LOMA 281 MODULE 1 UPDATED ACTUAL QUESTIONS AND CORRECT
ANSWERS VERIFIED 2027 EDITION
1. the possibility of an unexpected result.
Risk
2. A specified amount of money an insurer charges in exchange for its agreement to pay a policy
benefit when a specific loss occurs.
Premium
3. A company that provides protection against the risk of financial loss caused by specific events.
Insurance company
4. A type of insurance under which the insurer promises to pay a death benefit upon the death of a
named person.
Life insurance
5. A financial product by which an insurer, in return for receiving a premium, promises to make
periodic payments to a named person or entity.
Annuity
6. The person or entity that applies for an insurance policy.
Applicant
7. The person or entity that owns the issued policy.
Policyowner
8. The person whose life or health the policy insures.
Insured
9. The person named to receive the policy benefit if the insured event occurs.
Beneficiary
10. A policy one person purchases that insures the life of another person.
Third party policy
11. A risk that involves three possible outcomes: loss, gain, or no change.
Speculative risks
12. A risk that involves no possibility of gain; either a loss occurs or no loss occurs.
Pure risk
13. Health insurance; An insurance policy under which the amount of the policy benefit payable for a
covered loss is based on the actual amount of financial loss that results from the loss, as determined
at the time of the loss.
Contracts of indemnity
14. Life insurance; An insurance policy that specifies the amount of the policy benefit that will be
payable when a covered loss occurs, regardless of the actual amount of the loss the was incurred.
Valued contract
1
, 15. the amount of the policy benefit listed on the first page of a life insurance policy.
Face amount
16. A theory of probability which states that, typically, the more times we observe a particular event,
the more likely it is that our observed results will approximate the 'true' probability that the event
will occur.
Law of large numbers
17. Insurance that one insurance company, known as the direct writer, purchases from another
insurance company, known as the reinsurer, to transfer risk on insurance policies that the direct
writer has issued.
Reinsurance
18. The maximum amount of insurance that an insurer is willing to carry at its own risk on any one
life. The direct writer cedes anything above that limit to a reinsurer in a reinsurance transaction or
through other risk transfer mechanisms.
Retention limit
19. AKA ceding company; In a reinsurance transaction, the insurance company that purchases
reinsurance.
Direct writer
20. In a reinsurance transaction, the company that provides reinsurance to the direct writer.
Reinsurer
21. A reinsurance company that accepts risk ceded to it by another reinsurance company.
Retrocessionaire
22. An insurance employee who is responsible for evaluating proposed risks.
Underwriter
23. A physical characteristic that might increase the likelihood of loss.
Physical hazard
24. A characteristic that exists when the reputation, financial position, or criminal record of an
applicant for insurance or a proposed insured indicates that the person may act dishonestly in the
insurance transaction.
Moral hazard
25. AKA adverse selection; The tendency of individuals who believe they have a greater-than-average
likelihood of loss to seek insurance protection to a greater extent than those who believe they have
an average or less-than-average likelihood of loss.
Antiselection
26. A grouping of insureds who represent a similar level of risk to an insurer.
Risk class
27. The interest that an insurance policyowner has in the risk that is insured. A policyowner has an
insurable interest if she is likely to suffer a genuine loss or detriment should the event insured against
occur.
Insurable interest
2
ANSWERS VERIFIED 2027 EDITION
1. the possibility of an unexpected result.
Risk
2. A specified amount of money an insurer charges in exchange for its agreement to pay a policy
benefit when a specific loss occurs.
Premium
3. A company that provides protection against the risk of financial loss caused by specific events.
Insurance company
4. A type of insurance under which the insurer promises to pay a death benefit upon the death of a
named person.
Life insurance
5. A financial product by which an insurer, in return for receiving a premium, promises to make
periodic payments to a named person or entity.
Annuity
6. The person or entity that applies for an insurance policy.
Applicant
7. The person or entity that owns the issued policy.
Policyowner
8. The person whose life or health the policy insures.
Insured
9. The person named to receive the policy benefit if the insured event occurs.
Beneficiary
10. A policy one person purchases that insures the life of another person.
Third party policy
11. A risk that involves three possible outcomes: loss, gain, or no change.
Speculative risks
12. A risk that involves no possibility of gain; either a loss occurs or no loss occurs.
Pure risk
13. Health insurance; An insurance policy under which the amount of the policy benefit payable for a
covered loss is based on the actual amount of financial loss that results from the loss, as determined
at the time of the loss.
Contracts of indemnity
14. Life insurance; An insurance policy that specifies the amount of the policy benefit that will be
payable when a covered loss occurs, regardless of the actual amount of the loss the was incurred.
Valued contract
1
, 15. the amount of the policy benefit listed on the first page of a life insurance policy.
Face amount
16. A theory of probability which states that, typically, the more times we observe a particular event,
the more likely it is that our observed results will approximate the 'true' probability that the event
will occur.
Law of large numbers
17. Insurance that one insurance company, known as the direct writer, purchases from another
insurance company, known as the reinsurer, to transfer risk on insurance policies that the direct
writer has issued.
Reinsurance
18. The maximum amount of insurance that an insurer is willing to carry at its own risk on any one
life. The direct writer cedes anything above that limit to a reinsurer in a reinsurance transaction or
through other risk transfer mechanisms.
Retention limit
19. AKA ceding company; In a reinsurance transaction, the insurance company that purchases
reinsurance.
Direct writer
20. In a reinsurance transaction, the company that provides reinsurance to the direct writer.
Reinsurer
21. A reinsurance company that accepts risk ceded to it by another reinsurance company.
Retrocessionaire
22. An insurance employee who is responsible for evaluating proposed risks.
Underwriter
23. A physical characteristic that might increase the likelihood of loss.
Physical hazard
24. A characteristic that exists when the reputation, financial position, or criminal record of an
applicant for insurance or a proposed insured indicates that the person may act dishonestly in the
insurance transaction.
Moral hazard
25. AKA adverse selection; The tendency of individuals who believe they have a greater-than-average
likelihood of loss to seek insurance protection to a greater extent than those who believe they have
an average or less-than-average likelihood of loss.
Antiselection
26. A grouping of insureds who represent a similar level of risk to an insurer.
Risk class
27. The interest that an insurance policyowner has in the risk that is insured. A policyowner has an
insurable interest if she is likely to suffer a genuine loss or detriment should the event insured against
occur.
Insurable interest
2
