2. Insurance
Is protection for individuals against possible financial losses
Provides protection against many risks such as unexpected property loss, illness and injury
Acts like a safety net for unforeseen events

3. Insurance Companies
Are financial institutions agreeing to compensate for losses of individuals or businesses resulting from damages, injury, treatment or hardship
Allow individuals to benefit from the coverage by purchasing a policy
is the scope of protection provided under an insurance policy

4. Coverage
Is provided by the insurance company to a policyholder to cover a risk
Is specified in the insurance policy

5. Insurance Policy Is a written contract effecting insurance
Binds the insurance company to assume the risk of the policyholder
in return, the policyholder must pay a premium
in many cases, the policyholder is required to pay a deductible when filing a claim
The premium is a fee the policyholder pays to the insurance company in order to be insured for a defined period of time.

6. Deductible
Is the portion of a claim the policyholder must pay before the insurance company provides the benefits of the policy
for example, if you have a $200 deductible with your auto insurance, a repair covered by the policy costing $1,000 would require you pay $200, and the insurance covers the remaining $800
Is specified in the insurance policy

7. Risk Is the chance of loss or injury
Refers to an accident or trouble which no one can predict
policyholders transfer risks to insurance companies through a policy
policyholders are required to pay a deductible, which covers their portion of the risk
A deductible is the set amount which the policyholder must pay per loss on an insurance policy.

8. Peril Is anything which may cause a possible loss, including: fire
floods
wind or hail storms
explosions
robbery
accidents

9. Hazard
Is anything which increases the likelihood of loss through some peril
for example, defective house wiring can increase the chance of house fires

10. Negligence
Is the failure to take ordinary or reasonable care to prevent accidents from happening
for example, if a restaurant owner does not clear the ice from the steps in front of the store, he or she creates a liability risk of customers falling

11. Pure Risks
Are risks in which the only possibility is loss and there is no beneficial result
Are purely accidental and unintentional
most of these risks can be covered by insurance

12. Speculative Risks
Are risks which carry a chance of either loss or gain
an individual is starting a small business which may or may not be successful
Are NOT insurable

13. Automobile Insurance
Reduces the financial impact of an automobile accident
Is often required by Financial Responsibility Laws
these laws vary from state to state, but require people to prove they have the financial means to pay for damage or injury caused by an accident
some states have compulsory insurance laws requiring drivers to have liability insurance
Typically includes a deductible

14. Types of Automobile Insurance
Include:
bodily injury liability
property damage liability
medical payments coverage
uninsured motorist protection
collision insurance
comprehensive insurance

15. Bodily Injury Liability
Covers physical injuries to others caused by an automobile accident for which the policyholder was responsible
Covers costs if pedestrians, people in other cars, or passengers in the driver’s car are injured or killed
Does not cover injuries to the policyholder

16. Property Damage Liability
Applies when the policyholder damages the property of another person
Covers the damage of the vehicle when an individual is driving another person’s vehicle with the owner’s permission
Covers damage done to buildings and equipment such as telephone poles, fences or mail boxes

17. Medical Payments Coverage
Is insurance which applies to the medical expenses of anyone who is injured in policyholder’s automobile, no matter who was at fault for the accident
Is not available in all states

18. Uninsured Motorist Protection
Covers costs if an individual is involved in a car accident with an uninsured driver
can include bodily injury and/or damage to the vehicle, depending on the policy
Is relatively inexpensive to add to the automobile policy

19. Collision Insurance
Covers damage to the policyholder’s car when it is involved in an accident
Allows the policyholder to collect cash value no matter who was at fault
Only allows the policyholder to collect the cash value of the car, or of the cost of repairs, at the time of the accident
Is required when a car is financed or leased

20. Comprehensive Insurance
Covers physical damage to an individual’s car which occurs as a result of a non-collision incident
examples include fire, flooding, wind, damage resulting from animals, theft, vandalism
Is required when a car is financed or leased

21. Auto Insurance Prices Are affected by the following factors:
amount of coverage
vehicle type
rating territory
driver classification

22. Amount of Coverage
Needs to protect the policyholder legally and financially
liability insurance is required by many states to legally use the vehicle
the policyholder can select the amount of coverage depending on his or her financial state

23. Vehicle Type Refers to the year, make and model of a vehicle
Can make insurance more expensive
if the vehicle has expensive replacement parts, requires more complicated repairs or is a type of car that is frequently stolen
Can lower the price of insurance
if the vehicle has added safety features or a security system

24. Rating Territory
Is the residential location used to determine the automobile insurance premium
different locations have different costs
insurance is cheaper in rural areas due to fewer accidents and thefts.

25. Driver Classification
Is based on age, sex, marital status, driving record and driving habits
drivers age 21 to 24 typically represent a higher risk than other age groups
Is also influenced by the cost and number of claims the policyholder has filed with the insurance company

26. Assigned Risk Pools
Consist of people who cannot obtain an insurance policy from regular carriers due to poor driving record or other factors
in states where liability insurance is required, the state assigns high-risk drivers to insurance carriers which charge them much higher rates and only allow them to buy the absolute minimum coverage

27. Tips To reduce auto insurance rates include:
compare companies’ rates and services
obtain premium discounts by maintaining a good driving record
install security devices into your vehicle
increase the amount of your deductible