Podcast
Questions and Answers
What does a Children's Endowment Policy primarily provide for?
What does a Children's Endowment Policy primarily provide for?
Which type of insurance covers medical expenses such as hospital bills and surgeries?
Which type of insurance covers medical expenses such as hospital bills and surgeries?
What is one of the merits of having an insurance policy?
What is one of the merits of having an insurance policy?
What type of insurance is specifically designed to protect goods and ships during sea transport?
What type of insurance is specifically designed to protect goods and ships during sea transport?
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What is a common challenge faced when claiming insurance?
What is a common challenge faced when claiming insurance?
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Which of the following is NOT considered a demerit of insurance?
Which of the following is NOT considered a demerit of insurance?
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What type of insurance involves coverage for a ship against damage?
What type of insurance involves coverage for a ship against damage?
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What principle ensures that both the insurer and the insured provide honest information?
What principle ensures that both the insurer and the insured provide honest information?
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Which of the following is an example of insurable interest?
Which of the following is an example of insurable interest?
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What does the principle of indemnity refer to?
What does the principle of indemnity refer to?
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Under which principle might an insurance company deny a claim if the cause of loss is not explicitly covered?
Under which principle might an insurance company deny a claim if the cause of loss is not explicitly covered?
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What does the principle of subrogation allow an insurance company to do?
What does the principle of subrogation allow an insurance company to do?
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If a policyholder has two health insurance policies and needs to file a claim, what principle is applied?
If a policyholder has two health insurance policies and needs to file a claim, what principle is applied?
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What is one of the key functions of insurance related to financial security?
What is one of the key functions of insurance related to financial security?
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Which type of life insurance policy provides coverage for your entire life?
Which type of life insurance policy provides coverage for your entire life?
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Study Notes
Insurance Fundamentals
- Insurance is a contract between an individual (the insured) and an insurance company. The company agrees to compensate for financial losses from specific events.
Principles of Insurance
- Utmost Good Faith: Both parties must be honest and accurate in their information provision. Failing to disclose relevant information can lead to claim rejection.
- Insurable Interest: The insured must have a financial stake in the item being insured. One cannot insure something that does not affect their finances
- Indemnity: Insurance payouts are limited to the actual loss incurred, not to profit. The goal is to restore the insured to their prior financial condition.
- Proximate Cause: Insurance covers only losses resulting from the specific listed reasons (ex. Fire insurance won't cover earthquake damages).
- Subrogation: Once the insurer compensates the insured, they can pursue legal action against any responsible third-party.
- Contribution: If multiple policies cover the same loss, insurers share the payment.
Functions of Insurance
- Providing Certainty: Insurance provides financial security against unforeseen events.
- Protection: Insurance safeguards individuals, businesses, and assets from substantial losses.
- Risk Sharing: The risk of loss is distributed among policyholders through pooled premiums.
- Capital Formation: Investment of premiums into economic ventures can drive development.
Types of Insurance
- Life Insurance - Provides financial support to families or individuals upon death.
Types of Life Insurance Policies
- Whole Life: Lifetime coverage;
- Endowment: Pays out after a specified period or on death.
- Joint Life: Covers two or more people usually spouses
- Annuity: Provides regular income payments, usually after retirement
- Children's Endowment: Provides money for children's education/marriage related issues
Other Types of Insurance
- Health: Covers hospital bills and surgeries.
- Fire: Protects against property damage from fires.
- Marine: Protects goods and ships during transport.
Merits of Insurance
- Provides financial security during emergencies
- Reduces stress due to unexpected expenses
- Encourages long term savings
- Promotes economic growth
Demerits of Insurance
- Regular premium payments can be burdensome
- Exclusions limit coverage
- Claim processing can be lengthy
- Risk of claim rejection for violations of rules
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Description
This quiz covers the basic principles and concepts of insurance, including the contract between the insured and the insurer. Explore important principles such as utmost good faith, insurable interest, and indemnity. Test your understanding of how these principles govern insurance practices.
