Ohio Life and Health Insurance Exam
Cram Correct 100%
The term describing the insured's notification to the insurer requesting payment for a
covered loss is:
a. Limit of liability
b. Premium
c. Claim
d. Deductible - ANSWER An insurance claim is the insured's notification to the insurer
that a payment is requested for a covered loss.
The correct answer is: Claim
Which of the following is the consideration an insured pays for insurance coverage?
Select one:
a. Deductible
b. Premium
c. Limit of liability
d. Coinsurance - ANSWER Premiums are the cost of insurance coverage and the
insured's consideration.
The correct answer is: Premium
Adverse selection is characterized by:
Select one:
a. Unfair discrimination
b. Rating risks
c. A healthy person purchasing health insurance
d. A sick person purchasing health insurance - ANSWER Adverse selection is the
tendency for poorer than average risks to seek insurance.
The correct answer is: A sick person purchasing health insurance
Judith is injured in a car accident. She incurs a covered loss of $50,000. She is required
to pay $3,000 before the insurer will cover 80% of the covered loss. Which of the
following terms best describes the $3,000 Judith must pay?
a. Premium
b. Deductible
c. Coinsurance
d. Claim - ANSWER A deductible is the amount an insured must pay before the insurer
will begin to pay benefits.
The correct answer is: Deductible
Judith's health insurance will pay a maximum of $3 million for all of her claims. Which of
the following terms best describes this policy feature?
Select one:
,a. Indemnity
b. Limit of liability
c. Coinsurance
d. Claim - ANSWER A limit of liability is the total amount the insurer will pay for an
insured risk.
The correct answer is: Limit of liability
The tendency for poorer than average risks to seek out insurance is the definition of:
Select one:
a. Indemnity
b. Reinsurance
c. Adverse selection
d. Coinsurance - ANSWER Insurers must minimize adverse selection, which is defined
as the tendency for poorer than average risks to seek out insurance.
The correct answer is: Adverse selection
Cost-sharing between the insurer and the insured that is often expressed as the percent
for insurer and insured is known as:
Select one:
a. Coinsurance
b. Deductible
c. Premium
d. Claim - ANSWER Coinsurance is the cost-sharing between the insurer and the
insured. It is usually expressed as the percent for insurer and insured, such as 80/20.
The correct answer is: Coinsurance
Which of the following types of insurance covers a debt?
Select one:
a. Credit
b. Casualty
c. Property
d. Legal liability - ANSWER Credit insurance is used to protect against the risk of
inability to repay a debt. Property, casualty and legal liability do not cover debts.
The correct answer is: Credit
Reinsurance is defined as:
Select one:
a. Risk reduction
b. Spreading risk from one insurer to another
c. To make whole
d. Adverse selection - ANSWER Your answer is correct
When an insurer incurs too much loss, it can spread risk to another insurer.
The correct answer is: Spreading risk from one insurer to another
This product protects against the risk of living too long:
Select one:
, a. Life insurance
b. Health insurance
c. Annuities
d. Variable life insurance - ANSWER Annuities protect against the risk of living too long.
The correct answer is: Annuities
Which of the following correctly identifies the most important principle(s) of insurance?
Select one:
a. Risk pooling only
b. Insurable interest only
c. Risk pooling and the law of large numbers
d. Risk pooling, the law of large numbers and insurable interest - ANSWER The two
most important principles of insurance are risk pooling and the law of large numbers.
The correct answer is: Risk pooling, the law of large numbers and insurable interest
The law of large numbers and spreading the uncertainty of loss over a large number of
people is:
Select one:
a. Insurance
b. Hazard
c. Loss
d. Exposure - ANSWER Insurance is the transfer of risk that spreads the uncertainty of
loss over a large group of people.
The correct answer is: Insurance
Risk pooling is best described by which of the following?
Select one:
a. As a group increases in size, it is easier to predict the number of future losses over a
certain period of time.
b. A valid concern for the continuation of life or well being of the person insured
c. The chance of loss occurring
d. Combining similar losses from many people so the average loss over the entire group
remains relatively constant - ANSWER With risk pooling, the losses of many people are
averaged together and the uncertainty of one loss occurrence is spread over a large
number of people.
The correct answer is: Combining similar losses from many people so the average loss
over the entire group remains relatively constant
Which of the following best explains why death protection may be covered by an
insurance policy, even though all people eventually die?
Select one:
a. Loss must occur by chance or accident.
b. Most life insurance policies are purchased at face amounts of less than $50,000.
c. Most people buy life insurance when they are in their twenties.
d. Loss does not cause significant economic hardship. - ANSWER Premature death is a
feasible risk to insure because life insurance protects against the uncertainty of when a
Cram Correct 100%
The term describing the insured's notification to the insurer requesting payment for a
covered loss is:
a. Limit of liability
b. Premium
c. Claim
d. Deductible - ANSWER An insurance claim is the insured's notification to the insurer
that a payment is requested for a covered loss.
The correct answer is: Claim
Which of the following is the consideration an insured pays for insurance coverage?
Select one:
a. Deductible
b. Premium
c. Limit of liability
d. Coinsurance - ANSWER Premiums are the cost of insurance coverage and the
insured's consideration.
The correct answer is: Premium
Adverse selection is characterized by:
Select one:
a. Unfair discrimination
b. Rating risks
c. A healthy person purchasing health insurance
d. A sick person purchasing health insurance - ANSWER Adverse selection is the
tendency for poorer than average risks to seek insurance.
The correct answer is: A sick person purchasing health insurance
Judith is injured in a car accident. She incurs a covered loss of $50,000. She is required
to pay $3,000 before the insurer will cover 80% of the covered loss. Which of the
following terms best describes the $3,000 Judith must pay?
a. Premium
b. Deductible
c. Coinsurance
d. Claim - ANSWER A deductible is the amount an insured must pay before the insurer
will begin to pay benefits.
The correct answer is: Deductible
Judith's health insurance will pay a maximum of $3 million for all of her claims. Which of
the following terms best describes this policy feature?
Select one:
,a. Indemnity
b. Limit of liability
c. Coinsurance
d. Claim - ANSWER A limit of liability is the total amount the insurer will pay for an
insured risk.
The correct answer is: Limit of liability
The tendency for poorer than average risks to seek out insurance is the definition of:
Select one:
a. Indemnity
b. Reinsurance
c. Adverse selection
d. Coinsurance - ANSWER Insurers must minimize adverse selection, which is defined
as the tendency for poorer than average risks to seek out insurance.
The correct answer is: Adverse selection
Cost-sharing between the insurer and the insured that is often expressed as the percent
for insurer and insured is known as:
Select one:
a. Coinsurance
b. Deductible
c. Premium
d. Claim - ANSWER Coinsurance is the cost-sharing between the insurer and the
insured. It is usually expressed as the percent for insurer and insured, such as 80/20.
The correct answer is: Coinsurance
Which of the following types of insurance covers a debt?
Select one:
a. Credit
b. Casualty
c. Property
d. Legal liability - ANSWER Credit insurance is used to protect against the risk of
inability to repay a debt. Property, casualty and legal liability do not cover debts.
The correct answer is: Credit
Reinsurance is defined as:
Select one:
a. Risk reduction
b. Spreading risk from one insurer to another
c. To make whole
d. Adverse selection - ANSWER Your answer is correct
When an insurer incurs too much loss, it can spread risk to another insurer.
The correct answer is: Spreading risk from one insurer to another
This product protects against the risk of living too long:
Select one:
, a. Life insurance
b. Health insurance
c. Annuities
d. Variable life insurance - ANSWER Annuities protect against the risk of living too long.
The correct answer is: Annuities
Which of the following correctly identifies the most important principle(s) of insurance?
Select one:
a. Risk pooling only
b. Insurable interest only
c. Risk pooling and the law of large numbers
d. Risk pooling, the law of large numbers and insurable interest - ANSWER The two
most important principles of insurance are risk pooling and the law of large numbers.
The correct answer is: Risk pooling, the law of large numbers and insurable interest
The law of large numbers and spreading the uncertainty of loss over a large number of
people is:
Select one:
a. Insurance
b. Hazard
c. Loss
d. Exposure - ANSWER Insurance is the transfer of risk that spreads the uncertainty of
loss over a large group of people.
The correct answer is: Insurance
Risk pooling is best described by which of the following?
Select one:
a. As a group increases in size, it is easier to predict the number of future losses over a
certain period of time.
b. A valid concern for the continuation of life or well being of the person insured
c. The chance of loss occurring
d. Combining similar losses from many people so the average loss over the entire group
remains relatively constant - ANSWER With risk pooling, the losses of many people are
averaged together and the uncertainty of one loss occurrence is spread over a large
number of people.
The correct answer is: Combining similar losses from many people so the average loss
over the entire group remains relatively constant
Which of the following best explains why death protection may be covered by an
insurance policy, even though all people eventually die?
Select one:
a. Loss must occur by chance or accident.
b. Most life insurance policies are purchased at face amounts of less than $50,000.
c. Most people buy life insurance when they are in their twenties.
d. Loss does not cause significant economic hardship. - ANSWER Premature death is a
feasible risk to insure because life insurance protects against the uncertainty of when a
