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Questions and Answers
What advantage does an annuity policy provide after retirement?
What advantage does an annuity policy provide after retirement?
Which type of insurance covers medical expenses such as hospital bills?
Which type of insurance covers medical expenses such as hospital bills?
What does marine insurance primarily protect?
What does marine insurance primarily protect?
Which of the following is a merit of insurance?
Which of the following is a merit of insurance?
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What is a common disadvantage of insurance policies?
What is a common disadvantage of insurance policies?
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What type of marine insurance covers damage to a ship?
What type of marine insurance covers damage to a ship?
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Which situation exemplifies a claim that might not be fully covered by fire insurance?
Which situation exemplifies a claim that might not be fully covered by fire insurance?
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Which policy provides financial support for children's education and marriage?
Which policy provides financial support for children's education and marriage?
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What financial benefit can insurance provide during emergencies?
What financial benefit can insurance provide during emergencies?
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What does the term 'exclusions' in insurance refer to?
What does the term 'exclusions' in insurance refer to?
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What is the principle of utmost good faith in insurance?
What is the principle of utmost good faith in insurance?
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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 state in insurance?
What does the principle of indemnity state in insurance?
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Under what condition will an insurance company pay a claim based on proximate cause?
Under what condition will an insurance company pay a claim based on proximate cause?
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What is the purpose of subrogation in insurance?
What is the purpose of subrogation in insurance?
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Which of the following is NOT a function of insurance?
Which of the following is NOT a function of insurance?
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What is the key characteristic of a whole life insurance policy?
What is the key characteristic of a whole life insurance policy?
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Which type of life insurance policy pays out either after a specified term or on the death of the policyholder?
Which type of life insurance policy pays out either after a specified term or on the death of the policyholder?
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What happens when you have multiple insurance policies according to the principle of contribution?
What happens when you have multiple insurance policies according to the principle of contribution?
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What does the principle of mitigation require from the insured?
What does the principle of mitigation require from the insured?
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Study Notes
Insurance Fundamentals
- Insurance is a contract between the insured (you) and an insurance company.
- The insurance company agrees to compensate for financial losses due to specified events.
Principles of Insurance
- Utmost Good Faith: Both parties must provide honest and complete information. Dishonesty (hiding information) may result in claim rejection.
- Insurable Interest: The insured must have a financial stake in the item being insured.
- Indemnity: Insurance only compensates for actual losses, not profit.
- Proximate Cause: Insurance pays only for losses directly resulting from the covered event.
- Subrogation: Insurance companies can pursue claims against third parties after compensating the insured.
- Contribution: If multiple policies cover the same loss, claims are shared proportionally.
Types of Insurance (Examples)
- Health Insurance: Covers medical expenses (hospital bills, surgery).
- Fire Insurance: Covers losses due to fire.
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Marine Insurance: Protects goods and ships during transportation.
- Includes Ship/Hull (ship damage), Cargo (goods), and Freight (payment if goods are lost).
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Life Insurance: Provides financial support to beneficiaries upon death.
- Whole Life: Coverage for the entire life.
- Endowment: Pays out after a fixed term or death.
- Joint Life: Covers two people (usually spouses).
- Annuity: Regular payments after retirement.
- Children's Endowment: Covers children's education/marriage.
Functions of Insurance
- Certainty: Financial security against unexpected events.
- Protection: Reduces the impact of significant losses to individuals, businesses, or property.
- Risk Sharing: Distributes losses among many insured individuals.
- Capital Formation: Insurers invest premiums, encouraging economic growth.
Merits of Insurance
- Financial protection during emergencies.
- Reduced stress from unexpected expenses
- Encourages long-term savings.
- Promotes economic growth through investments.
Demerits of Insurance
- Regular premium payments can be burdensome.
- Exclusions may limit coverage.
- Lengthy claims processes are common.
- Risk of claims rejection due to policy violations.
Mitigation
- Insured individuals have a duty to take reasonable steps to reduce potential loss or damage.
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Description
This quiz explores the foundational concepts of insurance, including key principles such as utmost good faith, insurable interest, and indemnity. Test your understanding of various types of insurance and the critical terms that define this essential industry.
