unit 1 life and health Flashcards
1
Q
Insurance
A
is a contract that indemnifies another against loss, damage, or
liability arising from an unknown even
2
Q
Indemnify
A
means to make a person whole by restoring that person to the same financial position that existed before the loss.
3
Q
Policyowner
A
The insured
4
Q
Premium
A
pays a set amount of money
5
Q
Insurer
A
the insurance company
6
Q
Insured
A
the person who is
covered by the insurance
7
Q
policy
A
is established in a legal document referred to as a contract of insurance
8
Q
Loss
A
reduction in the value of an asset.
9
Q
claim
A
is a demand for payment of the insurance benefit to the person named in the policy.
10
Q
What must a person do in order to be paid for a loss?
A
They must make a claim.
11
Q
Risk involves two things what are they?
A
a possibility of loss and
an uncertainty about whether the loss will occur.
12
Q
Risk
A
means uncertainty of financial loss, or the chance of loss,
when more than one outcome is possible
13
Q
What are the two types of risk?
A
Pure and Speculative
14
Q
Pure risk
A
means that there is only a chance of loss
15
Q
Speculative risk
A
involves both an uncertainty of loss and of gain
16
Q
peril
A
is the immediate specific event causing loss and giving rise to risk
17
Q
hazard
A
is any factor that gives rise to a peril.
18
Q
Three types of hazards
A
physical, moral, and morale
19
Q
Physical hazards
A
arise from material, structural, or operational features
of a risk situation
20
Q
Moral hazards
A
arise from people’s habits and values
21
Q
Morale hazards
A
arise out of human carelessness or irresponsibility
22
Q
STARR.
A
Sharing, Transfer, Avoidance, Reduction, Retention
23
Q
Sharing
A
when a risk cannot be avoided and retention would involve too much exposure to loss, we may choose risk sharing as a
means of handling the risk.
24
Q
Transfer
A
Risk transfer means transferring the risk of loss to another party, usually an insurance company, that is more willing or able to bear the risk
25
Avoidance
avoiding the risk in the first place
26
Retention
simply means doing nothing about the risk. In other words, people assume or retain the risk and, in effect, become self-insurers.
26
Reduction
Sometimes, when risks cannot be avoided, they can be reduced. Risk reduction can work in one of two ways: it can reduce the chance that a particular loss will occur, or it can reduce the amount of a potential loss
if it occurs
27
Law Of Large Numbers
Insurers are able to predict how many losses will occur in a group.
28
Insurable Interest
A basic rule governing insurance states that before an individual can benefit from insurance, that individual must have a legitimate interest in the
preservation of the life or property insured
29
What are the 5 types of Insurable risk?
1. Large numbers of homogeneous(alike) units
2. Loss must be measurable
3. Loss must be uncertain
4. Economic Hardship
5. Exclusion of Catastrophic Perils
30
Large Numbers of Homogeneous Units
A large number of similar exposure units is necessary in order for the pooling and sharing mechanisms of insurance to function
31
Loss Must Be Measurable
The insurer must be able to place a specific (cash) value on exposures and losses in order to be able to calculate rates and premiums and reach settlements.
32
Loss Must Be Uncertain
Insurance covers pure risks, which must involve an uncertainty of loss.
33
Economic Hardship
There must be a significant potential for economic loss.
34
Exclusion of Catastrophic Perils
The insurance system would collapse if it covered events that caused
widespread losses to large numbers of insureds at the same time. Such as earthquakes, nuclear wars, floods.
35
Indemnity
states that insurance should restore the insured,
in whole or in part, to the condition the insured enjoyed before the loss
36
What's the concept of indemnity for life and health insurance?
Life insurance-replace present and future income. Health Insurance- pays the medical bills and cover wage lost as result of injury
37
Subrogation
a right held by most insurance carriers to legally pursue a third party that caused an insurance loss to the insured. This is done in order to recover the amount of the claim paid by the insurance carrier to the insured for the loss.
37
Limit of Liability
the maximum amount the insurer will pay for a specified insured contingency.
38
What insurance uses "face amount"?
Life insurance, refer to the maximum liability of the insurer for a death claim.
39
What do health and disability policies specify?
Health and disability policies are more likely to specify a maximum benefit amount or period instead
40
Deductible
is simply the initial amount of a covered loss (or losses) that the insured must absorb before the insurer begins to pay for additional loss amounts
41
elimination period
is simply the number of days an insured must be disabled before disability income benefits become payable.
42
Coinsurance
generally expressed as a fixed percentage, an insured must pay toward a covered claim after the deductible is satisfied
43
Property insurance
protects the insured against the financial consequences of the direct or consequential loss or damage to property of every
kind
44
Casualty insurance
protects the insured against the financial consequences of legal liability, including that for death, injury, disability, or damage
to real or personal property.
45
Life insurance
It is designed to protect against the risk of premature death, which exposes a family or a business to certain financial risks, such as burial expenses, paying debts, loss of family income, and business profits.
46
annuity
provides guaranteed income for the life of an annuitant.
47
Accident and health or sickness
insurance protects the insured against financial loss caused by sickness, bodily injury, or accidental death and may include benefits for disability income
48
Variable life and variable annuity products
include insurance coverage provided under variable life insurance contracts and variable annuities.
49
Credit
is a limited line of insurance protecting the insured, who is usually a creditor, against the financial consequences should a debtor be unable to pay debts as a result of illness or death.
50
What major three sources is insurance provided as?
1. private commercial insurers (profit making)
2.private noncommercial insurers (nonprofit
service organizations) 3. the US government (special nonprofit).
51
What kind of insurers are in commercial?
Private Life and Health
52
What kind of insures are private?
Stock and Mutual
53
What kind of insurers are private noncommercial?
Blue Cross and Blue Shield
54
Stock Insurers
consists of stockholders, also known as shareholders, who own shares in the company
55
Mutual Insurers
A mutual insurance company provides insurance coverage to its members and policyholders at or near cost.
Any profits from premiums and investments are distributed to its members via dividends or a reduction in premiums.
56
Reciprocal Insurers
form of insurance organization in which individuals and businesses exchange insurance contracts and spread the risks associated with those contracts among themselves
57
policy dividends
returns a portion of money back to you that you've already paid toward your insurance policy
58
subscriber
Each individual who is a member of the reciprocal
59
Fraternal benefit societies
primarily life insurance carriers that exist as social organizations and usually engage in charitable and benevolent activities
60
Lloyd’s
a is an insurance and reinsurance marketplace. Its members operate as syndicates to provide insurance coverage for businesses, organizations, and individuals
61
Reinsurers
handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to.
62
Excess and Surplus Lines
specialty market that insures things standard carriers won't cover.
63
Risk Retention Groups
state-chartered insurance company that insures commercial businesses and government entities against liability risks.
64
Self-Insurers
retaining risk. as well as setting aside your own money to pay for a possible loss instead of purchasing insurance and expecting an insurance company to reimburse you.
65
Domestic insurers
A company is a domestic insurer in the state in which it is incorporated.
66
Foreign insurers
A foreign insurer is licensed to conduct business in states (the District of Columbia or other US territories) other than the one in which it is incorporated.
67
Alien insurers
Alien insurers are companies incorporated in a country other than the United States, the District of Columbia, or any US territorial possession.
68
authorized (admitted) insurer
means an insurer that is entitled to transact insurance within the state, having complied with the law and satisfying
all conditions to transacting insurance
69
unauthorized (nonadmitted)
means an insurer that is not entitled to transact insurance within the state.
70
Independent insurance agents
sell the insurance products of several
companies and work for themselves or other agents.
71
Exclusive or captive agents
represent only one company.
72
General agents or managing general agents (MGAs)
hire, train, and
supervise other career agents within a specific geographical area
73
Direct-writing companies
usually pay salaries to employees whose job function is to sell the company’s insurance products
74
The United States Government as Insurer
These include Social Security benefits, military
life insurance benefits, federal employee compensation benefits, and various
retirement benefit programs. It also provides, supports, or subsidizes a number
of insurance programs designed to cover catastrophic risks, including insurance for war risks, nuclear energy liability, flood, and crop losses.
75
Life and Health Agents
an individual licensed, as required by law, to sell life, health, disability or accident insurance including activities as a licensed life insurance consultant
76
PRoperty and Casualty Agents
sell policies that help individuals and companies cover expenses and losses from such disasters as fires, burglaries, traffic accidents, and other emergencies
77
Property and Casualty Agents
sell policies that help individuals and companies cover expenses and losses from such disasters as fires, burglaries, traffic accidents, and other emergencies.
78
Brokers
Represents consumers in their search for coverage and can sell policies from several different insurance companies for a commission
79
Solicitors
a salesperson who works for an agent or a broker
80
Insurance Consultants
helps businesses identify the types of risk they may be exposed to and choose appropriate insurance policies to cover potential liabilities.
