Casualty Actuarial Society (CAS) Practice Exam

How is money defined in insurance terms?

1. All property owned by an individual

2. Currency and written instruments representing value

3. Only bank notes and coins

4. Investment properties like stocks and bonds

The correct answer is: Currency and written instruments representing value

The definition of money in insurance terms is correctly represented by the choice indicating currency and written instruments representing value. In the context of insurance, "money" encompasses not just physical cash such as bank notes and coins, but also includes negotiable instruments like checks, drafts, and even certain types of contracts that can hold monetary value. This broader definition is essential in insurance policies, especially when addressing liability and property coverage. It acknowledges that financial assets come in various forms, enhancing clarity regarding what is covered under an insurance policy. By including written instruments, the definition captures the diverse ways money can manifest beyond just physical currency, which aligns with contemporary financial practices where electronic transactions and assets are increasingly prevalent. The other choices narrow the scope of what constitutes money in a way that may not align with typical insurance coverage definitions. For example, defining money solely as all property owned misses the financial definition aspect, focusing too broadly without specifying currency or instruments. Limiting the definition to only bank notes and coins is overly restrictive and overlooks significant forms of value representation, while considering investment properties like stocks and bonds diverts from the core definition of money used in insurance contexts.