unit 1 life and health

Question 1

Insurance

Answer 1

is a contract that indemnifies another against loss, damage, or
liability arising from an unknown even

Question 2

Indemnify

Answer 2

means to make a person whole by restoring that person to the same financial position that existed before the loss.

Question 3

Policyowner

Answer 3

The insured

Question 4

Premium

Answer 4

pays a set amount of money

Question 5

Insurer

Answer 5

the insurance company

Question 6

Insured

Answer 6

the person who is
covered by the insurance

Question 7

policy

Answer 7

is established in a legal document referred to as a contract of insurance

Question 8

Loss

Answer 8

reduction in the value of an asset.

Question 9

claim

Answer 9

is a demand for payment of the insurance benefit to the person named in the policy.

Question 10

What must a person do in order to be paid for a loss?

Answer 10

They must make a claim.

Question 11

Risk involves two things what are they?

Answer 11

a possibility of loss and
an uncertainty about whether the loss will occur.

Question 12

Risk

Answer 12

means uncertainty of financial loss, or the chance of loss,
when more than one outcome is possible

Question 13

What are the two types of risk?

Answer 13

Pure and Speculative

Question 14

Pure risk

Answer 14

means that there is only a chance of loss

Question 15

Speculative risk

Answer 15

involves both an uncertainty of loss and of gain

Question 16

peril

Answer 16

is the immediate specific event causing loss and giving rise to risk

Question 17

hazard

Answer 17

is any factor that gives rise to a peril.

Question 18

Three types of hazards

Answer 18

physical, moral, and morale

Question 19

Physical hazards

Answer 19

arise from material, structural, or operational features
of a risk situation

Question 20

Moral hazards

Answer 20

arise from people’s habits and values

Question 21

Morale hazards

Answer 21

arise out of human carelessness or irresponsibility

Question 22

STARR.

Answer 22

Sharing, Transfer, Avoidance, Reduction, Retention

Question 23

Sharing

Answer 23

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.

Question 24

Transfer

Answer 24

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

Question 25

Avoidance

Answer 25

avoiding the risk in the first place

Question 26

Retention

Answer 26

simply means doing nothing about the risk. In other words, people assume or retain the risk and, in effect, become self-insurers.

Question 26

Reduction

Answer 26

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

Question 27

Law Of Large Numbers

Answer 27

Insurers are able to predict how many losses will occur in a group.

Question 28

Insurable Interest

Answer 28

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

Question 29

What are the 5 types of Insurable risk?

Answer 29

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

Question 30

Large Numbers of Homogeneous Units

Answer 30

A large number of similar exposure units is necessary in order for the pooling and sharing mechanisms of insurance to function

Question 31

Loss Must Be Measurable

Answer 31

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.

Question 32

Loss Must Be Uncertain

Answer 32

Insurance covers pure risks, which must involve an uncertainty of loss.

Question 33

Economic Hardship

Answer 33

There must be a significant potential for economic loss.

Question 34

Exclusion of Catastrophic Perils

Answer 34

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.

Question 35

Indemnity

Answer 35

states that insurance should restore the insured,
in whole or in part, to the condition the insured enjoyed before the loss

Question 36

What’s the concept of indemnity for life and health insurance?

Answer 36

Life insurance-replace present and future income. Health Insurance- pays the medical bills and cover wage lost as result of injury

Question 37

Subrogation

Answer 37

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.

Question 37

Limit of Liability

Answer 37

the maximum amount the insurer will pay for a specified insured contingency.

Question 38

What insurance uses “face amount”?

Answer 38

Life insurance, refer to the maximum liability of the insurer for a death claim.

Question 39

What do health and disability policies specify?

Answer 39

Health and disability policies are more likely to specify a maximum benefit amount or period instead

Question 40

Deductible

Answer 40

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

Question 41

elimination period

Answer 41

is simply the number of days an insured must be disabled before disability income benefits become payable.

Question 42

Coinsurance

Answer 42

generally expressed as a fixed percentage, an insured must pay toward a covered claim after the deductible is satisfied

Question 43

Property insurance

Answer 43

protects the insured against the financial consequences of the direct or consequential loss or damage to property of every
kind

Question 44

Casualty insurance

Answer 44

protects the insured against the financial consequences of legal liability, including that for death, injury, disability, or damage
to real or personal property.

Question 45

Life insurance

Answer 45

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.

Question 46

annuity

Answer 46

provides guaranteed income for the life of an annuitant.

Question 47

Accident and health or sickness

Answer 47

insurance protects the insured against financial loss caused by sickness, bodily injury, or accidental death and may include benefits for disability income

Question 48

Variable life and variable annuity products

Answer 48

include insurance coverage provided under variable life insurance contracts and variable annuities.

Question 49

Credit

Answer 49

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.

Question 50

What major three sources is insurance provided as?

Answer 50

1. private commercial insurers (profit making)
   2.private noncommercial insurers (nonprofit
   service organizations) 3. the US government (special nonprofit).

Question 51

What kind of insurers are in commercial?

Answer 51

Private Life and Health

Question 52

What kind of insures are private?

Answer 52

Stock and Mutual

Question 53

What kind of insurers are private noncommercial?

Answer 53

Blue Cross and Blue Shield

Question 54

Stock Insurers

Answer 54

consists of stockholders, also known as shareholders, who own shares in the company

Question 55

Mutual Insurers

Answer 55

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.

Question 56

Reciprocal Insurers

Answer 56

form of insurance organization in which individuals and businesses exchange insurance contracts and spread the risks associated with those contracts among themselves

Question 57

policy dividends

Answer 57

returns a portion of money back to you that you’ve already paid toward your insurance policy

Question 58

subscriber

Answer 58

Each individual who is a member of the reciprocal

Question 59

Fraternal benefit societies

Answer 59

primarily life insurance carriers that exist as social organizations and usually engage in charitable and benevolent activities

Question 60

Lloyd’s

Answer 60

a is an insurance and reinsurance marketplace. Its members operate as syndicates to provide insurance coverage for businesses, organizations, and individuals

Question 61

Reinsurers

Answer 61

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.

Question 62

Excess and Surplus Lines

Answer 62

specialty market that insures things standard carriers won’t cover.

Question 63

Risk Retention Groups

Answer 63

state-chartered insurance company that insures commercial businesses and government entities against liability risks.

Question 64

Self-Insurers

Answer 64

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.

Question 65

Domestic insurers

Answer 65

A company is a domestic insurer in the state in which it is incorporated.

Question 66

Foreign insurers

Answer 66

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.

Question 67

Alien insurers

Answer 67

Alien insurers are companies incorporated in a country other than the United States, the District of Columbia, or any US territorial possession.

Question 68

authorized (admitted) insurer

Answer 68

means an insurer that is entitled to transact insurance within the state, having complied with the law and satisfying
all conditions to transacting insurance

Question 69

unauthorized (nonadmitted)

Answer 69

means an insurer that is not entitled to transact insurance within the state.

Question 70

Independent insurance agents

Answer 70

sell the insurance products of several
companies and work for themselves or other agents.

Question 71

Exclusive or captive agents

Answer 71

represent only one company.

Question 72

General agents or managing general agents (MGAs)

Answer 72

hire, train, and
supervise other career agents within a specific geographical area

Question 73

Direct-writing companies

Answer 73

usually pay salaries to employees whose job function is to sell the company’s insurance products

Question 74

The United States Government as Insurer

Answer 74

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.

Question 75

Life and Health Agents

Answer 75

an individual licensed, as required by law, to sell life, health, disability or accident insurance including activities as a licensed life insurance consultant

Question 76

PRoperty and Casualty Agents

Answer 76

sell policies that help individuals and companies cover expenses and losses from such disasters as fires, burglaries, traffic accidents, and other emergencies

Question 77

Property and Casualty Agents

Answer 77

sell policies that help individuals and companies cover expenses and losses from such disasters as fires, burglaries, traffic accidents, and other emergencies.

Question 78

Brokers

Answer 78

Represents consumers in their search for coverage and can sell policies from several different insurance companies for a commission

Question 79

Solicitors

Answer 79

a salesperson who works for an agent or a broker

Question 80

Insurance Consultants

Answer 80

helps businesses identify the types of risk they may be exposed to and choose appropriate insurance policies to cover potential liabilities.