Michigan Credit Insurance Study Guide
Questions with Definitive Solutions
Definintion of Insurance - Answer "A social device for transferring risk through an accumulation of
funds"
Policy - Answer A contract with the insurance company (insurer) that states what the policyowner
(insured) must pay for and what they agree to cover if damage or loss occurs.
Premium - Answer A set amount that must be paid for a Policy.
Concept of Risk - Answer Risk evolves from uncertainty - the unpredictable chance occurrences of
everyday life, which result in financial or economic loss.
Life insurance addresses the financial impact of ____________. - Answer Premature Death
Speculative Risk - Answer Involves the chance of winning or losing. It is a win-lose situation.
Pure Risk - Answer Creates only financial loss. It's a lose-lose situation.
Insurance only deals with _______ risk. - Answer Pure
Ways to Manage Risk - Answer - Avoidance
- Reduction
- Retention
- Sharing
- Transfer
Elements in Insurable Risks:
The loss.. - Answer - Must Be Preictable
, - Must Be Definite
- Must Be Due to Chance
- Cannot Be Catastrophic
- Exposure Must Be Large
Law of Large Numbers - Answer The larger number of similar risks, the more accurate the prediction of
loss will be over a period of time.
Mortality Table - Answer Contains statistical information related to the probability of death occurring at
specific ages.
Mortality Expense - Answer The cost of death protection.
Stock Insurance Company - Answer Owned by its stockholders, policyholders DO NOT participate in
dividends.
Mutual Insurance Company - Answer Owned by policyholders, policyholders DO participate in dividends.
Fraternal Benefit Society - Answer Promotes social and charitable activities, markets insurance products
to its members.
Lloyd's of London - Answer Underwrites insurance, and is NOT an insurer.
Service Providers - Answer Provides medical services to its subscriber.
Self-Insurers - Answer A corporation establishes a fund to pay claims. Buys "stop-loss" coverage for
excess amounts.
Government Insurers - Answer Rely on tax dollars to fund social insurance programs.
Questions with Definitive Solutions
Definintion of Insurance - Answer "A social device for transferring risk through an accumulation of
funds"
Policy - Answer A contract with the insurance company (insurer) that states what the policyowner
(insured) must pay for and what they agree to cover if damage or loss occurs.
Premium - Answer A set amount that must be paid for a Policy.
Concept of Risk - Answer Risk evolves from uncertainty - the unpredictable chance occurrences of
everyday life, which result in financial or economic loss.
Life insurance addresses the financial impact of ____________. - Answer Premature Death
Speculative Risk - Answer Involves the chance of winning or losing. It is a win-lose situation.
Pure Risk - Answer Creates only financial loss. It's a lose-lose situation.
Insurance only deals with _______ risk. - Answer Pure
Ways to Manage Risk - Answer - Avoidance
- Reduction
- Retention
- Sharing
- Transfer
Elements in Insurable Risks:
The loss.. - Answer - Must Be Preictable
, - Must Be Definite
- Must Be Due to Chance
- Cannot Be Catastrophic
- Exposure Must Be Large
Law of Large Numbers - Answer The larger number of similar risks, the more accurate the prediction of
loss will be over a period of time.
Mortality Table - Answer Contains statistical information related to the probability of death occurring at
specific ages.
Mortality Expense - Answer The cost of death protection.
Stock Insurance Company - Answer Owned by its stockholders, policyholders DO NOT participate in
dividends.
Mutual Insurance Company - Answer Owned by policyholders, policyholders DO participate in dividends.
Fraternal Benefit Society - Answer Promotes social and charitable activities, markets insurance products
to its members.
Lloyd's of London - Answer Underwrites insurance, and is NOT an insurer.
Service Providers - Answer Provides medical services to its subscriber.
Self-Insurers - Answer A corporation establishes a fund to pay claims. Buys "stop-loss" coverage for
excess amounts.
Government Insurers - Answer Rely on tax dollars to fund social insurance programs.
