Massachusetts Life and Health Insurance Exam 381
Questions with Verified Answers
Insurance - CORRECT ANSWER Transfer of Risk
Risk - CORRECT ANSWER Uncertainty/ Possibility of Loss
Exposure - CORRECT ANSWER Risks for which the insurance company would be
liable
Peril - CORRECT ANSWER Cause of Loss
Hazard - CORRECT ANSWER Something that causes an increase in the chance of
loss
Physical Hazard - CORRECT ANSWER Hazard that can be seen
Moral Hazard - CORRECT ANSWER A belief that intentionally causing a loss is
acceptable
Morale Hazard - CORRECT ANSWER Carelessness
STARR - CORRECT ANSWER Method of handling risk
S- Method of handling risks - CORRECT ANSWER Sharing
T- Method of handling risk - CORRECT ANSWER Transfer
A- Method of handling risk - CORRECT ANSWER Avoidance
R- Method of handling risk - CORRECT ANSWER Retention
R- Method of handling risk - CORRECT ANSWER Reduction
,Contract Policy - CORRECT ANSWER An agreement between the insured and the
insurer
Law of Large Numbers - CORRECT ANSWER The larger the group, the more
accurate losses can be predicted
CANHAM Risks - CORRECT ANSWER Can be insured with the following
characteristics
C- CANHAM Risks - CORRECT ANSWER Calculable
A- CANHAM Risks - CORRECT ANSWER Affordable
N- CANHAM Risks - CORRECT ANSWER Non- Catastrophic
H- CANHAM Risks - CORRECT ANSWER Homogeneous
A- CANHAM Risks - CORRECT ANSWER Accidental
M- CANHAM Risks - CORRECT ANSWER Measurable
Adverse Selection - CORRECT ANSWER risks that have a greater than average
chance of loss
Reinsurance- - CORRECT ANSWER An insurance company sells some of its risk to
other insurance companies.
Facultative Reinsurance - CORRECT ANSWER the reinsurer evaluates each risk
before allowing the transfer
Treaty Reinsurance - CORRECT ANSWER the reinsurer accepts the transfer
according to an agreement called a treaty
Stock Insurer - CORRECT ANSWER An insurer that is owned by its stockholders and
formed as a corporation for the purpose of earning a profit for the stockholders.-
Issues Non Par Policies
,Mutual Insurer - CORRECT ANSWER An insurer that is owned by its policyholders
and formed as a corporation for the purpose of providing insurance to them.- Non
Taxable dividends & Participating Polcies
Fraternal Insurer - CORRECT ANSWER provides insurance and other benefits
must be a member of the society to get the benefits
Reciprocal Insurers - CORRECT ANSWER unincorporated groups of people that
provide insurance for one another through individual indemnity agreements
Llyod's Associations - CORRECT ANSWER Organizations that provide support
facilities for underwriters or groups of individuals that accept insurance risk.
Risk Retention Group - CORRECT ANSWER A liability insurance company owned by
its members, which are exposed to similar liability risks by virtue of being in the
same business or industry.
Risk Purchasing Groups - CORRECT ANSWER Groups of people with similar
insurance needs who form an organization to buy insurance as a group.
Self-insurance - CORRECT ANSWER a business that pays its own claims
Residual Market - CORRECT ANSWER insurance from the state or federal
government
Insurance Company Locations - CORRECT ANSWER Domestic, Foreign, and Alien
Certificate of Authority - CORRECT ANSWER state license for an insurance
company
Admitted or Authorized - CORRECT ANSWER state requires the insurance
company to have a certificate of authority
Non-admitted - CORRECT ANSWER unauthorized-insurance company not required
to have a Certificate of Authority from the state
, Surplus Lines - CORRECT ANSWER any type of insurance for which there is no
available market within the state, and the coverage must be placed with a non
admitted insurer
Methods of Marketing - CORRECT ANSWER - Independent
- Exclusive or captive
- General agents or managing general agents
- direct writing companies
Agency - CORRECT ANSWER The insurance agent acts on behalf of principal
(Insurance Company)
Agent Authority - CORRECT ANSWER express, implied, apparent
Fiduciary Trust - CORRECT ANSWER - Promptly sends premiums to insurer
- Has knowledge of products
- Complies with laws and regulations
- Does not commingle funds
Legal Contract - CORRECT ANSWER Consideration, Legal Purpose, Offer (Made by
Insured), Acceptance, Competent Parties
Adhesion - CORRECT ANSWER Policy written by the insurance company
aleatory - CORRECT ANSWER not equal value - small premium for a large amount
of coverage
Utmost Good Faith - CORRECT ANSWER An obligation to act in complete honesty
and to disclose all relevant facts.
indemnity - CORRECT ANSWER pay for the loss but with no gain
representation - CORRECT ANSWER believed to be true
Misrepresentation - CORRECT ANSWER information that is not true, but would
not affect the insurance company decision
Questions with Verified Answers
Insurance - CORRECT ANSWER Transfer of Risk
Risk - CORRECT ANSWER Uncertainty/ Possibility of Loss
Exposure - CORRECT ANSWER Risks for which the insurance company would be
liable
Peril - CORRECT ANSWER Cause of Loss
Hazard - CORRECT ANSWER Something that causes an increase in the chance of
loss
Physical Hazard - CORRECT ANSWER Hazard that can be seen
Moral Hazard - CORRECT ANSWER A belief that intentionally causing a loss is
acceptable
Morale Hazard - CORRECT ANSWER Carelessness
STARR - CORRECT ANSWER Method of handling risk
S- Method of handling risks - CORRECT ANSWER Sharing
T- Method of handling risk - CORRECT ANSWER Transfer
A- Method of handling risk - CORRECT ANSWER Avoidance
R- Method of handling risk - CORRECT ANSWER Retention
R- Method of handling risk - CORRECT ANSWER Reduction
,Contract Policy - CORRECT ANSWER An agreement between the insured and the
insurer
Law of Large Numbers - CORRECT ANSWER The larger the group, the more
accurate losses can be predicted
CANHAM Risks - CORRECT ANSWER Can be insured with the following
characteristics
C- CANHAM Risks - CORRECT ANSWER Calculable
A- CANHAM Risks - CORRECT ANSWER Affordable
N- CANHAM Risks - CORRECT ANSWER Non- Catastrophic
H- CANHAM Risks - CORRECT ANSWER Homogeneous
A- CANHAM Risks - CORRECT ANSWER Accidental
M- CANHAM Risks - CORRECT ANSWER Measurable
Adverse Selection - CORRECT ANSWER risks that have a greater than average
chance of loss
Reinsurance- - CORRECT ANSWER An insurance company sells some of its risk to
other insurance companies.
Facultative Reinsurance - CORRECT ANSWER the reinsurer evaluates each risk
before allowing the transfer
Treaty Reinsurance - CORRECT ANSWER the reinsurer accepts the transfer
according to an agreement called a treaty
Stock Insurer - CORRECT ANSWER An insurer that is owned by its stockholders and
formed as a corporation for the purpose of earning a profit for the stockholders.-
Issues Non Par Policies
,Mutual Insurer - CORRECT ANSWER An insurer that is owned by its policyholders
and formed as a corporation for the purpose of providing insurance to them.- Non
Taxable dividends & Participating Polcies
Fraternal Insurer - CORRECT ANSWER provides insurance and other benefits
must be a member of the society to get the benefits
Reciprocal Insurers - CORRECT ANSWER unincorporated groups of people that
provide insurance for one another through individual indemnity agreements
Llyod's Associations - CORRECT ANSWER Organizations that provide support
facilities for underwriters or groups of individuals that accept insurance risk.
Risk Retention Group - CORRECT ANSWER A liability insurance company owned by
its members, which are exposed to similar liability risks by virtue of being in the
same business or industry.
Risk Purchasing Groups - CORRECT ANSWER Groups of people with similar
insurance needs who form an organization to buy insurance as a group.
Self-insurance - CORRECT ANSWER a business that pays its own claims
Residual Market - CORRECT ANSWER insurance from the state or federal
government
Insurance Company Locations - CORRECT ANSWER Domestic, Foreign, and Alien
Certificate of Authority - CORRECT ANSWER state license for an insurance
company
Admitted or Authorized - CORRECT ANSWER state requires the insurance
company to have a certificate of authority
Non-admitted - CORRECT ANSWER unauthorized-insurance company not required
to have a Certificate of Authority from the state
, Surplus Lines - CORRECT ANSWER any type of insurance for which there is no
available market within the state, and the coverage must be placed with a non
admitted insurer
Methods of Marketing - CORRECT ANSWER - Independent
- Exclusive or captive
- General agents or managing general agents
- direct writing companies
Agency - CORRECT ANSWER The insurance agent acts on behalf of principal
(Insurance Company)
Agent Authority - CORRECT ANSWER express, implied, apparent
Fiduciary Trust - CORRECT ANSWER - Promptly sends premiums to insurer
- Has knowledge of products
- Complies with laws and regulations
- Does not commingle funds
Legal Contract - CORRECT ANSWER Consideration, Legal Purpose, Offer (Made by
Insured), Acceptance, Competent Parties
Adhesion - CORRECT ANSWER Policy written by the insurance company
aleatory - CORRECT ANSWER not equal value - small premium for a large amount
of coverage
Utmost Good Faith - CORRECT ANSWER An obligation to act in complete honesty
and to disclose all relevant facts.
indemnity - CORRECT ANSWER pay for the loss but with no gain
representation - CORRECT ANSWER believed to be true
Misrepresentation - CORRECT ANSWER information that is not true, but would
not affect the insurance company decision
