Which term describes the entity that bears the financial exposure and is party to the contract with the insured for payment of losses?

Which term describes the entity that bears the financial exposure and is party to the contract with the insured for payment of losses?

• A. Agent
• B. Broker
• C. Insurer
• D. Premium

Answer: (C)

In insurance, the party that bears the financial exposure and is contractually obligated to pay losses is the insurer—the insurance company. It underwrites the policy, accepts the risk of covered claims, and promises to indemnify the insured for losses up to the policy terms and limits. The insured provides the premium in exchange for this promise. Intermediaries like agents and brokers facilitate obtaining coverage but do not assume the financial risk or owe payment of losses themselves; they act on behalf of the insurer or the insured. The premium is simply the money the insured pays for coverage, not the entity responsible for paying claims.

In insurance, the party that bears the financial exposure and is contractually obligated to pay losses is the insurer—the insurance company. It underwrites the policy, accepts the risk of covered claims, and promises to indemnify the insured for losses up to the policy terms and limits. The insured provides the premium in exchange for this promise. Intermediaries like agents and brokers facilitate obtaining coverage but do not assume the financial risk or owe payment of losses themselves; they act on behalf of the insurer or the insured. The premium is simply the money the insured pays for coverage, not the entity responsible for paying claims.