Insurance Benefits and Costs Overview
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Questions and Answers

What is the main purpose of insurance?

  • Reducing the financial costs of insurance premiums
  • Indemnifying the insured after a loss (correct)
  • Helping insureds manage cash flow uncertainty
  • Avoiding any deductibles in case of a loss

    • How does insurance help manage cash flow uncertainty?

  • By providing free coverage for any loss amount
  • By increasing the financial burden on the insured
  • By reducing the variation in cash flows related to covered losses (correct)
  • By eliminating the need for deductibles

    • Which of the following is NOT a benefit provided by insurance?

  • Reduction of financial effect on cash flow
  • Eliminating the need for deductibles (correct)
  • Meeting legal requirements
  • Helping regain footing after a loss

    • What is one of the potential costs associated with insurance?

    <p>Premiums paid by insurers</p> Signup and view all the answers

    Which type of insurance helps employers meet legal obligations for job-related injuries or illnesses?

    <p>Workers’ compensation insurance</p> Signup and view all the answers

    What is one additional benefit of insurance besides helping regain footing after a loss?

    <p>Assisting in meeting legal requirements</p> Signup and view all the answers

    What is one benefit of insurance mentioned in the text?

    <p>Encouraging insured's loss control activities</p> Signup and view all the answers

    How is insurance viewed as per the text?

    <p>As a business and a contract between insured and insurer</p> Signup and view all the answers

    What is a cost associated with insurance mentioned in the text?

    <p>Opportunity costs</p> Signup and view all the answers

    Which types of insurance policies mainly cover personal loss exposures?

    <p>Property-casualty insurance policies</p> Signup and view all the answers

    What do commercial insurance policies often combine, according to the text?

    <p>Property and liability coverages</p> Signup and view all the answers

    What is insurance primarily considered as?

    <p><strong>A risk transfer system</strong></p> Signup and view all the answers

    Which of the following statements best describes a potential drawback of insurance for policyholders?

    <p>Premiums paid to insurers could be used for immediate needs instead.</p> Signup and view all the answers

    According to the passage, which of the following statements is true regarding insurance?

    <p>Insurance provides protection against unforeseen events that could cause financial hardship.</p> Signup and view all the answers

    Which of the following is NOT mentioned as one of the major roles of insurance in the passage?

    <p>As a financial investment</p> Signup and view all the answers

    According to the passage, which of the following statements is true regarding fraudulent insurance claims?

    <p>Fraudulent claims increase costs for both insurers and policyholders.</p> Signup and view all the answers

    Which of the following statements best describes the role of insurance as a business?

    <p>Insurance companies generate revenue by collecting premiums and investing funds.</p> Signup and view all the answers

    According to the passage, which of the following statements is true regarding the need for insurance?

    <p>Insurance is sometimes required to satisfy contractual obligations.</p> Signup and view all the answers

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