215 Insurance License Exam Questions And Answers

215 Insurance License Exam Questions And Answers risk pooling - ANS spreading risk over a large group of people law of large numbers - ANS larger the group, the more certain the predictions speculative risk - ANS not insurable - involves both chance of loss or gain pure risk - ANS insurable - involves chance of loss, never gain or profit peril - ANS event causing loss Ex: fire, death, accident, windstorm, disease hazard - ANS any factor that gives rise to peril or increase likelihood of a loss from a peril physical hazard - ANS slippery floor, blindness, deafness, past medical history moral hazard - ANS intentional act, tendencies to take risks; Ex: alcoholism, drugs, dishonesty morale hazard - ANS carelessness, indifference Ex: driving recklessly with no fear of injury risk avoidance - ANS avoiding the risk, don't do anything Ex: choosing not to drive, fly or invest (not practical) risk reduction - ANS reducing the risk of a loss Ex: installing smoke detectors, quit smoking, don't test and drive risk retention - ANS self-insure, setting up fund to offset your losses; should be limited to what you can easily afford to pay risk transfer - ANS purchasing insurance, best way; transferring risk from an individual to an insurance company adverse selection - ANS tendency for less favorable insurance risks to seek and continue insurance to greater extent than other risks Ex: people in poor health human life value - ANS economic value measured in part by future earnings potential needs base approach - ANS how much money needed if death occurs today stock insurers - ANS private organization owned by stockholders; in business to make profit for stockholders mutual insurers - ANS corporation owned by policyholders; issue participating policies that pay policy dividends lloyds of london - ANS association of individuals and companies that underwrite insurance; coverage for unusual or high risks Ex: kidnap or ransom, disability for professional athletes reinsurers - ANS insurer for insurers risk retention group - ANS mutual insurance company formed to insure those in same business, occupation, or profession Ex: dentists, engineers, pharmacists fraternal benefit society - ANS charitable, social, nonprofit, lodge system, representative form of government whose membership is based on religion, nationality, or ethnic lines; began on assessment bassi to help poorer members but now issues insurance certificates and annuities similar to commercial insurers home service insurers - ANS industrial; small face amounts of insurance issued; premiums collected weekly by selling agent service provider - ANS sell medical and hospital care services, not insurance Ex: BCBS hmo - ANS fixed premium paid in advance; treatment from physicians and hospitals contracted; known for stressing preventive care and early treatment ppo - ANS group (ex: employer or union) arranges discounts from select health care providers