Define insurance in your own words. What is its primary purpose?

Insurance is a contract where one party (insurer) agrees to compensate another party (insured) for losses covered in the policy. Its primary purpose is to provide financial protection against unexpected events.

Explain the difference between a premium and a deductible in an insurance policy.

A premium is the regular payment made to an insurance company to maintain coverage. A deductible is the amount the insured pays out-of-pocket before the insurance coverage begins to pay.

Describe a situation where having insurance would be beneficial. Explain what type of insurance would be most suitable and why.

If someone gets into a car accident, having car insurance is beneficial. It covers the costs of repairs, medical bills, and potential liability claims, preventing significant financial burden.

What are some factors that insurance companies consider when determining the premium for a car insurance policy?

Factors include age, driving history, type of car, location, and coverage limits.

Explain the concept of risk pooling in insurance. How does it benefit both the insurance company and the policyholders?

Risk pooling involves insurance companies collecting premiums from many individuals to cover the losses of a few. It benefits the company by providing a large pool of funds and policyholders by making insurance more affordable.

Insurance Terms

Name: Insurance Terms
Author: Insta~Lesson

11th Grade · Economics · 45 min

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Learning Objective

I can define basic insurance terms like premium, deductible, and coverage.

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Insurance Terms

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Related Lessons

Creating a Personal Budget

Exploring Alternative Economic Theories

Creating a Personal Budget

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