OHIO Life Insurance Exam Answered 100% Correct

Insurance: - ANSWER-A contract in which the insurance company agrees to indemnify the insured party against loss, damage or liability arising from an unknown event. 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 Sharing: (Method of handling risk) - ANSWER-Method of dealing with risk for a group of individuals or businesses with the same or similar exposure to loss to share the losses that occur within that group. Reduction: (Method of handling risk) - ANSWER-Includes actions such as installing smoke detectors in our homes, having an annual physical to detect health problems early, or perhaps making a change in our lifestyles. Transfer: - ANSWER-The most effective way to handle risk. Transfer it to another party.