Which of the following describes the financial consequence the insurer bears when a claim is filed?

Which of the following describes the financial consequence the insurer bears when a claim is filed?

• A. Loss
• B. Premium
• C. Underwriting
• D. Coverage

Answer: (A)

The term that best describes the financial consequence the insurer bears when a claim is filed is "Loss." When an insurer receives a claim, it has a financial obligation to investigate and potentially pay out on that claim if it is determined to be valid. This payment represents a loss for the insurer because it involves disbursing funds that were collected through premiums. Understanding this concept is crucial in the context of title insurance because title insurers assume the risks associated with defects in title that may arise after the sale of property. If a defect is reported and a claim is made, the insurer must cover the costs involved with rectifying the issue or compensating the affected parties, which directly affects their financial position. Premiums refer to the fees paid by policyholders to ensure coverage and do not reflect a financial loss incurred by the insurer. Underwriting involves assessing risk and determining coverage terms but does not entail the actual consequences of handling a claim. Coverage itself pertains to the protections offered under a policy, rather than the financial ramifications following a claim. Thus, "Loss" accurately captures the nature of the insurer's financial impact when a claim is submitted.

The term that best describes the financial consequence the insurer bears when a claim is filed is "Loss." When an insurer receives a claim, it has a financial obligation to investigate and potentially pay out on that claim if it is determined to be valid. This payment represents a loss for the insurer because it involves disbursing funds that were collected through premiums.

Understanding this concept is crucial in the context of title insurance because title insurers assume the risks associated with defects in title that may arise after the sale of property. If a defect is reported and a claim is made, the insurer must cover the costs involved with rectifying the issue or compensating the affected parties, which directly affects their financial position.

Premiums refer to the fees paid by policyholders to ensure coverage and do not reflect a financial loss incurred by the insurer. Underwriting involves assessing risk and determining coverage terms but does not entail the actual consequences of handling a claim. Coverage itself pertains to the protections offered under a policy, rather than the financial ramifications following a claim. Thus, "Loss" accurately captures the nature of the insurer's financial impact when a claim is submitted.