Study 3

Question 1

Who is the “pool” managed by?

Answer 1

The insurer

Question 2

What is the contract evidence of?

Answer 2

The insurance policy

Question 3

Who brings together the customer and insurance company?

Answer 3

An agent or broker

Question 4

What is the primary function of insurance?

Answer 4

Spread risk

Question 5

What are the six functions of insurance?

Answer 5

(S.A.L.S.A.S.)

S. Spread risk
A. Aid to security- peace of mind
L. Loss prevention
S. Source of capital- insurers invest large ammounts of 
    money in the canadian economy through bonds and 
    stocks
A. Aid to credit
S. Source of employment

Question 6

What are three functions of spreading the risk?

Answer 6

(D.V.D.)

D. Diversity of type of risk- writing insurance on as
many types of risks
V. Volume- insuring a large number of risks
D. Diversity of location

Question 7

Methods to calculate indemnity…..

Answer 7

1. Actual cash value (ACV)- value of property taking into
   account depreciation
2. Replacement value - will be valued on the basis of
   the cost to repair or replace it without any deduction
   or depreciation

Question 8

What is it when in the event of total loss, the insurer pays a predetermined amount agreed upon when contract was made (Example: used for jewelery, paintings, stamps and coin collection)?

Answer 8

Valued contracts