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Florida Life & Health Insurance Exam > Basic Principles of Insurance > Flashcards

Basic Principles of Insurance Flashcards

1
Q

a company that provides financial protection to insurance companies

They handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to.

A

reinsurer

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2
Q

a federal law requiring an individual to be informed if she is being investigated by an inspection company

it also outlines the sharing and impact of such information and requires individuals to be notified prior to the start of the investigation

A

Fair Credit Reporting Act

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3
Q

a form of insurance that insures the beneficiary’s earned income against the risk that a disability creates a barrier for a worker to complete the core functions of their work

A

Disability

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4
Q

a general way of describing insurance against loss through sickness or accidental bodily injury; applies to many different types of insurance

A

health insurance

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5
Q

a guarantee to restore the insured to the position they were in before the uncertain incident that caused a loss for the insured

A

principle of indemnity

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6
Q

a mandatory health insurance provision stating that the insured must provide a completed claim form with proof to the insurer of their loss within days of the date of loss

A

proof of loss

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7
Q

a piece of paper which provides basic key information about the insurance policy including name and address of the insured, policy period, location of property, and policy

A

declaration page

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8
Q

a plan under which the policy owner receives shares (or dividends) of the divisible surplus of the company

A

participating plan

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9
Q

a policy provision that describes the policy owner’s obligation to provide notification of loss to the insurer within a reasonable period of time; only requires the insurance company to be notified, not proven

A

notice of claim

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10
Q

an informational document with a summary of the terms of an insurance policy, including the conditions, coverage limitations, and premiums

the insurance company is required to give this to the applicant

A

Policy Summary

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11
Q

a type of life insurance in which a single contract covers an entire group of people; the insured typically does not own the policy

A

group life insurance

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12
Q

an association established by each state to support insurers and protect consumers in the case of insurere insolvency

A

State Guaranty Association

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13
Q

an association of all of the state insurance commissioners active in insurance regulartory problems and in forming and recommending model legislation and requirements

this association does not make laws, but rather works on suggesting standards for state adoption; their goal is to standardize the insurance industry

A

National Association of Insurance Commissioners (NAIC)

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14
Q

An insurance company or independent agent that provides a one-stop shop for businesses or individuals seeking coverage for all their insurance needs.

A

multi-line insurer

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15
Q

an insurance policy provision stating that the application and policy contain all provisions

A

entire contract

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16
Q

an insurance policy that provides financial reimbursement to the owner or renter of a structure and its contents in the event of damage or theft

A

property insurance

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17
Q

any situation that presents the possibility of a loss

A

loss exposure

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18
Q

home service or “debit” insurance companies that specialize in insurance for work related injuries and illnesses (worker’s compensation)

A

industrial insurer

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19
Q

individual characteristics that increase the chance of peril

A

physical hazards

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20
Q

industrial insurer

A

home service or “debit” insurance companies that specialize in insurance for work related injuries and illnesses (worker’s compensation)

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21
Q

informational consumer guide books that explain insurance policies and concepts

they are often required to be given to applicants who are considering certain types of coverage

often used with life insurance, long-term care insurance, and annuities

A

Buyer’s Guide

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22
Q

insurance against loss due to the death of a particular person (the insured) upon whose death the insurance company agrees to pay a stated sum or income to the beneficiary

“we will pay this amount when this person dies”

A

life insurance

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23
Q

Insurance companie characterized by having no capital stock; it is owned by its policy owners and usually issues participating insurance

for the purposes of insurance

A

mutual companies

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24
Q

Insurance companies owned and controlled by a group of stockholders whose investment in the company provides the safety margin necessary in issuance of guaranteed, fixed premium, nonparticipating policies.

for the purposes of insurance

A

stock companies

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25
insurance that pays benefits for nonsurgical doctors' fees commonly rendered in a hospital; sometimes pays for home and office calls
medical expense insurance
26
Insurance under which the insured is not entitled to share in the divisible surplus of the company
nonparticipating plan
27
insurance which broadly encompasses insurance not directly concerned with life, health or property insurance; it protects you financially in the event that someone sues you
casualty (liability) insurance
28
life insurance
insurance against loss due to the death of a particular person (the insured) upon whose death the insurance company agrees to pay a stated sum or income to the beneficiary | "we will pay this amount when this person dies" ##Footnote insurance that provides beneficiaries with a lump sum upon the insured’s death
29
life insurance protection for a set number of years ## Footnote designed to provide temporary protection in case a person dies during a set period of time
term life insurance
30
nonprofit benevolent organization that provides insurance to its members
Fraternal Benefit Societies
31
permanant life insurance protection for a person's "whole of life," from policy issue to the death of the insured
whole life insurance
32
protects the insured from damage caused by property owned by the insured ## Footnote main kinds include auto, homeowner's, renters, and umbrella insurance
property and casualty insurance
33
risks that are not insurable because they involve the chance of both loss and gain ## Footnote Example: gambling at the casino, or investing in the stock market
speculative risks
34
similar objects of insurance that are exposed to the same group of perils
homogeneous exposure units
35
something that can cause a financial loss; the accident itself
peril
36
states that the larger the number of individual risks (or exposures) that are combined in a group, the more certainty there is as to the amount of loss incurred in any given period
Law of Large Numbers
37
tendencies that people may have that arise from an attitude or state of mind causing indifference to loss, and loss increasing the chance of loss ## Footnote Example: someone with a habit of driving recklessly
morale hazards
38
tendencies that people may have which increase risk and the chance of loss ## Footnote Example: alcoholism and drug addiction
moral hazards
39
the act of putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums requires
reinstatement
40
the amount of expense or loss to be paid by the insured before an insurance policy starts paying benefits ## Footnote typically applies to property, casualty, and health insurance
deductible
41
the only insurable type of risks; they involve only the chance of loss and there is never a possibility of gain or profit
pure risks
42
1. the value given in exchange for the promises sought 2. a clause in an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments
Consideration
43
the portion of the insurance policy in which the insurer promises to make payment to or on behalf of the insured; states the scope and limits of coverage
the insuring agreement | aka insuring clause or insurance provision
44
the practice of **accepting the risk** and **confronting it** if and when it occurs **through self-insurance**
risk retention
45
the practice of attempting to lessen the possibility of loss by taking action to reduce the risk ## Footnote Example: installing a smoke alarm to reduce the risk of loss from fire
risk reduction
46
the practice of avoiding as many risks as possible ## Footnote Example: avoiding vehicular peril by choosing not to drive or own a vehicle
risk avoidance
47
the practice of transferring the risk to another party so that, if a loss occurs, it's absorbed by the other party
risk transference
48
the process of analyzing exposures that create risk and designing programs to handle them
risk management
49
the unintentional decrease in the value of an asset due to a peril
loss
50
These are funds held by the company to help fulfill future claims. Minimums are usually set the state Department of Insurance
reserve
51
this spreads risk by sharing the possibility of loss over a large number of people; it transfers risk from an individual to a group
risk pooling
52
uncertainty regarding loss
risk
53
whole life insurance
permanant life insurance protection for a person's "whole of life," from policy issue to the death of the insured
54
the practice of spreading risk from one insurer to one or more other insurers in order to minimize exposure to loss and deal with catastrophic loss
reinsurance
55
reinsurer
a company that provides financial protection to insurance companies ## Footnote They handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to.
56
Fair Credit Reporting Act
a federal law requiring an individual to be informed if they are being investigated by an inspection company it also outlines the sharing and impact of such information and requires individuals to be notified prior to the start of the investigation
57
Disability
a form of insurance that insures the beneficiary's earned income against the risk that a disability creates a barrier for a worker to complete the core functions of their work
58
health insurance
a general way of describing insurance against loss through sickness or accidental bodily injury; applies to many different types of insurance
59
principle of indemnity
a guarantee to restore the insured back to the position they were in before the uncertain incident that caused a loss for the insured ##Footnote A concept that states the insurance company will make the insured whole again.
60
proof of loss provision
a mandatory health insurance provision stating that the insured must provide a completed claim form with proof to the insurer within days of the date of loss
61
declaration page
a piece of paper which provides basic key information about the insurance policy including name and address of the insured, policy period, location of property, and policy
62
participating plan
a plan under which the policy owner receives shares (or dividends) of the divisible surplus of the company
63
notice of claim provision
a policy provision that describes the policy owner's obligation to provide notification of loss to the insurer within a reasonable period of time only requires the insurance company to be notified, not proven ##Footer a provision stating that the policy owner must notify the insurance company of any losses within a reasonable amount of time
64
Policy Summary
an **informational document** with a **summary of the terms** of an insurance policy, including the conditions, coverage limitations, and premiums ## Footnote the insurance company is required to give this to the applicant
65
group life insurance
a type of life insurance in which a single contract covers an entire group of people; the insured typically does not own the policy
66
State Guaranty Association
an **association established by each state to support insurers and protect consumers** in the case of insurer insolvency
67
National Association of Insurance Commissioners (NAIC)
an association of all of the state insurance commissioners active in insurance regulatory problems and in forming and recommending model legislation and requirements ## Footnote this association does not make laws, but rather works on suggesting standards for state adoption; their goal is to standardize the insurance industry
68
multi-line insurer
An insurance company or independent agent that provides a one-stop shop for businesses or individuals seeking coverage for all their insurance needs.
69
entire contract
an insurance policy provision stating that the application and policy contains all provisions and contitute the entire contract
70
property insurance
an insurance policy that provides financial reimbursement to the owner or renter of a structure and its contents in the event of damage or theft
71
loss exposure
any situation that presents the possibility of a loss
72
physical hazards
individual characteristics that increase the chance of peril
73
Buyer's Guide
informational consumer guide books that explain insurance policies and concepts they are often required to be given to applicants who are considering certain types of coverage ## Footnote often used with life insurance, long-term care insurance, and annuities
74
mutual companies
Insurance companies characterized by having **no capital stock**; it is **owned by its policy owners** and usually **issues participating insurance**
75
stock companies
Insurance companies owned and controlled by a group of stockholders whose investment in the company provides the safety margin necessary in issuance of guaranteed, fixed premium, nonparticipating policies. ##Footnote Insurance companies owned by stockholders that provide a safety net for the insurance company
76
medical expense insurance
insurance that pays benefits for nonsurgical doctors' fees commonly rendered in a hospital; sometimes pays for home and office calls
77
nonparticipating plan
Insurance under which the insured is not entitled to share in the divisible surplus of the company
78
casualty (liability) insurance
insurance which broadly encompasses insurance *not directly concerned* with life, health or property insurance it protects you financially in the event that someone sues you
79
term life insurance
life insurance protection for a set number of years ## Footnote designed to provide temporary protection in case a person dies during a set period of time
80
Fraternal Benefit Societies
nonprofit benevolent organiztion that provides insurance to its members ## Footnote Producers or agents who only sell within their society do not receive commission, stay under a specific premium threshold, and often have less stringent licensing requirements.
81
property and casualty insurance
protects the insured from being from damage caused by property owned by the insured ## Footnote main kinds include auto, homeowner's, renters, and umbrella insurance
82
speculative risks
risks that are not insurable because they involve the chance of both loss and gain ## Footnote Example: gamblinb at the casino, or investing in the stock market
83
homogeneous exposure units
similar objects of insurance that are exposed to the same group of perils
84
peril
something that can cause a financial loss; the accident itself
85
Law of Large Numbers
states that the larger the number of individual risks (or exposures) that are combined in a group, the more certainty there is as to the amount of loss incurred in any given period
86
morale hazards
tendencies that people may have that arise from an attitude or state of mind causing indifference to loss, and loss increasing the chance of loss ## Footnote Example: someone with a habit of driving recklessly
87
moral hazards
tendencies that people have that may increase risk and the chance of loss ## Footnote Example: alcoholism and drug addiction
88
reinstatement
the act of putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums requires
89
deductible
the amount of expense or loss to be paid by the insured before an insurance policy starts paying benefits ## Footnote typically applies to property, casualty, and health insurance
90
pure risks
the only insurable type of risks; they involve only the chance of loss and there is never a possibility of gain or profit
91
Consideration
1. the value given in exchange for the promises sought 2. a clause in an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments
92
the insuring agreement | aka insuring clause or insurance provision
the portion of the insurance policy in which the insurer promises to make payment to or on behalf of the insured; states the scope and limits of coverage
93
risk retention
the practice of **accepting the risk and confronting it** if and when it occurs **through self-insurance**, a fund set up to offset the costs of a potential loss
94
risk reduction
the practice of attempting to lessen the possibility of loss by taking action to reduce the risk ## Footnote Example: installing a smoke alarm to reduce the risk of loss from fire
95
risk avoidance
the practice of avoiding as many risks as possible ## Footnote Example: avoiding vehicular peril by choosing not to drive or own a vehicle
96
risk transference
the practice of transferring the risk to another party so that, if a loss occurs, it's absorbed by the other party
97
risk management
the process of analyzing exposures that create risk and designing programs to handle them
98
loss
the unintentional decrease in the value of an asset due to a peril
99
reserve
These are funds held by the company to help fulfill future claims. Minimums are usually set the state Department of Insurance
100
risk pooling
this spreads risk by sharing the possibility of loss over a large number of people; it transfers risk from an individual to a group
101
risk
uncertainty regarding loss
102
reinsurance
the practice of **spreading risk from one insurer to multiple other insurers** in order to minimize exposure to loss and deal with catastrophic loss
103
an association of individuals and companies that individually underwrite insurance ##Footnote a formal group of individual underwriters
Lloyd’s of London
104
Lloyd’s of London
an association of individuals and companies that individually underwrite insurance ##Footnote a formal group of individual underwriters
105
a common reinsurance contract between two insurance companies that involves an automatic sharing of the risks assumed
treaty reinsurance
106
treaty reinsurance
a common reinsurance contract between two insurance companies that involves an automatic sharing of the risks assumed
107
an insurer established and owned by a parent firm for the purpose of insuring the parent firm’s loss exposure
captive insurer
108
captive insurer
an insurer established and owned by a parent firm for the purpose of insuring the parent firm’s loss exposure ##Footnote insurer who insures their parent firm
109
a mutual insurance company formed to insure people in the same business, occupation, or profession
risk retention group (RRG)
110
risk retention group (RRG)
a mutual insurance company formed to insure people in the same business, occupation, or profession

Florida Life & Health Insurance Exam (6 decks)

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