Annuities And Life Insurance Exam Questions With Accurate
Answers.
Insurance will cover speculative risks. T/F - accurate answers-False
Peril - accurate answers-Cause of financial loss; an event for which an
individual purchases insurance
ex: Fire
Hazard - accurate answers-condition increasing the probability a peril will
occur
What are the 3 categories of a hazard? - accurate answers-Physical, Moral and
Morale
Physical Hazard - accurate answers-a physical condition that increases the
frequency or severity of loss
ex: leaving a candle burning in an unmonitored home
Moral Hazard - accurate answers-ex: dishonesty of an employee who
embezzles
Morale Hazard - accurate answers-i.e., indifference.
typical exclusions - accurate answers-Acts of war, terrorism in commercial
policies, nuclear incidents, flooding, earthquakes.
Riders & Endorsements - accurate answers-written additions to insurance
contracts
Law of large numbers - accurate answers-theory that says if you want to
predict how likely an event is to occur, you will get the most accurate answer
by looking at the largest number of cases where it might
Adverse selection - accurate answers-people with the highest risk of loss will
also be the most likely to purchase insurance
Risk classifications include: - accurate answers-statics & dynamic
fundamental & particular
,pure & specualtive
Static risks - accurate answers-results from factors other than changes in the
economy
Dynamic risks - accurate answers-result of changes in the economy
*not typically covered
Fundamental risks - accurate answers-affect a large group of people
ex. recessions and earthquakes
Particular risks - accurate answers-affect individuals or small groups of
people
Pure risks - accurate answers-involves only the chance of loss or no loss
ex: possibility of a home burning down
Speculative risks - accurate answers-involves both the chance of a loss and a
gain
ex: gambling
*not insurable
Identify the incident that would best be described as a hazard
-your car hits a light pole after skidding on ice
-after a hurricane, a tree falls on your car
-you own a luxury automobile
-you park your car on a steep incline without setting the parking brake -
accurate answers--you park your car on a steep incline without setting the
parking brake
*options 1 & 2 are perils
Choose the correct statement regarding insurance terminology
-Insurance is a device used to manage risk by having a large pool of people
shar in the financial losses suffered by members of the pool
-peril is the indifference to loss that creates carelessness and increases the
chance of loss due to the existence of insurance
-a hazard is the cause of a financial loss
, -speculative risk involves the chance of loss or no loss - accurate answers--
Insurance is a device used to manage risk by having a large pool of people
shar in the financial losses suffered by members of the pool
Insurable risk has 4 elements: - accurate answers-1. homogeneous exposure
units
2.loss produced must be measurable and definite
3.must be accidental and not intentional
4. cannot be catastrophic to society
Insurable Interest - accurate answers-must be a relationship in which the
person applying for the insurance will incur a loss
For property and casualty insurance, and insurable interest must exist? -
accurate answers-When the policy is written and when the loss occurs
For life insurance an insurable interest must exist? - accurate answers-only
when the policy is written
Identify the characteristics that must be present for there to be an insurable
risk
-loss must be intentional
-must be uncertain
-cannot be catastrophic to society
- the loss must be measurable - accurate answers-- the loss must be
measurable
-cannot be catastrophic to society
Risk Management Process - accurate answers-1. clarify objectives
2.identify the risk
3. measure the risk
4.manage the risk
5. monitor the risk
What are the 5 basic methods of managing risk? - accurate answers-1.
Avoidance
2.diversification
3.reduction
4. retention
Answers.
Insurance will cover speculative risks. T/F - accurate answers-False
Peril - accurate answers-Cause of financial loss; an event for which an
individual purchases insurance
ex: Fire
Hazard - accurate answers-condition increasing the probability a peril will
occur
What are the 3 categories of a hazard? - accurate answers-Physical, Moral and
Morale
Physical Hazard - accurate answers-a physical condition that increases the
frequency or severity of loss
ex: leaving a candle burning in an unmonitored home
Moral Hazard - accurate answers-ex: dishonesty of an employee who
embezzles
Morale Hazard - accurate answers-i.e., indifference.
typical exclusions - accurate answers-Acts of war, terrorism in commercial
policies, nuclear incidents, flooding, earthquakes.
Riders & Endorsements - accurate answers-written additions to insurance
contracts
Law of large numbers - accurate answers-theory that says if you want to
predict how likely an event is to occur, you will get the most accurate answer
by looking at the largest number of cases where it might
Adverse selection - accurate answers-people with the highest risk of loss will
also be the most likely to purchase insurance
Risk classifications include: - accurate answers-statics & dynamic
fundamental & particular
,pure & specualtive
Static risks - accurate answers-results from factors other than changes in the
economy
Dynamic risks - accurate answers-result of changes in the economy
*not typically covered
Fundamental risks - accurate answers-affect a large group of people
ex. recessions and earthquakes
Particular risks - accurate answers-affect individuals or small groups of
people
Pure risks - accurate answers-involves only the chance of loss or no loss
ex: possibility of a home burning down
Speculative risks - accurate answers-involves both the chance of a loss and a
gain
ex: gambling
*not insurable
Identify the incident that would best be described as a hazard
-your car hits a light pole after skidding on ice
-after a hurricane, a tree falls on your car
-you own a luxury automobile
-you park your car on a steep incline without setting the parking brake -
accurate answers--you park your car on a steep incline without setting the
parking brake
*options 1 & 2 are perils
Choose the correct statement regarding insurance terminology
-Insurance is a device used to manage risk by having a large pool of people
shar in the financial losses suffered by members of the pool
-peril is the indifference to loss that creates carelessness and increases the
chance of loss due to the existence of insurance
-a hazard is the cause of a financial loss
, -speculative risk involves the chance of loss or no loss - accurate answers--
Insurance is a device used to manage risk by having a large pool of people
shar in the financial losses suffered by members of the pool
Insurable risk has 4 elements: - accurate answers-1. homogeneous exposure
units
2.loss produced must be measurable and definite
3.must be accidental and not intentional
4. cannot be catastrophic to society
Insurable Interest - accurate answers-must be a relationship in which the
person applying for the insurance will incur a loss
For property and casualty insurance, and insurable interest must exist? -
accurate answers-When the policy is written and when the loss occurs
For life insurance an insurable interest must exist? - accurate answers-only
when the policy is written
Identify the characteristics that must be present for there to be an insurable
risk
-loss must be intentional
-must be uncertain
-cannot be catastrophic to society
- the loss must be measurable - accurate answers-- the loss must be
measurable
-cannot be catastrophic to society
Risk Management Process - accurate answers-1. clarify objectives
2.identify the risk
3. measure the risk
4.manage the risk
5. monitor the risk
What are the 5 basic methods of managing risk? - accurate answers-1.
Avoidance
2.diversification
3.reduction
4. retention
