Terms

Question 1

Law of Large Numbers

Answer 1

• The larger the number of individuals in a group, the more accurate the losses within the group can be determined
• By insuring a large group of the same age and gender, the insurer can accurately predict the death rate, and determine the premiums, and death beneftis

Question 2

Speculative Risk

Answer 2

• Not insurable
• Gambling or lottery

Question 3

Pure Risk

Answer 3

• Only suffer a “loss”
• No game (lottery)

Question 4

Loss

Answer 4

• The financial hurt or reduction in value as a result of the death of the insured

Question 5

Peril

Answer 5

• The cause of a loss
• Death is the peril in life insurance

Question 6

Hazard

Answer 6

• Any condition that increases the peril occurring
• Wreckless driving for example

Question 7

Policy

Answer 7

• A contract of insurance

Question 8

Contract Validity

Answer 8

1. Agreement
2. Consideration
3. Competent Parties
4. Legal Purpose

Question 9

Features in Life Insurance

Answer 9

1. Adhesion
2. Aleatory
3. Unilateral
4. Conditional

Question 10

Adhesion

Answer 10

• Prepared by one party and rejected or accepted by another party on a take it or leave it basis

-

Question 11

Aleatory

Answer 11

• An exchange of unequal values
• Insured pays less and insurer pays in the event of a loss

Question 12

Unilateral

Answer 12

• Only one of the parties in the contract is legally bound to the contract
• Insurer legally must pay the death benefit covered by the policy, if it’s active

Question 13

Conditional

Answer 13

• Certain conditions by both parties must be met
• The insured promises to pay the premiums and proof of loss
• Insurer must pay the loss covered in the policy if it’s active

Question 14

Face Amount

Answer 14

• Face value, death benefit, policy proceeds