New Mexico health and life insurance
exam
Reasonable Expectations - CORRECT ANSWER-The reasonable expectations of policy
owners or beneficiaries will be honored even though the strict terms of the policy do not
support these expectations
indemnity - CORRECT ANSWER-a payment for damage or loss
Utmost good faith - CORRECT ANSWER-The fair and equal bargaining by both parties
in forming the contract, where the applicant must make full disclosure of risk to the
company, and the insurance company must be fair in underwriting the risk.
Elements of insurable risks - CORRECT ANSWER-1.Large numbers of homogeneous
units, I large number of similar exposure units is necessary in order for the pooling in
sharing mechanisms of insurance to function
2.Los must be measurable by being able to place a specific monetary value on
exposures and losses in order to be able to calculate rates in premiums and reach
settlements
3. Lost must be uncertain, insurance covers purists which messed inns involve an
uncertainty of loss
4.Economic hardship, there must be a significant potential for economic loss a.k.a. a
higher dollar value
5.Exclusion of catastrophic perils, Mini policies exclude losses resulting from war
nuclear hazards flooded earthquake because the insurance system would collapse if we
covered events that caused widespread losses to large numbers at the same time
Adverse selection - CORRECT ANSWER-Those who are most likely to file claims are
the ones most likely to purchase insurance
Reinsurance - CORRECT ANSWER-A form of insurance whereby one insurance
company (the reinsurer) in consideration of a premium paid to it, agrees to indemnify
another insurance company (the ceding company) for part or all of its liabilities from
insurance policies it has issued.
risk - CORRECT ANSWER-Risk
Uncertainty of financial loss or a chance of loss - CORRECT ANSWER-
, hazard - CORRECT ANSWER-A hazard is a condition that makes a peril more likely to
happen or that increases the seriousness of a loss
hazard - CORRECT ANSWER-Any factor that gives rise to peril
peril - CORRECT ANSWER-cause of loss
Peril - CORRECT ANSWER-And immediate specific event causing loss in giving rise to
risk
Physical Hazard - CORRECT ANSWER-Arises from material structural for operational
features such as a slippery floor or unsanitary conditions
Moral hazard - CORRECT ANSWER-Arises from people's habits and values such as
filing a false claim
Morale Hazard - CORRECT ANSWER-Arises from human carelessness or a
responsibility such as bailing to take safety precaution
exposure - CORRECT ANSWER-
loss - CORRECT ANSWER-Last must be measurable, the insurer must be able to place
a specific monetary value
Methods of Handling Risk - CORRECT ANSWER-Avoidance
Retention
Sharing
Reduction
TransferAvoidance
Types of insurers - CORRECT ANSWER-Stock companies, mutual companies,
fraternal benefit society's, risk retention group's
Stock insurance companies - CORRECT ANSWER-may issue non- participating
policies, stockholder does not have to be policy owner.Stockholders/shareholders own
shares in the company a stock company is referred to as non-participating company
because they do not participate in dividends resulting from stock ownership.
Mutual insurance companies - CORRECT ANSWER-owned by policyholdersFunds not
paid out after paying claims and other operating costs are returned to the policy owners
in the form of policy dividends. Mutual companies are referred to as participating
companies because the policy owner is participate in dividends.
exam
Reasonable Expectations - CORRECT ANSWER-The reasonable expectations of policy
owners or beneficiaries will be honored even though the strict terms of the policy do not
support these expectations
indemnity - CORRECT ANSWER-a payment for damage or loss
Utmost good faith - CORRECT ANSWER-The fair and equal bargaining by both parties
in forming the contract, where the applicant must make full disclosure of risk to the
company, and the insurance company must be fair in underwriting the risk.
Elements of insurable risks - CORRECT ANSWER-1.Large numbers of homogeneous
units, I large number of similar exposure units is necessary in order for the pooling in
sharing mechanisms of insurance to function
2.Los must be measurable by being able to place a specific monetary value on
exposures and losses in order to be able to calculate rates in premiums and reach
settlements
3. Lost must be uncertain, insurance covers purists which messed inns involve an
uncertainty of loss
4.Economic hardship, there must be a significant potential for economic loss a.k.a. a
higher dollar value
5.Exclusion of catastrophic perils, Mini policies exclude losses resulting from war
nuclear hazards flooded earthquake because the insurance system would collapse if we
covered events that caused widespread losses to large numbers at the same time
Adverse selection - CORRECT ANSWER-Those who are most likely to file claims are
the ones most likely to purchase insurance
Reinsurance - CORRECT ANSWER-A form of insurance whereby one insurance
company (the reinsurer) in consideration of a premium paid to it, agrees to indemnify
another insurance company (the ceding company) for part or all of its liabilities from
insurance policies it has issued.
risk - CORRECT ANSWER-Risk
Uncertainty of financial loss or a chance of loss - CORRECT ANSWER-
, hazard - CORRECT ANSWER-A hazard is a condition that makes a peril more likely to
happen or that increases the seriousness of a loss
hazard - CORRECT ANSWER-Any factor that gives rise to peril
peril - CORRECT ANSWER-cause of loss
Peril - CORRECT ANSWER-And immediate specific event causing loss in giving rise to
risk
Physical Hazard - CORRECT ANSWER-Arises from material structural for operational
features such as a slippery floor or unsanitary conditions
Moral hazard - CORRECT ANSWER-Arises from people's habits and values such as
filing a false claim
Morale Hazard - CORRECT ANSWER-Arises from human carelessness or a
responsibility such as bailing to take safety precaution
exposure - CORRECT ANSWER-
loss - CORRECT ANSWER-Last must be measurable, the insurer must be able to place
a specific monetary value
Methods of Handling Risk - CORRECT ANSWER-Avoidance
Retention
Sharing
Reduction
TransferAvoidance
Types of insurers - CORRECT ANSWER-Stock companies, mutual companies,
fraternal benefit society's, risk retention group's
Stock insurance companies - CORRECT ANSWER-may issue non- participating
policies, stockholder does not have to be policy owner.Stockholders/shareholders own
shares in the company a stock company is referred to as non-participating company
because they do not participate in dividends resulting from stock ownership.
Mutual insurance companies - CORRECT ANSWER-owned by policyholdersFunds not
paid out after paying claims and other operating costs are returned to the policy owners
in the form of policy dividends. Mutual companies are referred to as participating
companies because the policy owner is participate in dividends.
