Life, Accident and Health - Michigan Study Guide with Questions With Correct Answers 100%

Insurance Contract - Legal agreement between an insurance company and an individual, where the insurer collects a premium from the insured in exchange for the insurers promise to pay potential future benefits in the event of covered losses. Risk Pooling - Combines similar losses from many people so that the average loss over the entire group is relatively constant Law of Large Numbers - States that as a group increases in size, it is easier to predict the number of future losses over a certain period of time. Actuaries - Mathematicians employed by insurance companies, who analyze statistical data to determine mortality and morbidity rates. Mortality - The rate at which people die. Morbidity - The rate at which people get sick, injured, or disabled. Risk - The possibility of a loss occurring. Pure Risk - The only insurable risks and present a potential for loss such as injury, illness, and death Speculative Risk - Present the chance for loss or gain Loss - The unintentional decrease in the value of an asset due to a peril. Exposure - The condition of being prone to loss due to a hazard or uncertain eventPeril - The cause of the loss and the event insured against Life and Health insurance perils - Premature death, dependency during old age, accident, and sickness Hazard - Anything that increases the chance of loss occurring from a particular peril The 4 types of hazards - Physical, moral, morale, and legal Physical hazard - Physical characteristics which raise the loss potential for a particular peril Moral hazard - The predisposition, character, habits, and values of a person which increase the chance of a loss occurring Morale hazard - An insureds careless attitude, indifference or lack of responsibility which increase the chance of a loss occurring Legal hazard - The application of laws, regulations, and legal court rulings which increase the chance or amount of loss 5 Methods of handling risk - Avoidance, retention, sharing, reduction and transfer Insurance - Risk Transfer Adverse Selection - Demand for insurance coverage by people who are worse than average risks and more likely to need and use the coverage Reinsurance - Spreads risk from one insurer to one or more other insurersReinsurer - The insurer that accepts the additional risk Primary Insurer - The insurer that gives the risk to the reinsurer Competent parties Indemnity - "To make whole" provide benefit of payments to restore the insureds economic loss Limit of liability - The total amount the insurer will pay for an insured risk Premium - Set cost of insurance coverage paid by the policyholder to the insurer Deductible - The amount the insured must pay before the insurer will pay a claim Coinsurance - A cost-sharing mechanism between the insurer and insured in medical insurance, where for a certain range of coverage the insurer agrees to pay a large percentage of the expenses and the insured is responsible for paying the remainder Claim - The insured's notification to the insurer that a payment is requested for a covered loss Life insurance - protects against the risk of premature death Health insurance - Protects against the severity of financial loss due to illness, disease, short or long-term disability, wages lost while ill or disabled, and medical expenses Annuities - Protects against the risk of living longer than expected and provides guaranteed life income to protect against the risk of depleting retirement funds Property Insurance - Protects against the risk of damage and destruction to all types of propertyCasualty Insurance - Protects against the risk of legal liability for injury, death, disability, damage and destruction to property Credit Insurance Credit Life/Credit Health - Protects against the risk that a person in debt, termed debtor, cannot repay the debt to the creditor because of accident, sickness, disability or death Variable - Comprised of variable life and variable annuities. Invests premium dollars in securities, which carry more risk due to price fluctuations