Basic Principles Of Life And Health Insurance

Question 1

Is a legal contract that transfers an uncertain risk from one party to another. The insured transfers, the possibility of suffering, a large financial loss to an insurer in return for paying a relatively small, contractually defined premium.

Answer 1

Insurance

Question 2

When an insurance policy restores an insured to the financial position, he or she experienced before an insured loss. Insurance companies _________ they’re insured when covered losses occur.

Answer 2

Indemnify

Question 3

Nonparticipating insurance companies are also known as:

Answer 3

Stock companies

Question 4

Stock insurers issue ___________ insurance policies because policy owners are not stockholders and therefore, are not owners.

Answer 4

Non-participating

Question 5

Participating insurance companies are also known as:

Answer 5

Mutual companies

Question 6

• the policy holders own mutual insurance companies
• the revenue paid out in the form of policy dividends is referred to as the divisible surplus

What type of company? Hint: think participating

Answer 6

Mutual companies

Question 7

Participating policies: are when policy owners receive a share of surplus revenue in the form of policy dividends.

What type of insurance companies sell participating policies?

Answer 7

Mutual insurance companies

Question 8

To pay for claims this type of insurance company assesses premiums at the time members experience loss.

Answer 8

Assessment mutual insurers

Question 9

• not for profit organizations that are noted for their social, charitable, and benevolent activities.
• membership is based on a common bond, and these organizations may be formed around a common religion, nationality, ethnicity, charitable, cause, or other affiliation.

Answer 9

Fraternal benefits societies

Question 10

Each policy owner individually assumes a share of another’s risk. This type of insurance contracts, a form of risk sharing rather than risk transfer.

Answer 10

Reciprocal insurers

Question 11

A specialized insurance company that provides liability insurance for individuals and entities with a common bond

Answer 11

Risk retention groups (RRGs)

Question 12

_____________ buys coverage for its members, which must have a common bond.
• this type of group becomes a master policyholder, and it’s members receives certificates of insurance.

Answer 12

Risk purchasing groups (RPGs)

Question 13

___________ provide insurance for other insurance companies.

Answer 13

Reinsurers

Question 14

In the concept of reinsurers, the primary insurer is also referred to as:

Answer 14

a ceding insurer

Question 15

The maximum amount of exposure that the insurer can carry when ensuring a single risk

Answer 15

Risk retention limit

Question 16

____________ exists when a reinsurer enters into a contract with a primary insurance company to automatically assume it’s excess exposure for risks that meet contractually defined criteria. This agreement is also referred to as automatic reinsurance.

Answer 16

Treaty reinsurance

Question 17

When a primary insurer seeks reinsurance for a specific exposure without an ongoing agreement, it’s referred to as:

Answer 17

Facultative reinsurance

Question 18

A ____________ is established to cover the loss exposure of the parent organization that owns it

Answer 18

Captive insurer

Question 19

______________ are unauthorized insurers that provide coverage when authorized insurers reject buyers or authorized insures don’t offer the type of insurance being sought.

Answer 19

Surplus lines insurance carriers

Question 20

___________ is a syndicate of individuals that individually underwrite special (unique) risks.

Answer 20

Lloyds of London

Question 21

An _____________________ describes an insurer that has been issued a certificate of AUTHORITY from a state’s insurance department authorizing the insurer to transact insurance in that state. Insurers must receive a certificate of authority from each state they wish to transact insurance.

Answer 21

Authorized or admitted insurer

Question 22

An _________________ company is prohibited from conducting insurance operations in that particular

Answer 22

Unauthorized (non-admitted) insurance

Question 23

_____________ is organized and incorporated in the state in which it’s writing business

Answer 23

Domestic insurer

Question 24

____________ is organized under the laws of a different state

Answer 24

Foreign insurer

Question 25

_________________ is organized under the laws of a different nation

Answer 25

Alien insurer

Question 26

The term ___________ describes an individual or organization that is licensed by a state to solicit, cell, or transact insurance in that state.

Answer 26

Producer

Question 27

_____________ identify, examine, assess, and classify loss exposures.

They also approve or decline applications and determine the cost of insurance

Answer 27

Underwriters

Question 28

___________ calculate policy rates, reserves, and dividends.

Answer 28

Actuaries

Question 29

_________________ is an industry association of state insurance regulators focused on establishing model, acts and regulations that provide a common framework for state officials to address industrywide issues. These regulatory models help streamline legislative and administrative processes while encouraging uniform standards.

Answer 29

National Association of insurance commissioners (NAIC)

Question 30

The NAIC list 4 objectives:

Answer 30

1. To encourage regulatory uniformity among the states.
2. To promote efficient regulatory administration.
3. Protect policy owners and consumer interests.
4. To preserve state regulation of the insurance industry.

Question 31

The NAIC’s ______________ label certain words and phrases as inherently misleading and bans their use.

Answer 31

Model advertising code

Question 32

_____________ gives a state insurance department the power to:
• investigate insurance companies and producers
• issue cease and desist orders
• impose penalties
• seek a court injunction to restrain unfair activities

UTPA

Answer 32

NAIC Unfair Trade Practices Act (model act)

Question 33

____________ is an association of state legislators that serves on insurance and financial institutions committees to educate policy makers and preserve state regulation. Also rights model laws.

Answer 33

The national conference of Insurance legislators (NCOIL)

Question 34

______________ describe companies that determine an insurer’s financial strength. These services publicize the financial health of insurers after analyzing company reserves, and liquidity.

Answer 34

Rating services

Question 35

At what point must a life insurance applicant be informed of their rights that fall under the fair credit reporting act?

Answer 35

Upon completion of the application

Question 36

An insurance applicant must be informed of an investigation regarding his or her reputation and character according to the:

Answer 36

Fair credit reporting act

Question 37

A nonprofit incorporated society that does not have capital stock and operates for the soul benefit of its members is known as:

Answer 37

A fraternal benefits society

Question 38

Which of the following requires insurers to disclose when an applicants consumer or credit history is being investigated?

Answer 38

The fair credit reporting act - 1970

Question 39

Which of these describe a participating insurance policy?

Answer 39

Policy owners are entitled to receive dividends