Chapter 1 Flashcards
Another term which means the same as insurance policy
Insurance Contract
Which of the following correctly identifies the most important principle(s) of insurance
Risk Pooling, Insurable Interest, and The Law of Large Numbers
Risk Pooling is best described by
Combining similar losses from many people so the average loss over the entire group remains relatively constant
In life and health insurance, a person’s greatest asset is
The law of large numbers
All of the following correctly describe risk pooling, except
Loss sharing spreads risk by sharing the possibility of loss over a small number of people
Which of the following terms means risk is spread by sharing the possibility of loss over a large number of people
Risk Pooling
Which of the following correctly describes the law of large numbers
It states that as a group’s size increases, it is easier to predict the number of future losses over a specific time period
Actuaries are characterized by all of the following, except
They are underwriters
Insurance is
A transfer of the uncertainty of loss from the insured to the insurance company
All of the following are classifications of pure risk, except
Speculative risks
What type of risk is flood
Fundamental
(fundamental risks involve an entire population or group of people and include risks that everyone may be susceptible to such as natural disasters)
Harry is a 45 year old widower and father of three children. He decides it is time to purchase life insurance to protect the financial livelihood of his children, especially during the child-rearing years. How would you characterize Harry’s risk of permature death?
Particular and financial
Which of the following statements is not false regarding exposure?
Exposure is the condition of being prone to loss because of an uncertain event
Insurable risks include
Pure
Only pure risks are insurable. Speculative and nonfinancial are not insurable
A premature death is a cause of loss, which is also known as a/an
Peril
A peril is the cause of loss
