Why Do We Have Insurance?

What is risk in the context of insurance? Fill in the blank: Risk is uncertainty about ________, and it can be negative or positive.

• outcomes

• premiums

• policies

• agents

Fill in the blank: Insurance alleviates the uncertainty associated with ________ financial consequences.

• negative

• positive

• neutral

• predictable

What does transferring mean in insurance? Fill in the blank: Transferring is the act of transferring the financial consequences of unanticipated events to an ________.

• insurer

• employee

• policyholder

• beneficiary

What is pooling in insurance? Fill in the blank: With pooling, all insureds share the ________ of each other's losses.

• costs

• profits

• benefits

• premiums

Which of the following is NOT a benefit of insurance?

• A) Paying for losses

• B) Managing cash flow

• C) Increasing risk

• D) Complying with legal requirements

Fill in the blank: Insurance helps keep premiums ________ and helps the insurer cover large losses when they occur.

• affordable

• expensive

• unpredictable

• unstable

Insurance benefits society as a whole by:

• Providing financial protection against unexpected losses.

• Increasing the cost of living for everyone.

• Discouraging people from saving money.

• Making it harder to access healthcare.

What does property insurance protect?

• Only the insured's health

• An insured's assets by covering the cost of repairing or replacing property that is damaged, lost, or destroyed

• Only the insured's income

• Only the insured's liability

Liability insurance provides payments for injury to others or damage to others' property for which the insured is legally responsible.

• True

• False

Fill in the blank: Life insurance replaces the income-earning potential lost through ________.

• death

• retirement

• illness

• promotion