Basic Principles

Question 1

commercial insureres

Answer 1

sells insurances for a profit

-made up of 2 types: stock and mutual

Question 2

stock companies

Answer 2

purpose for making a profit for its stockholders

• nonparticipants because policyholders do not receive dividends and do not elect board members
• dividends are taxible

Question 3

mutual companies

Answer 3

known as PARTICIPATING members because they receive dividends and elect board members

• dividends are NOT subject to taxation
• OWNED by policyholders

Question 4

mixed insurer

Answer 4

both participating AND nonparticipating

Question 5

strong assessment mutual companies

Answer 5

assessed by the way they charge premium

Question 6

pure assessment mutual

Answer 6

no advanced premium payment, loss sharing is by group

Question 7

advance premium assessment mutual

Answer 7

charges premium at beginning of policy period

Question 8

fraternal benefits societies

Answer 8

nonforprofit insurance only for their members

Question 9

risk retention groups

Answer 9

mutual companies formed by a group of people with the same profession; i.e. doctors

Question 10

service providers

Answer 10

offer benefit to subscribes in return for premium payment

-HMO, PPO

Question 11

reciprocol insureres

Answer 11

managed by an attorney-in-fact