Chapter 1 - Chart A
Insurance Principles & Concepts

A: The Concept of Insurance

What is the purpose of insurance?

• Protecting people from financial loss;
• Insurance is based on the Law of Large Numbers;
• Spreading risk among many, many policyholders.

Types of Insurance - Property Insurance & Casualty Insurance

Property Insurance:

• The things we insure against with property insurance are known as "perils";
• If we name the perils on the form, they are referred to as "named perils";
• If we do not name the perils on the form, we use a special causes of loss form.

Casualty Insurance:

• Casualty insurance involves "third-party" claims;
• The "first-party" to the claim is the insured, the "third-party" to the claim brings suit against the insured.
• In casualty insurance, the insurance company will pay all legal expenses to defend the insured from lawsuits from third-parties.

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