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PSI: INSURANCE > 1: Insurance Basics for Life and Health > Flashcards

1: Insurance Basics for Life and Health Flashcards

1
Q

Insurance is defined as the ___________ of risk.

A

transference

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2
Q

Risk is defined as the “_________ or possibility of a loss.”

A

chance

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3
Q

In life insurance, an insured’s risk is ___________ _______

A

premature death

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4
Q

Insurance takes that large uncertain financial risk, and for a relatively minimal ____, passes the responsibility to the insurer.

A

fee

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5
Q

Once the insurer accepts the _____, it then spreads that _____ among other insureds with like exposure.

A

risk, risk

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6
Q

Insurance then becomes the “_____” paying for the few.

A

many

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7
Q

Risk has now been defined as the “____________ or chance of a loss.”

A

possibility

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8
Q

There are 2 types of risk: one type is ________, while the other is not.

A

insurable

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9
Q

The first type of insurance is referred to as “______ risk”

A

pure

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10
Q

In a pure risk, there is only a

A

possibility of loss

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11
Q

Examples of pure risk:

A

death, sickness, house burning down

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12
Q

The second type of insurance is ________ risk

A

speculative

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13
Q

With a speculative risk, an individual has the chance to _____ or lose.

A

gain

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14
Q

The insurance companies never insure speculative risks; they ONLY insure ______ risks.

A

pure

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15
Q

When Jill purchases an insurance policy, she is _________ risk from herself to the insurance company.

A

transferring

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16
Q

If Jill chooses not to expose herself to the risk, the risk can be ________

A

avoided

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17
Q

By ________ the risk, the chance of it occurring is less.

A

reducing

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18
Q

When Jill _______ the risk or a portion of the risk, she is willing to pay for the loss, when and IF it occurs.

A

retains

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19
Q

When a risk is ______, Jill assumes a portion of the risk in relationship to her invested portion.

A

shared

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20
Q

________ means that Jill takes the risk she is personally responsible for and ________ it to another party, who then assumes the risk.

A

transferring, transfers

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21
Q

A _______ is defined as a cause of a loss.

A

peril

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22
Q

Perils are two things:

A

accidents and sickness

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23
Q

Premature death, medical expenses and disabilities are caused by _______

A

perils

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24
Q

Hazards increase the _________ of a loss

A

chance

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25
Q

A hazard makes the risk ______ likely to occur.

A

more

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26
Q

3 TYPES OF HAZARDS

A

physical hazard, moral, morale

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27
Q

these hazards are physical in nature. you can see, touch or smell them. the ice in the above example is a _______ hazard. smoking is also this type of hazard.

A

physical

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28
Q

A ________ hazard is based on a person’s values or ethics.

A

moral

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29
Q

a policyholder might attempt to create a loss on purpose in order to take advantage of the insurance company is an EXAMPLE of what hazard?

A

moral

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30
Q

This hazard increases the chance that a company might have to pay a claim.

A

moral

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31
Q

This hazard deals more with carelessness or irresponsibility.

A

morale

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32
Q

Morale hazard: Someone who lives an unhealthy lifestyle or takes unnecessary risks may increase the chance of a ______

A

loss

33
Q

the LAW OF LARGE NUMBERS is a concept that states the _______ numbers used to a establish a statistic, the more accurate it will be.

A

more

34
Q

The chance of heads turning up in a coin toss is?

A

50/50

35
Q

Statistics would be much more accurate after how many coin tosses?

A

100

36
Q

Because insurance companies have access to statistics on large numbers of our population, they can adequately predict an insured’s chance of death at a ________ age or the chance that a house might burn to the ground.

A

specific

37
Q

The LAW OF LARGE NUMBERS is used to adequately ___________ and _________ risk.

A

predict, anticipate

38
Q

Lloy’s is a company that insures by:

A

spreading risk over a group of investors

39
Q

Lloyd’s of London is the original ______

A

Lloyd’s

40
Q

Whereas Lloyd’s is not considered is not considered to be an insurance company, they do _______

A

insure

41
Q

Lloyd’s specialize in what type of situations:

A

unique, hard

42
Q

Stock companies are companies owned by who?

A

stock or shareholders

43
Q

The policyholder does not normally participate in receiving any

A

divisible surplus

44
Q

STOCK companies both the product and company are referred to as

A

nonparticipating

45
Q

Stock companies do not generally pay what to the policyholders?

A

dividends

46
Q

Mutual companies owned by its

A

policyholders

47
Q

Since each policyholder has an ownership interest in the company, when the company makes a _______, it pays it out to the policyholder as a ________ surplus.

A

profit, divisible

48
Q

IN mutual companies, since the policy owner is receiving the dividend, this is referred to as a ____________ product or company.

A

participating

49
Q

The dividend from a participating product is defined as a

A

return of premium

50
Q

The GROSS premium of the insurance contract is determined by 3 SOURCES:

A

risk, interest and expenses

51
Q

For example, if fewer people had claims than the company expected in the current year, the company may not need as much as it collected and as a result has a ________ surplus.

A

divisible

52
Q

Any dividend returned to the policyholder will not be what?

A

taxed

53
Q

A fraternal is a nonprofit entity that organized under what type of system?

A

lodge

54
Q

It has a large enough membership that the organization is able to provide insurance protection to WHO?

A

its own members

55
Q

Dividends can be project, but NEVER what?

A

guaranteed

56
Q

Reinsurance is between what?

A

Insurers

57
Q

Occasionally an insurance company will need to spend its risk beyond its own policyholders is known as what?

A

ceding company

58
Q

If a risk is larger than the company is comfortable with, it may seek out a reinsurer known as?

A

assuming company

59
Q

A reinsurance treaty is the agreement between the ___________ and the _________ company.

A

ceding, assuming

60
Q

The four elements of a legal contract are

A

competent parties, legal purpose, offer and acceptance, consideration

61
Q

In a legal binding contract, each party must be ______ competent

A

legally

62
Q

The intent of the contract itself must be for a _____ purpose

A

legal

63
Q

For offer and acceptance, the offer is most typically made by who?

A

the applicant

64
Q

The first party to offer full “__________” as part in the transaction makes the offer.

A

consideration

65
Q

Agreement then results when an offer is

A

made and accepted

66
Q

Counter offers occur when an applicant what that is REJECTED

A

application and premium

67
Q

In the insurance transaction contract, CONSIDERATION is defined as something of value exchanged between who

A

each party of the contract

68
Q

In the insurance transaction the applicant gives what 2 things of value:

A

premium and information on the application

69
Q

In exchange for the applicant’s consideration, the company gives the promise to

A

pay

70
Q

A warranty is a ________ or a guarantee

A

promise

71
Q

A representation is the truth to the best of who’s knowledge?

A

applicant

72
Q

A misrepresentation is a

A

mistruth or a lie

73
Q

A material statement is something that had the insurance company been aware of, the information would have

A

affected how or IF the policy was issued

74
Q

concealment is the hiding or withholding of the

A

truth

75
Q

Insurable interest the

A

financial or emotional interest

76
Q

Insurable interest must exist at the time of the

A

sale

77
Q

Consent is established by obtaining a

A

signature on the application

78
Q

Based upon contract law, a contract does not go into effect until after the ___________ is complete

A

agreement

PSI: INSURANCE (1 decks)

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