Questions and Answers
What does it mean to compensate?
To pay someone for the value of something lost or damaged.
What is a deductible?
The amount of money the consumer must pay for an insurance claim before the insurance policy pays the remainder.
What is insurance?
A financial service in which a consumer makes regular payments in exchange for a guarantee the costs associated with damages will be covered.
What does liability refer to in insurance terms?
Signup and view all the answers
What is a premium in the context of insurance?
Signup and view all the answers
What is always a cost when buying insurance?
Signup and view all the answers
If two people are invited to invest and become partners in a business, what will the business owners then do?
Signup and view all the answers
What do insurance companies create to handle risks?
Signup and view all the answers
What is the $75 payment Nelson must make each month referred to as?
Signup and view all the answers
How does a deductible help an insurance company?
Signup and view all the answers
What steps are involved in filing an insurance claim?
Signup and view all the answers
What questions about risk should someone ask before making economic choices?
Signup and view all the answers
What does insurance allow a consumer to do in terms of liability?
Signup and view all the answers
Under which circumstance would someone need disability insurance?
Signup and view all the answers
How can an insurance company make a profit by taking in premiums and making payouts?
Signup and view all the answers
Study Notes
Insurance Terms and Definitions
- Compensate: Payment made to someone for loss or damage incurred.
- Deductible: The out-of-pocket amount a consumer pays on an insurance claim before further coverage kicks in.
- Insurance: A financial service involving regular payments for protection against potential damages.
- Liability: Responsibility for costs related to damages or issues requiring resolution.
- Premium: The regular payment made by an insurance policyholder for coverage under their policy.
Insurance Costs and Claims
- Premiums are a guaranteed cost when purchasing insurance.
- When partners invest in a business, they share the risk involved in the venture.
- Insurance companies establish a fund pool to manage risks effectively.
- An example scenario: Nelson pays a monthly premium of $75 and faces a $500 deductible after an accident, indicating the structure of insurance claims.
Insurance Claim Process
- Filing an insurance claim involves three key steps: experiencing damage, filing a claim, and getting expenses covered.
- Deductibles help insurance companies mitigate payouts, leading to reduced overall costs.
Assessing Risk in Insurance
- Important questions regarding risk to consider include the likelihood of problems occurring, potential negative outcomes, and the impact of the most damaging risks.
Specialized Insurance Situations
- Disability insurance is crucial for individuals unable to work due to accidents or long-term health issues.
- Insurance can be profitable for companies by managing payouts from a collective pool rather than relying on individual premiums.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge of essential insurance terms with these flashcards. This quiz covers key concepts like 'compensate', 'deductible', and the fundamental idea of insurance. Perfect for students and professionals looking to enhance their vocabulary in the insurance field.
