Can adverse selection cause an insurance market to collapse?

Yes, if adverse selection is severe, insurers may struggle to cover high claims costs, forcing them to raise premiums or exit the market. This can create a "death spiral," where fewer people buy insurance, worsening the financial viability of insurers.

What is extra expense coverage in business interruption insurance?

Extra expense coverage pays for additional costs incurred to keep the business running, such as renting a temporary location or outsourcing operations to another provider.

How does Universal Life Insurance differ from Whole Life Insurance?

While both are permanent life insurance policies, Universal Life offers flexibility in premium payments and death benefits, whereas Whole Life has fixed premiums and guaranteed cash value growth. UL allows adjustments based on financial needs, making it more versatile, while Whole Life provides more stability and predictable returns.

What happens if the insured moves to a different location?

If the insured moves, they must notify the insurer, as location changes can impact coverage. For example, home insurance policies may need to be adjusted for new addresses, and auto insurance rates may change based on regional risk factors.

How does disability insurance work?

Disability insurance provides income replacement if a policyholder becomes unable to work due to illness or injury, ensuring financial stability during periods of lost wages.

What are the common types of insurance fraud?

Common types include false claims, staged accidents, arson for profit, exaggerated injuries, phantom policies, premium diversion, and identity theft. Fraud can occur in health, auto, life, and property insurance, leading to significant financial losses for insurers and higher premiums for honest policyholders.

How much does employer liability insurance cost?

Costs depend on industry risk, number of employees, coverage limits, claims history, and location. Policies can range from a few hundred to thousands of dollars annually.

What is an HMO (Health Maintenance Organization) plan?

An HMO plan requires members to use a network of doctors and get referrals from a primary care physician for specialist visits.