Insurance Benefits and Costs Overview

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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?

Premiums paid by insurers (B) Signup and view all the answers

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

Workers’ compensation insurance (A) Signup and view all the answers

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

Assisting in meeting legal requirements (C) Signup and view all the answers

What is one benefit of insurance mentioned in the text?

Encouraging insured's loss control activities (D) Signup and view all the answers

How is insurance viewed as per the text?

As a business and a contract between insured and insurer (B) Signup and view all the answers

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

Opportunity costs (C) Signup and view all the answers

Which types of insurance policies mainly cover personal loss exposures?

Property-casualty insurance policies (D) Signup and view all the answers

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

Property and liability coverages (A) Signup and view all the answers

What is insurance primarily considered as?

A risk transfer system (C) Signup and view all the answers

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

Premiums paid to insurers could be used for immediate needs instead. (B) Signup and view all the answers

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

Insurance provides protection against unforeseen events that could cause financial hardship. (D) Signup and view all the answers

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

As a financial investment (B) Signup and view all the answers

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

Fraudulent claims increase costs for both insurers and policyholders. (C) Signup and view all the answers

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

Insurance companies generate revenue by collecting premiums and investing funds. (D) Signup and view all the answers

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

Insurance is sometimes required to satisfy contractual obligations. (D) Signup and view all the answers