Insurance Basics Quiz

Meaning of Insurance

• Insurance serves as protection against financial loss, functioning as a risk management tool.
• It primarily hedges against the risk of contingent or uncertain losses.
• An insurance contract involves the insurer compensating the insured for specified losses.
• The insured pays a fixed sum (premium) to the insurer on a regular basis.

Key Terms in Insurance

• Insured: The individual protected against specific losses, referred to as the assured in life insurance; also known as the policyholder.
• Insurer: The entity (firm or individual) that compensates the insured for losses. Known as the assurer in life insurance due to obligation to pay the sum assured upon maturity or to the nominee upon the policyholder's death.
• Premium: The cost paid by the insured to the insurer for coverage, representing the insurer's consideration to provide insurance.
• Policy: A formal contract detailing the terms and conditions between the insured and insurer.
• Claim: A formal request from the insured to the insurer for compensation following a loss due to an incident.
• Proposal: A written request from the insured to the insurance company seeking the issuance of a specific insurance policy.
• Subject Matter: The entity being insured, which can include life, property, cargo, or ships, as specified in the insurance policy.

Meaning of Insurance

• Insurance provides protection against financial loss, acting as a risk management tool.
• It serves to mitigate the risk of contingent or uncertain losses, safeguarding individuals and entities.
• A contract exists between the insurer and the insured, obligating the insurer to compensate the insured for losses.
• The insured pays a predetermined premium to the insurer, typically on a scheduled basis.

Basic Terms in Insurance

• Insured:

  • The individual protected against specified losses.
  • Referred to as "assured" in life insurance contracts, also known as the policyholder.

• Insurer:

  • The entity (firm or individual) that provides financial compensation for losses.
  • In life insurance, the insurer is termed "assurer" and must pay the sum assured either upon policy maturity or upon the death of the policyholder.

• Premium:

  • The amount paid by the insured to the insurer, serving as the consideration for insurance coverage.

• Policy:

  • The formal contract outlining the terms and conditions agreed upon by the insured and insurer.

• Claim:

  • A formal request made by the insured to the insurer for compensation following a loss due to a covered event.

• Proposal:

  • A written application submitted by the insured to an insurance company to initiate the issuance of an insurance policy.

• Subject Matter:

  • Represents the insured entity, such as life, property, or cargo, which is covered under the insurance policy.

Test your knowledge on the fundamental concepts of insurance. This quiz covers essential terms and definitions that are crucial for understanding how insurance works as a risk management tool. Perfect for students and anyone interested in the basics of financial protection.