life insurance and general insurance.

Life insurance provides coverage for the life of an insured individual. General insurance, on the other hand, does not cover life and focuses on non-life insurance products.

Signup and view all the flashcards

What are the main categories of general insurance?

Commercial lines of insurance are designed for businesses and corporations. Personal lines, as the name suggests, are for individuals and families.

Signup and view all the flashcards

What is the main reason for having life insurance?

Life insurance provides financial support for your family after your death, ensuring their financial stability.

Signup and view all the flashcards

Describe the basic types of life insurance policies.

Term insurance offers protection for a specific period of time. Whole life insurance provides lifelong coverage with a fixed maturity period. Endowment insurance combines protection with a savings plan.

Signup and view all the flashcards

What is an annuity or pension plan insurance?

An annuity is a contract between you and an insurance company. It protects and grows your money to provide a steady income during retirement.

Signup and view all the flashcards

Explain how an annuity works.

You buy an annuity by making a payment to the insurer. This payment grows over time, and you receive regular income payments in retirement.

Signup and view all the flashcards

What does medical and health insurance cover?

Medical and health insurance covers the cost of private medical treatment, offering peace of mind during health emergencies.

Signup and view all the flashcards

What are the benefits of medical and health insurance?

Medical and health insurance provides financial security during treatment, ensuring no worry about the cost of medical care.

Signup and view all the flashcards

What is hospitalization & surgical insurance?

Hospitalization and surgical insurance covers the cost of hospital stays and surgeries, providing financial assistance during medical emergencies.

Signup and view all the flashcards

What is dread disease or critical illness insurance?

Dread disease, or critical illness insurance, provides coverage for specific serious illnesses, offering financial support during difficult times.

Signup and view all the flashcards

What is disability income insurance?

Disability income insurance provides financial support if you're unable to work due to an illness or injury, ensuring a stream of income during disability.

Signup and view all the flashcards

What is hospital income insurance?

Hospital income insurance offers financial assistance during hospitalization, providing compensation for lost income.

Signup and view all the flashcards

What is travel insurance?

Travel insurance covers accidents and losses encountered during trips via air, sea, or land, providing peace of mind for travelers.

Signup and view all the flashcards

What are the common coverages of travel insurance?

Travel insurance covers death, permanent disability, lost luggage, hospitalization expenses, repatriation, trip curtailment, and hijacking.

Signup and view all the flashcards

List some common exclusions in travel insurance.

War risks, suicide, insanity, AIDS, self-inflicted injuries, childbirth, and miscarriage are typically excluded from travel insurance coverage.

Signup and view all the flashcards

What is Takaful?

Takaful is an Islamic insurance concept based on cooperative or mutual insurance, emphasizing mutual support and shared responsibility.

Signup and view all the flashcards

Explain the principles of Takaful.

Takaful operates on the principle of policyholders cooperating for their collective good. Each policyholder contributes to a pool that assists those facing hardship.

Signup and view all the flashcards

How does Takaful address uncertainty in insurance?

In a Takaful system, the uncertainty of subscription and compensation is minimized by the community pooling system, ensuring fair distribution of resources.

Signup and view all the flashcards

What is Fire/House Owner/House Holder Insurance?

Fire/House Owner/House Holder Insurance covers losses caused by fire or other perils to your home and belongings, providing financial protection against disasters.

Signup and view all the flashcards

What is Motor insurance?

Motor insurance provides financial protection in case of damage to your vehicle, injuries, or liabilities arising from accidents involving your car.

Signup and view all the flashcards

What is Personal Accident Insurance?

Personal Accident Insurance provides financial support in case of accidental injuries, death, or disability, ensuring financial security for you and your family.

Signup and view all the flashcards

Explain the concept of risk sharing in insurance.

The insured pays a premium to the insurance company, and the insurer makes a payout only if a covered event occurs, illustrating risk sharing.

Signup and view all the flashcards

Study Notes

Insurance Planning: An Introduction

  • Insurance is protection against possible financial loss, giving you peace of mind
  • Insurance company assumes financial responsibility for losses from an insured risk in exchange for a premium paid periodically

Concept of Insurance

  • Large group of people pay premiums into a fund (insurance pool)
  • When someone in the group suffers a hardship, they receive an amount of money from the fund to help ease the hardship

Principles of Insurance

  • Insurable interest: the person who purchases the insurance has an interest in the subject matter of the insurance
  • In exchange for premium payments, the insurance company pays a lump sum (death benefit) to beneficiaries after death

Types of Insurance Cover

  • Life insurance: covers the life of an insured
  • General insurance: does not cover the life of an insured (non-life insurance product)
  • Types of general insurance products:
    • Commercial Lines (for businesses/corporations)
    • Personal Lines (for the public)

Reasons for Having Life Insurance

  • Ensure financial support for immediate family after demise
  • Finance children’s education
  • Have a savings plan for the future
  • Ensure extra income is available
  • Income tax relief

Basic Types of Life Insurance Policy

  • Term insurance: protection for a limited period only
  • Whole life insurance: life-long protection with a fixed maturity
  • Endowment insurance: combines protection with a savings plan

Annuity or Pension Plan Insurance

  • A contract between you and an insurance company
  • Protects and grows your money, providing a stream of income during retirement
  • How it works:
    • Purchase an annuity by making a payment to an insurance company
    • Annuity grows over time
    • Receive a steady stream of income payments in retirement

General Insurance

  • Medical & Health Insurance
  • Personal Accident Insurance
  • Travel Insurance
  • Motor Insurance
  • Fire/House Owner/House Holder Insurance

Medical and Health Insurance

  • Covers the cost of private medical treatment
  • Ensures no worry about the cost of seeking treatment during emergencies
  • Provides an income stream while undergoing treatment
  • Types of policies:
    • Hospitalization and surgical insurance
    • Dread disease, or critical illness insurance
    • Disability income insurance
    • Hospital income insurance

Travel Insurance

  • Covers accidents to the insured and losses arising from a journey by air, sea, or land
  • Coverage includes:
    • Death and permanent disablement
    • Loss of luggage
    • Hospitalization and medical expenses
    • Repatriation
    • Curtailment
    • Hijacking
  • Exclusions include:
    • War risks
    • Suicide and insanity
    • AIDS
    • Provoke murder or assault
    • Childbirth or miscarriage
    • Hazardous sports

Takaful

  • An Islamic insurance concept based on cooperative or mutual insurance
  • Principles of Takaful:
    • Policyholders cooperate among themselves for their common good
    • Every policyholder pays their subscription to help those that need assistance
    • Losses are divided and liabilities spread according to the community pooling system
    • Uncertainty is eliminated in respect of subscription and compensation

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Description

This quiz covers the concepts of risk management and life insurance, including the principles of insurance, types of insurance, and insurance planning. It also explores the differences between takaful and conventional insurance.

More Like This

Use Quizgecko on...
Browser
Open
Browser
Browser