Chapter 1-Insurance Basics for Life & Health

Question 1

transfer of risk

Answer 1

Insurance

Question 2

possibility or chance of loss

Answer 2

Risk

Question 3

the company accepting the risk

Answer 3

Insurer

Question 4

only the possibility of loss/insurance companies only take on these types of risks

Answer 4

Pure Risk

Question 5

Individual has chance of gain or loss (gamble/investment)

Answer 5

Speculative Risk

Question 6

Avoid
Reduce
Retain
Share
Transfer

Answer 6

Risk Management Techniques

Question 7

Cause of loss (accidents & sickness)

Answer 7

Peril

Question 8

Chance of loss

Answer 8

Hazard

Question 9

physical in nature

Answer 9

Physical Hazard

Question 10

based on a person’s values or ethics (take advantage)

Answer 10

Moral Hazard

Question 11

Living an unnecessary, unhealthy or careless lifestyle

Answer 11

Morale Hazard

Question 12

more numbers used to establish a statistic

Answer 12

Law of Large Numbers

Question 13

spreading a risk over a group of investors

Answer 13

Lloyd’s

Question 14

owned by stock or shareholders (non-participating)

Answer 14

Stock Company

Question 15

policyholder does NOT receive a dividend-stock co

Answer 15

Non-Participating

Question 16

owned by its policyholders

Answer 16

Mutual Company

Question 17

policyholder receives a dividend (return of premium)-mutual

Answer 17

Participating

Question 18

Risk-interest +expenses

Answer 18

Gross Premium

Question 19

nonprofit entity organized under a lodge system
large enough membership to provide insurance protection to members

Answer 19

Fraternal

Question 20

insurance between insurers to limit exposure

Answer 20

Reinsurance

Question 21

of sound mind & legal age

Answer 21

Competent Parties

Question 22

the purpose of the contract must be legal

Answer 22

Legal Purpose

Question 23

offer and acceptance between applicant and insurer

Answer 23

Agreement

Question 24

something of value is exchanged
premium and information for promise to pay

Answer 24

Consideration

Question 25

when the company rejects the offer of the applicant, but comes back with a new offer

Answer 25

Counter Offer

Question 26

promise or guarantee does not apply to statements on an application

Answer 26

Warranties

Question 27

truth to the best of the applicant's knowledge

Answer 27

Representation

Question 28

mistruth or lie

Answer 28

Misrepresentation

Question 29

had the company been aware of it might change how or if the policy was issued

Answer 29

Material Statement

Question 30

hiding or withholding of the truth (lack of whole truth)

Answer 30

Concealment

Question 31

financial or emotional interest at the time of the sale

Answer 31

Insurable Interest

Question 32

permission of the individual or guardian of the one to be insured

Answer 32

Consent

Question 33

an agreement for the company to provide coverage on the client while still completing the underwriting process

Answer 33

Interim Insurance Agreement

Question 34

date coverage starts

Answer 34

Effective Date

Question 35

states coverage will begin either on the date of application or the date of the physical (if required) whichever is last IF the applicant was insurable on that date

Answer 35

Conditional Receipt

Question 36

coverage begins on the date of application unless notified otherwise

Answer 36

Binding Receipt

Question 37

agent checks the health status of the applicant one last time before delivery of the policy

Answer 37

Statement of Good Health

Question 38

contracts that pay a specified amount; life and disability are examples

Answer 38

Valued Contract

Question 39

a contract that is designed to reimburse the insured based on the extent of the loss

Answer 39

Reimbursement contract

Question 40

prepaid coverage that provides protection in the form of services rather than benefits (HMO)

Answer 40

Service Contract

Question 41

contract that requires certain events to occur before the company will pay claims

Answer 41

Conditional

Question 42

only one party in the contract can be held to a promise

Answer 42

Unilateral

Question 43

one party (the insurer) is responsible for wording leaving room for challenge if language is ambiguous

Answer 43

Adhesion

Question 44

contract of unequal exchange

Answer 44

Aleatory

Question 45

voluntarily give up known right

Answer 45

Waiver

Question 46

legally stopped from being able to enforce one's legal right

Answer 46

Estoppel

Question 47

lying with the intent to gain

Answer 47

Fraud

Question 48

contract between the agent and the company

Answer 48

Agency Agreement

Question 49

representative of a principal

Answer 49

Agent

Question 50

intermediary who sells, solicits or negotiates insurance on behalf of a client

Answer 50

Broker

Question 51

clearly spelled out powers

Answer 51

Expressed

Question 52

powers not spelled out but allowed or expected

Answer 52

Implied

Question 53

power that looks "real", but is not exist

Answer 53

Apparent

Question 54

situations in which an insurance company extends insurance coverage to an applicant whose actual risk is substantially higher than the risk known by the insurance company.

Answer 54

Adverse Selection

Question 55

written "offer" signed and made by the prospective insured

Answer 55

Application

Question 56

allows the agent to share information with the company concerning the applicant

Answer 56

Agent/Producer's Report

Question 57

report completed by the insured's current physician

Answer 57

Attending Physician's Report or Attending Physician's Statement

Question 58

a source that subscribing companies use to share application information to verify the information gathered in the application process

Answer 58

Medical Information Bureau (MIB)

Question 59

federal legislature designed to protect consumer information requiring the applicant the ability to know who is gathering the information, see what is being gathered and correct misinformation collected

Answer 59

Fair Credit Reporting Act

Question 60

financial report of information on applicant

Answer 60

Credit Report

Question 61

a report concerning the financial, moral, physical or any other relevant information about applicant

Answer 61

Inspection Report

Question 62

hobby of applicant that may impact risk

Answer 62

Avocation

Question 63

better than average risk

Answer 63

Preferred

Question 64

average risk

Answer 64

Standard

Question 65

below average risk

Answer 65

Substandard

Question 66

rejection of risk

Answer 66

Declined

Question 67

risk-interest=

Answer 67

Net Premium

Question 68

monthly, annual, etc

Answer 68

Premium Modes

Question 69

Obligations at Death Estate Building Living Benefits Property are all what?

Answer 69

Uses for Life Insurance

Question 70

How much death benefit would it take if the insured died today ? This is what type of valuation approach?

Answer 70

Needs Approach (Immediate, final exp, future needs of survivors)

Question 71

if the insured died today, what is the potential loss of future earnings? This is what type of valuation approach?

Answer 71

Human Life Value Approach