OHIO LIFE INSURANCE EXAM 4 FULL PRACTICE
QUESTIONS WITH POLICY TYPES AND LIFE
INSURANCE CONCEPTS
◉ Insurance Transfers:
Answer: The risk of loss from an individual or business entity to an
insurance company, which in turn spreads costs of unexpected
losses to many individuals.
◉ Direct response marketing:
Answer: A direct response marketing system effectively bypasses
the insurance agent. Business is conducted over the phone, through
the mail, or online. This is a perfectly legal approach to selling
insurance. It is not mandatory in all situations for the insured to
physically sign any documents in order for coverage to go into effect.
◉ Insurance Transaction: (4)
Answer: Solicitation, Negotiations, Sale (effectuation of a contract of
insurance, and Advising an individual concerning coverage of claims.
◉ Risk: (Two Types)
Answer: The uncertainty or chance of a loss occurring.
,Pure Risk:
-Situations that can only result in a loss or no change. There is no
opportunity for financial gain. This is the only type that insurance
companies will accept.
Speculative Risk:
-Involves the opportunity for either loss or gain. Ex: Risk of
gambling. These are not insurable risks.
◉ Concealment:
Answer: The withholding of information that will result in an
imprecise underwriting decision.
◉ Exposure:
Answer: A unit of measure used to determine rates charged for
insurance coverage.
EX of Life insurance factors:
-Age, medical history, occupation, and sex.
◉ Homogenous:
Answer: A large number of units having the same or similar
exposure to loss.
,◉ Hazards: (3 types)
Answer: Conditions or situations that increase the probability of an
insured loss occurring.
Physical hazards:
-Individual characteristics that increase the chances of the cause of
loss. Ex: past medical history, condition at birth (blindness).
Moral Hazards:
-Tendencies towards increased risk. Involves evaluating the
character and reputation of a proposed insured. Ex: When an
applicant lies on the application for insurance.
Morale Hazards:
-Arise from a state of mind that causes indifference to loss, such as
carelessness. Ex: Not spending money on a flu shot because if you
get the flu your insurance company will pay for it.
◉ Perils:
Answer: The causes of loss insured against in an insurance policy.
-Life insurance
, -Health insurance
-Property insurance
-Casualty insurance
◉ Loss:
Answer: The reduction, decrease, or disappearance of the value of
the person or property insured in a policy, caused by a named peril.
Look at transfer stuff pg 7
◉ Avoidance: (Method of handling risk)
Answer: Eliminating exposure to a loss. Ex: If a person wanted to
avoid the risk of being killed in an airplane crash, he/she might
choose never to fly in an airplane. It is effective but not practical.
◉ Risk Retention: (Method of handling risk)
Answer: The planned assumption of risk by an insured through the
use of deductibles, copayments, or self-insurance.
◉ Purpose of retention: (3 things)
Answer: 1) Reduce expenses and improve cashflow
2) Increase control of claim reserving and claims settlements
3)To fund for losses that cannot be insured
QUESTIONS WITH POLICY TYPES AND LIFE
INSURANCE CONCEPTS
◉ Insurance Transfers:
Answer: The risk of loss from an individual or business entity to an
insurance company, which in turn spreads costs of unexpected
losses to many individuals.
◉ Direct response marketing:
Answer: A direct response marketing system effectively bypasses
the insurance agent. Business is conducted over the phone, through
the mail, or online. This is a perfectly legal approach to selling
insurance. It is not mandatory in all situations for the insured to
physically sign any documents in order for coverage to go into effect.
◉ Insurance Transaction: (4)
Answer: Solicitation, Negotiations, Sale (effectuation of a contract of
insurance, and Advising an individual concerning coverage of claims.
◉ Risk: (Two Types)
Answer: The uncertainty or chance of a loss occurring.
,Pure Risk:
-Situations that can only result in a loss or no change. There is no
opportunity for financial gain. This is the only type that insurance
companies will accept.
Speculative Risk:
-Involves the opportunity for either loss or gain. Ex: Risk of
gambling. These are not insurable risks.
◉ Concealment:
Answer: The withholding of information that will result in an
imprecise underwriting decision.
◉ Exposure:
Answer: A unit of measure used to determine rates charged for
insurance coverage.
EX of Life insurance factors:
-Age, medical history, occupation, and sex.
◉ Homogenous:
Answer: A large number of units having the same or similar
exposure to loss.
,◉ Hazards: (3 types)
Answer: Conditions or situations that increase the probability of an
insured loss occurring.
Physical hazards:
-Individual characteristics that increase the chances of the cause of
loss. Ex: past medical history, condition at birth (blindness).
Moral Hazards:
-Tendencies towards increased risk. Involves evaluating the
character and reputation of a proposed insured. Ex: When an
applicant lies on the application for insurance.
Morale Hazards:
-Arise from a state of mind that causes indifference to loss, such as
carelessness. Ex: Not spending money on a flu shot because if you
get the flu your insurance company will pay for it.
◉ Perils:
Answer: The causes of loss insured against in an insurance policy.
-Life insurance
, -Health insurance
-Property insurance
-Casualty insurance
◉ Loss:
Answer: The reduction, decrease, or disappearance of the value of
the person or property insured in a policy, caused by a named peril.
Look at transfer stuff pg 7
◉ Avoidance: (Method of handling risk)
Answer: Eliminating exposure to a loss. Ex: If a person wanted to
avoid the risk of being killed in an airplane crash, he/she might
choose never to fly in an airplane. It is effective but not practical.
◉ Risk Retention: (Method of handling risk)
Answer: The planned assumption of risk by an insured through the
use of deductibles, copayments, or self-insurance.
◉ Purpose of retention: (3 things)
Answer: 1) Reduce expenses and improve cashflow
2) Increase control of claim reserving and claims settlements
3)To fund for losses that cannot be insured
