Insurance Types and Concepts

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What is the primary objective of life insurance?

To provide financial protection against accidental death

To indemfify losses due to natural disasters

To create a fund for the next of kin in the event of the insured's death (correct)

To provide medical and health benefits

What type of insurance compensates the insured for losses due to a gas pipe leakage?

Life insurance

General insurance (correct)

Accidental insurance

Health insurance

What is the term for the process of compensating the insured for losses?

Restitution

Compensation

Reimbursement

Indemnification (correct)

What type of insurance does not fall under life insurance?

All of the above Signup and view all the answers

What is the outcome of a fortuitous loss?

Unforeseen and unexpected loss Signup and view all the answers

What is a necessary condition for an insurer to calculate the probability of loss?

The loss must be measurable in specific dollar amounts Signup and view all the answers

What is the primary reason why insurers usually charge a high premium for perils with high probability of occurring?

Due to the high risk involved Signup and view all the answers

Which of the following is NOT a legal principle of insurance?

Principle of Caveat Emptor Signup and view all the answers

What type of losses are usually not covered by insurers?

Catastrophic losses Signup and view all the answers

Why would an insurer not insure the contents of a container that carries illegal weapons or drugs?

Because it is against society's interest Signup and view all the answers

What is the primary purpose of the premium charged by an insurer?

To cover the potential loss Signup and view all the answers

What is the primary objective of the principle of indemnity?

To compensate the insured for the loss suffered Signup and view all the answers

Which type of insurance policies does the principle of indemnity not apply to?

Personal accidents and disability insurance Signup and view all the answers

What is the consequence of non-disclosure or misrepresentation of facts by the insured?

The insurance contract becomes void Signup and view all the answers

What is the purpose of the principle of subrogation?

To allow the insurer to recover loss from the third party's insurer Signup and view all the answers

Which principle of insurance involves the transfer of rights from the insured to the insurer?

Principle of subrogation Signup and view all the answers

What type of insurance contracts is the principle of subrogation usually applicable to?

General insurance contracts Signup and view all the answers

What is the primary purpose of the principle of insurable interest?

To establish economic relevance and/or financial dependence on the subject matter Signup and view all the answers

What happens when a policyholder takes out multiple insurance policies to cover the same loss?

The insurer has the right to call upon other insurers to share the cost of the indemnity Signup and view all the answers

What is the role of the insured in determining liability in the principle of proximate cause?

To prove the cause of the loss Signup and view all the answers

What is the main objective of the principle of contribution?

To apportion the cost of an indemnity among multiple insurers Signup and view all the answers

What happens in the absence of insurable interest?

The insurance policy is deemed unenforceable Signup and view all the answers

What is the key consideration in determining liability under the principle of proximate cause?

The nearest and most dominant cause of the loss Signup and view all the answers

Which of the following is NOT a characteristic of speculative risks?

Definite and measurable loss Signup and view all the answers

What is a key reason for requiring a large number of exposure in insurable risks?

To reduce the risk borne by the insurer and predict losses more accurately Signup and view all the answers

Which type of insurance is NOT typically classified under life insurance?

Motor Signup and view all the answers

What is a key characteristic of fortuitous losses?

They occur by random chance, unintentional and unexpected Signup and view all the answers

What is a key requirement for a definite and measurable loss?

Particulars of the loss must be established with certainty Signup and view all the answers

Which of the following is an example of a general insurance product?

Marine insurance Signup and view all the answers