01 - Basic principles of life and health insurance

Question 1

Actuarial Department:

Answer 1

This is the department that calculates policy rates, reserves, and dividends.

Question 2

Adjuster:

Answer 2

This is the person who investigates claims and arranges for them to be settled or denied.

Question 3

Alien Insurer:

Answer 3

In the United States, this is an insurer whose principal office and domicile location is outside this country.

Question 4

Admitted Insurer:

Answer 4

This is an insurer who has received a certificate of authority from a state’s department of insurance which authorizes them to conduct insurance business in that state.

Question 5

Agent:

Answer 5

This is an individual or organization that’s authorized to solicit, sell, and transact (bind) coverage for specific insurance providers under the terms of one or more agent contracts.

Question 6

Authorized Insurer:

Answer 6

This is an admitted insurer.

Question 7

Broker:

Answer 7

This is a person who represents himself and the insured (i.e., the client or customer). A broker cannot bind coverage on behalf of an insurance carrier because a broker is not appointed as an agent.

Question 8

Captive Insurer:

Answer 8

This is an insurer that’s established and owned by a parent firm for the purpose of insuring the parent firm’s loss exposure.

Question 9

Certificate of Authority:

Answer 9

This is a license that’s issued to an insurer by an insurance department (or equivalent state agency) that authorizes that company to conduct insurance business in that particular state.

Question 10

Claims Department:

Answer 10

This is the department that’s responsible for processing, investigating, and paying claims.

Question 11

Divisible Surplus:

Answer 11

This is the amount of earnings that are paid to policy owners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes.

Question 12

Domestic Insurer:

Answer 12

This is an insurer with its principal or home office in the state in which it’s authorized.

Question 13

Foreign Insurer:

Answer 13

This is an insurer whose principal office or domicile location is in a state that’s different from the state in which it’s transacting insurance business.

Question 14

Fraternal Benefit Society:

Answer 14

This is a non-profit benevolent organization that provides insurance to its members.

Question 15

Independent Insurance Agency:

Answer 15

This is an agency that any number of insurance companies through contractual agreements.

Question 16

Insurance:

Answer 16

This is the transfer of risk through the pooling or accumulation of funds.

Question 17

Insured:

Answer 17

This is the customer who receives insurance protection under an insurance policy.

Question 18

Insurer:

Answer 18

This is an insurance company.

Question 19

Lloyds of London:

Answer 19

This is NOT an insurer but a group of individuals and companies that underwrite unusual insurance policies.

Question 20

Marketing Division:

Answer 20

This is the division that’s responsible for acquiring prospective applicants through various advertising media.

Question 21

Monoline Insurer:

Answer 21

This is an insurance carrier that only sells one line of insurance.

Question 22

Multi-Line Insurer:

Answer 22

This is an insurance company or independent agent that provides a “one-stop-shop” for businesses or individuals who are seeking coverage for all of their insurance needs. For example, many large insurers offer individual policies for automobile, homeowner, long-term care, life, and health insurance needs.

Question 23

Mutual Insurance Company:

Answer 23

This is an insurance company that’s characterized by having no capital stock, being owned by their policy owners, and typically issuing participating insurance.

Question 24

Non-Admitted (Unauthorized) Insurer:

Answer 24

This is an insurer that has not received a certificate of authority from a state’s department of insurance which authorizes it to conduct insurance business in that state.

Question 25

Nonparticipating Policy:

Answer 25

This is a policy that’s typically issued by stock companies. This type of policy doesn’t allow policy owners to participate in dividends or to elect the board of directors.

Question 26

Participating Policy:

Answer 26

This is an insurance policy that pays policy dividends to policy owners. By receiving dividends, policy owners share in the company’s divisible surplus and also elect the company’s board of directors.

Question 27

Personal Producing General Agency (PPGA):

Answer 27

This is an agency that represents one or more specific insurers. A PPGA is a similar agency system, but PPGAs don’t recruit, train, or supervise career agents.

Question 28

Policy owner:

Answer 28

This is the person who’s responsible for the payment of premiums and who possesses all ownership rights of the contract. Typically, the policy owner is also the insured.

Question 29

Private (Commercial) Insurer:

Answer 29

This is an insurer that’s owned by private citizens or groups that offer one or more insurance lines. Commercial insurers are NOT government-owned.

Question 30

Producer:

Answer 30

This is an individual who’s licensed by one or more states to sell, solicit, or transact insurance in a given state.

Question 31

Proposed Insured:

Answer 31

This is the person whose life will be covered by an insurance policy. (See also: Insured).

Question 32

Public Adjuster:

Answer 32

This person acts on behalf of a consumer who’s settling an insurance claim.

Question 33

Reciprocal Insurer:

Answer 33

This is an unincorporated organization in which all members insure one another. An attorney-in-fact manages it.

Question 34

Reinsurance:

Answer 34

This is the acceptance by one or more insurers (referred to as reinsurers) of a portion of the risk being underwritten by another insurer that has contracted with a consumer to cover the entire risk.

Question 35

Reinsurer:

Answer 35

This is a company that provides financial protection to insurance companies. Reinsurers handle risks that are too large for insurance companies to cover on their own and make it possible for insurers to obtain more business than they would otherwise be able to obtain.

Question 36

Risk Retention Group:

Answer 36

This is a group-owned liability insurer that assumes and spreads product liability and other forms of commercial liability risks among its members.

Question 37

Sales Department:

Answer 37

This department acquires clients through one-on-one meetings in which consumers complete applications.

Question 38

Self-Insurer:

Answer 38

This is a company that establishes a self-funded plan to cover potential losses rather than transferring the risk to an insurance company.

Question 39

Service Representatives:

Answer 39

These are customer service employees. Service representatives are not required to obtain a license because they neither sell nor solicit coverage, and they don’t bind coverage.

Question 40

Solicitors:

Answer 40

These are the individuals who solicit and schedule sales meetings between consumers and the producers for whom they work. Some states separately license these individuals.

Question 41

Stock Insurance Company:

Answer 41

This is an insurance company that’s owned and controlled by a group of stockholders (or shareholders) whose investment in the company provides the safety margin necessary in the issuance of guaranteed, fixed premium, nonparticipating policies.

Question 42

Surplus Lines Insurance:

Answer 42

This is non-traditional insurance that’s only available from a surplus lines insurer. This type of insurance provides coverage for substandard or unusual risks and is not available through private or commercial carriers.

Question 43

Unauthorized Insurer:

Answer 43

This is a non-admitted insurer.

Question 44

Underwriting Department:

Answer 44

This is the department within an insurance company that’s responsible for reviewing applications, approving or declining applications, and assigning risk classifications.