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KY Life Insurance License > Key Terms > Flashcards

Key Terms Flashcards

0
Q

Refers to situations that can only result in a loss or no change. The is no opportunity for financial gain. This is the only type of risk insurance companies are willing to accept.

A

Pure risk

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1
Q

The uncertainty or chance of a loss occurring. There are two types: pure and speculative

A

Risk

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2
Q

This term involves the opportunity for either loss or gain. An example is gambling. This type of risk is not insurable

A

Speculative risk

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3
Q

The causes of loss insured against in an insurance policy

A

Perils

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4
Q

Conditions or situations that increase the probability of an insured loss occurring.

A

Hazards

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5
Q

Individual characteristics that increase the chances of the cause of loss. This type of hazard exist because of a physical condition, past medical history, or a condition at birth

A

Physical hazard

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6
Q

Tendencies towards increased risk. These hazards involve evaluating the character and reputation of the proposed insured. This term refers to those applicants that may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer

A

Moral hazard

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7
Q

Similar to moral hazards, except that they arise from a state of mind that causes indifference to loss, such as carelessness. Actions taken without fore thought may cause physical injuries.

A

Morale hazard

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8
Q

The risk of loss from an individual or business entity to an insurance company, which in turn spreads the costs of unexpected losses to many individuals. If the were no insurance mechanism, the cost of a loss would have to be borne solely by the individual who suffered the loss

A

Insurance transfers

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9
Q

Elements of Pure Risk

Loss must be…

A
  • must be due to chance
  • must be definite and measurable
  • must be statistically predictable
  • cannot be catastrophic
  • loss exposure must be large
  • insurance must NOT be mandatory
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10
Q

Method of dealing with risk that eliminates exposure to a loss

A

Avoidance

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11
Q

The planned assumption of risk by an insured through the use of deductibles, copayments, or self-insurance

A

Risk retention

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12
Q

Purposes of risk retention:

A

1 To reduce expenses and improve cash flow
2 To increase control of claim reserving and settlements
3 To fund for losses that cannot be insured

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13
Q

A method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within that group.

A

Sharing

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14
Q

A formal risk-sharing arrangement

A

Reciprocal insurance exchange

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15
Q

Method for dealing with risk including actions that attempt to lessen the possibility or severity of a loss

A

Reduction

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16
Q

Three Factors to Determine Insurable Interest:

A

1 Insuring one’s own life
2 Insuring the life of a family member (relative or spouse)
3 Insuring the life of a business partner, key ee, someone w financial obligation

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17
Q

Four Elements of a Contract:

A

1 Agreement - offer & acceptance
2 Consideration - premium payment & representations in app
3 Competent Parties
4 Legal Purpose

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18
Q

The binding force in any contract. Something of value that each parties gives to the other. The ______ on the part of the insured is the payment if premium and representations made in the app. The ______ on the part of the insurer is the promise to pay in the event of loss.

A

Consideration

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19
Q

Term for a contract prepared by one of the parties (insurer) and accepted/rejected by the other party (insured). Insurance policies are not drawn up through negotiations and an insured has little to say about its provisions.

A

Contract of adhesion

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20
Q

Term for a contract wherein there is an unequal amounts of values. The premiums paid by the insured is small in relation to the amount that will be paid by the insurer in the event of loss

A

Aleatory

21
Q

Term for a contract wherein only one of the parties to the contract is legally bound to do anything. The insured makes no legally binding promises while the insurer is legally bound to pay losses covered by a policy in force

A

Unilateral contract

22
Q

Term for a contract requiring that certain conditions must be met by the policy owner and the company in order for the contract to be executed and before each party fulfills it’s obligations

A

Conditional contract

23
Q

A provision in an insurance policy that states that in the event of loss, an insured or a bene is permitted to collect only to the extent of the financial loss and is not allowed to gain financially because of the existence of an insurance contract. Also referred to as reimbursement

A

Indemnity

24
Q

A statement that, if discovered, would alter the underwriting decision of insurer. Considered fraud.

A

Material misrepresentations

25
Q

An absolutely true statement upon which the validity of the insurance policy depends. Breach of _____ can be considered grounds for voiding the policy.

A

Warranty

26
Q

The legal term for the intentional withholding of information of a material fact that is crucial in making a decision.

A

Concealment

27
Q

The intentional misrepresentation or intentional concealment of a material fact used to induce another party to make or refrain from making a contract, or to deceive or cheat a party. Grounds for voiding an insurance contract.

A

Fraud

28
Q

The intentional act of relinquishing a known right, claim, or privilege

A

Waiver

29
Q

A legal process that can be used to prevent a party to a contract from re-asserting a right or privilege after that right or privilege has been waived

A

Estoppel

30
Q

The relationship of the number of deaths that occur within a group to the number of people who belong to the group over a particular period of time

A

Mortality rate

31
Q

The appearance of, or an assumption of, authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.

A

Apparent

32
Q

This type of plan allows a closely held corporation to, upon the death of a stockholder, purchase their stock from the deceased’s estate.

A

Stock redemption plan

33
Q

Where should disclosure statements be placed in an insurance advertisement?

A

In close proximity to the statements to which the information relates or so prominent that it cannot be minimized, obscured or ambiguous.

34
Q

The cash value in a ________ policy has to build up faster since the funds are intended to be used while the insured is alive, the premium for this type of policy is considerably more expensive than an ordinary straight life policy.

A

An endowment policy

35
Q

__________ is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application.

A

Consideration

36
Q

__________ dividends are paid when fewer insured died than were actuarially projected; therefore, fewer death claims were paid so dividends are paid out.

A

Mortality

37
Q

The type of interest that the insurer assumes that investment premium dollars will earn.

A

Assumed rate of interest

38
Q

When do full social security benefits begin?

A

When the worker reaches age 65 and has earned the required amount of work credits

39
Q

A type of decreasing term insurance in which the face amount directly correlates with the amount of outstanding loan and length of time remaining on the mortgage. The face amount decreases as the amount owed on the mortgage decreases.

A

Mortgage Protection Term (Mortgage Redemption)

40
Q

The term used for a term life insurance policy with the convertible option because the policyholder wants to convert the policy to permanent insurance.

A

Interim term

41
Q

Type of term insurance featuring level annual premiums and a death benefit that increases each year over the duration of the policy term.

A

Increasing term life insurance

42
Q

What does level refer to in level term insurance?

A

Face amount

43
Q

When a breadwinner insured by a Family Policy dies, what rights are provided to other family members that are covered under the policy?

A

They can convert their coverage to permanent insurance if requested within the time star in the policy

44
Q

This type of policy combines decreasing term insurance with whole life insurance to provide the insured’s family with a monthly income upon the death of the insured, while maintaining permanent coverage until the end of the income payments?

A

Family income policy

45
Q

What policy component must decrease in decreasing term insurance?

A

Face amount

46
Q

A ________ policy provides permanent life insurance for the breadwinner and term riders for other family members. With this type of policy, the principal wage earner is the only family member insured.

A

Family policy

47
Q

Two features of level premium term:

A

Level DB

Level premium

48
Q

Two features of annually renewable term:

A

Renews each year w/o proof of insurability

Premiums increased at attained age

49
Q

Two features of decreasing term:

A

Coverage gradually decreases at predetermined times

Premiums stay level

50
Q

2 Features of increasing term life insurance

A

Coverage increases each year

Premiums stay level

KY Life Insurance License (4 decks)

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