Unit 1 introduction to insurance principles and concepts

Question 0

Risk is the…..

Answer 0

Possibility that loss may occur:

Life insurance protects against the death of a loved one , or business associate.

Question 1

Life Insurance protects against…

Answer 1

Loss-
a loss is the reduction of the quantity or value of something. life insurance is most commonly used to protect family and business from any financial effects due to premature death. In the event of the tragedy, life insurance proceeds can help pay the bills, continue the family business, finance future needs like education and protect spouses retirement plans.

Question 2

There are two kinds of risk what are they?

Answer 2

Pure and speculative.

Question 3

Pure risk has a chance of…..? Speculative risk has a chance of…..?

Answer 3

loss only; loss or gain

Question 4

Their are five ways to handle risk, what are they?

Answer 4

Sharing; transfer; avoidance; reduction; retention

Question 5

To be insurable, the risk must be……..(5 facts)

Answer 5

...be a large number of similar risk to pool and share (statistically predictable).
...be measurable.
...be uncertain.
...must cause economic hardship.
... Cannot be catastrophic.

Question 6

Terms:

Loss

Answer 6

A reduction in the quantity or value of something.

Question 7

Term:

Risk

Answer 7

The possibility that a loss might occur.

Question 8

Terms:

The immediate event causing a loss.

Answer 8

Peril

Question 9

Terms:

The factor that gives rise to a peril.

Answer 9

Hazard

Question 10

Explain the law of large numbers.

Answer 10

The larger the number of similar risks, the more accurate the prediction of future loss. This is important because insurance rates and premiums are based on these numbers.

Question 11

The most common insurers are…

Answer 11

Stock & Mutual

Question 12

Stock insurers (companies) are made up of ___ ___ who have ___ in the company and receive ___ based on company ___.

Answer 12

Stock holders; shares; dividends; profits

Question 13

The dividends received from stock insurers are…..

Answer 13

Taxable

Question 14

Mutual insurers (companies) are owned by___and___received from___insurers are based on a return of___premium and are therefore not___.

Answer 14

Policyholders; dividends; mutual; excess; taxable

Question 15

Insurers are also classified by their place of origin which means where they conduct business. There are three types what are they?

Answer 15

Domestic; foreign; alien

Question 16

Terms:

A chartered or incorporated within the state is a ___ insurer.

Answer 16

Domestic

Question 17

Terms:

Chartered in another state, US territory, or District of Columbia is a___insurer.

Answer 17

Foreign

Question 18

An___ insurer is charted outside of the US, US territories or district of Columbia.

Answer 18

Alien

Question 19

Individuals who solicit applications for life insurance are___or___.

Answer 19

Producers; agents

Question 20

Producers or agents represent who?

Answer 20

The insurer.

Question 21

Producers or agents authority can be___,___or___authority.

Answer 21

expressed; implied; apparent

Question 22

A contract is a legally binding agreement between two or more legally competent parties. To form a valid contract, four elements are necessary what are they?

Answer 22

agreement; consideration; competent parties; legal purpose

Question 23

_______is an offer, followed by acceptance. The application and initial premium, if collected from the proposed insured is the offer and the insurance company from approving the application and issuing a policy is the acceptance.

Answer 23

Agreement (offer and acceptance)

Question 24

_____ Is the exchange of something of value for a service, such as the exchange of premiums for insurance coverage.

Answer 24

Consideration

Question 25

Who have legal capacity to enter into a contract. Parties to a contract must be of legal age, saying, sober of sound mind.

Answer 25

Competent parties

Question 26

The purpose of an insurance contract must be legal this is called what?

Answer 26

Legal purpose

Question 27

Terms:

A statement guaranteed to be true, the absolute truth.

Answer 27

Warranties

Question 28

Terms:

A statement believed to be true to the best of one’s knowledge.

Answer 28

Representations

Question 29

A false statement is called?

Answer 29

Misrepresentation

Question 30

Terms:

Concealment is…..

Answer 30

Failure to disclose a known fact.

Question 31

Terms:

intentional act designed to deceive and induce (a life for financial gain).

Answer 31

Fraud

Question 32

Term:

To intentionally give up a known fact.

Answer 32

Waiver