Poora X-B syllabus.
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Basics of Insurance

1.1  Requirements of an Insurable Risk

• Large number of exposure units — spreads risk across a common pool; fewer participants = higher premium per head.
• Insurable interest — insured must face genuine monetary loss on the event; loss cannot be merely emotional.
• Accidental and unintentional — loss must be fortuitous. Exception: life insurance (death is certain, but its timing is uncertain).
• Determinable and measurable — cause and amount of loss must be ascertainable.
• No prospect of gain or profit — must be pure risk; speculative risk (e.g. stock market) is not insurable.
• Chance of loss must be calculable — frequency & severity.
• Premium must be economically feasible — well below the value of risk covered.

1.2  Two Fundamental Principles

• Utmost Good Faith (Uberrimae Fidei) — insured must truthfully disclose all material facts (medical/family history, habits, profession). Non-disclosure lets the insurer reject the claim.
• Insurable Interest — insured must be worse off if the risk occurs. Business owner has interest in own inventory (not a competitor's); family members in each other; lender in borrower (to extent of outstanding); employer in key employees.

1.3  Indemnity vs. Defined Benefit Policies

1.4  Key Concepts — Highly Examinable

• Subrogation — after paying a claim, insurer steps into the insured's shoes to recover loss from the at-fault third party. Applies to indemnity policies only.
• Contribution — if the same risk is covered by 2+ indemnity policies, insurers share the claim proportionately. Not applicable to benefit policies.
• Co-Pay — insured bears an agreed % of every claim. Higher co-pay = lower premium.
• Deductible — insured bears a fixed first slice of each claim, then insurer pays the rest.