LOMA 281 Module 1 Exam 2025
Questions and Answers
Risk - ✔✔the possibility of an unexpected result.
Premium - ✔✔A specified amount of money an insurer charges in exchange for its
agreement to pay a policy benefit when a specific loss occurs.
Insurance company - ✔✔A company that provides protection against the risk of
financial loss caused by specific events.
Life insurance - ✔✔A type of insurance under which the insurer promises to pay a
death benefit upon the death of a named person.
Annuity - ✔✔A financial product by which an insurer, in return for receiving a
premium, promises to make periodic payments to a named person or entity.
Applicant - ✔✔The person or entity that applies for an insurance policy.
Policyowner - ✔✔The person or entity that owns the issued policy.
Insured - ✔✔The person whose life or health the policy insures.
Beneficiary - ✔✔The person named to receive the policy benefit if the insured event
occurs.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
, Third party policy - ✔✔A policy one person purchases that insures the life of another
person.
Speculative risks - ✔✔A risk that involves three possible outcomes: loss, gain, or no
change.
Pure risk - ✔✔A risk that involves no possibility of gain; either a loss occurs or no loss
occurs.
Contracts of indemnity - ✔✔Health insurance; An insurance policy under which the
amount of the policy benefit payable for a covered loss is based on the actual amount of
financial loss that results from the loss, as determined at the time of the loss.
Valued contract - ✔✔Life insurance; An insurance policy that specifies the amount of
the policy benefit that will be payable when a covered loss occurs, regardless of the
actual amount of the loss the was incurred.
Face amount - ✔✔the amount of the policy benefit listed on the first page of a life
insurance policy.
Law of large numbers - ✔✔A theory of probability which states that, typically, the more
times we observe a particular event, the more likely it is that our observed results will
approximate the 'true' probability that the event will occur.
Reinsurance - ✔✔Insurance that one insurance company, known as the direct writer,
purchases from another insurance company, known as the reinsurer, to transfer risk on
insurance policies that the direct writer has issued.
Retention limit - ✔✔The maximum amount of insurance that an insurer is willing to
carry at its own risk on any one life. The direct writer cedes anything above that limit to
a reinsurer in a reinsurance transaction or through other risk transfer mechanisms.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
Questions and Answers
Risk - ✔✔the possibility of an unexpected result.
Premium - ✔✔A specified amount of money an insurer charges in exchange for its
agreement to pay a policy benefit when a specific loss occurs.
Insurance company - ✔✔A company that provides protection against the risk of
financial loss caused by specific events.
Life insurance - ✔✔A type of insurance under which the insurer promises to pay a
death benefit upon the death of a named person.
Annuity - ✔✔A financial product by which an insurer, in return for receiving a
premium, promises to make periodic payments to a named person or entity.
Applicant - ✔✔The person or entity that applies for an insurance policy.
Policyowner - ✔✔The person or entity that owns the issued policy.
Insured - ✔✔The person whose life or health the policy insures.
Beneficiary - ✔✔The person named to receive the policy benefit if the insured event
occurs.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
, Third party policy - ✔✔A policy one person purchases that insures the life of another
person.
Speculative risks - ✔✔A risk that involves three possible outcomes: loss, gain, or no
change.
Pure risk - ✔✔A risk that involves no possibility of gain; either a loss occurs or no loss
occurs.
Contracts of indemnity - ✔✔Health insurance; An insurance policy under which the
amount of the policy benefit payable for a covered loss is based on the actual amount of
financial loss that results from the loss, as determined at the time of the loss.
Valued contract - ✔✔Life insurance; An insurance policy that specifies the amount of
the policy benefit that will be payable when a covered loss occurs, regardless of the
actual amount of the loss the was incurred.
Face amount - ✔✔the amount of the policy benefit listed on the first page of a life
insurance policy.
Law of large numbers - ✔✔A theory of probability which states that, typically, the more
times we observe a particular event, the more likely it is that our observed results will
approximate the 'true' probability that the event will occur.
Reinsurance - ✔✔Insurance that one insurance company, known as the direct writer,
purchases from another insurance company, known as the reinsurer, to transfer risk on
insurance policies that the direct writer has issued.
Retention limit - ✔✔The maximum amount of insurance that an insurer is willing to
carry at its own risk on any one life. The direct writer cedes anything above that limit to
a reinsurer in a reinsurance transaction or through other risk transfer mechanisms.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
