Vocabulary - Section 1 - Life & Health

Question 1

insurer

Answer 1

insurance company

Question 2

insured

Answer 2

person covered by the policy

Question 3

policy owner

Answer 3

usually the person covered by the policy

Question 4

beneficiary

Answer 4

the person paid when a claim is submitted

Question 5

agent aka producer

Answer 5

legal representative of the insurance company

Question 6

broker

Answer 6

representative of the Insured, not the insurance company

Question 7

pure risk

Answer 7

chance of experiencing a loss w/o the possibility of gain

Question 8

speculative risk

Answer 8

chance of loss one accepts in the hope of realizing a gain

Question 9

risk

Answer 9

the chance of loss; the uncertainty of loss

Question 10

RM technique: risk avoidance

Answer 10

staying away from risky activities altogether

Question 11

RM technique: risk reduction

Answer 11

taking measures to reduce the chance of something bad happening

Question 12

RM technique: risk shifting

Answer 12

waiver of liability or hold harmless agreement

Question 13

RM technique: buying insurance

Answer 13

transfers a portion of risk to the insurer

Question 14

RM technique: risk retention (self-insuring)

Answer 14

person or company retains entire risk; holds funds to cover future claims

Question 15

insurance

Answer 15

the transfer of risk with a contract where an insurer agrees to protect an insured against injury, damage, or liability arising from some future event

Question 16

indemnification

Answer 16

the concept that we can only be made whole after a loss…not come out ahead (reimbursement)

Question 17

life insurance is a ___ policy

Answer 17

valued

Question 18

health policies are ___ policies

Answer 18

indemnity

Question 19

subrogation

Answer 19

transfer to the Insurer of the Insured’s rights to recover damages from a responsible third party. Prevents one from coming out ahead and can save Insurer $

Question 20

peril

Answer 20

cause of loss

Question 21

Law of Large Numbers

Answer 21

concept that makes it easier to predict losses if there is a large number of Insureds

Question 22

Insurers prefer these characteristics for a loss to be insurable:

Answer 22

1. pure risk - no potential gain
2. predictable loss
3. accidental loss
4. measurable loss
5. economic loss
6. non-catastrophic loss

Question 23

Types of Insurers

Answer 23

1. Stock Companies - non-participating companies because profits are not shared with policyholders
2. Mutual Companies - participating companies because policyholders can receive dividends

Question 24

Social Security known as…

Answer 24

OASDI - Old Age, Survivors, and Disability Insurance

Question 25

How is Social Security funded?

Answer 25

Federal Insurance Contributions Act (FICA) tax

Question 26

Self-employed people pay what % in FICA?

Answer 26

Both halves (employer & employee) for a total 15% of first $100K in income.