CA PSI Life, Health, and Sickness Exam
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1. What is an Actuarial Department: Dept. that calculates policy rates, reserves, and dividends
2. Alien Insurer: Insurer whose principal office and domiciled location is outside the country
3. Admitted (Authorized) Insurer: Insurer who has received a certificate of authority from a state's
department of insurance that authorizes them to conduct insurance business in that state.
4. Broker: Represents themselves and the insured (client)
5. Captive Insurer: Issuer established and owned by a parent firm for the purpose of insuring the parent firm's
loss exposure.
6. Certificate of Authority: license issued to an insurer by a dept. of insurance, which authorizes that
company to conduct insurance business in that particular state
7. Claims Department: Responsible for processing, investigating, and paying claims
8. Divisible Surplus: Amount of earnings paid to policyowners as dividends after the insurance company sets
aside funds required to cover reserves, operating expenses, and general business purposes.
9. Domestic Insurer: Insurer with its principal or home office in a state where it is authorized
10. Foreign Insurer: Insurer with its principal office or domicile location in a state different from the state it is
transacting insurance business
11. Fraternal Benefit Society: Nonprofit benevolent organizations that provide insurance to its members
12. Industrial Insurer: Primarily providing policies with small face amounts with weekly premiums
13. Insurance: Transfer of risk through the pooling or accumulation of funds
14. Insured: Customer receiving insurance protection under an insurance policy
15. Insurer: The insurance company
16. Lloyds of London: NOT an insurer, but a group of individuals and companies that underwrite unusual
insurance
17. Multi-line Insurer: Insurance Co. that provides a one-stop-shop for businesses or individuals seeking
coverage for all their insurance needs.
18. Mutual Insurance Company: Insurance Companies characterized by having no capital stock, being
owned by its policy owners, and usually issue participating insurance
19. Non-Admitted Insurer: Insurer who has not received a certificate of authority from a state's department
of insurance authorizing them to conduct insurance business in that state.
20. Nonparticipating Policy: (Typically issued by Stock Companies) Does not allow policyowners to partic-
ipate in dividends or electing the board of directors
21. Participating Plan: Insurance policy that allows policyowners to share in the company's earnings through
receipt of dividends and also elect the company's board of directors.
, CA PSI Life, Health, and Sickness Exam
Study online at https://quizlet.com/_d71tj6
22. Private (Commerical) Insurer: Companies owned by private citizens or groups that offer one or more
insurance lines (NOT government owned)
23. Reciprocal Insurer: Unincorporated organization in which all members insure one another
24. Reinsurance: Acceptance by one or more insurers (reinsurers) of a portion of the risk underwritten by another
insurer who has contracted for the entire coverage
25. Reinsurer: Company that provides financial protection to insurance companies
26. Risk Retention Group: Group-Owned liability insurer which assumes and spread product liability and
other forms of commercial liability risks among its members.
27. Self-Insurers: Establishes self-funded plan to cover potential losses instead of transferring the risk to an
insurance company
28. Stock Insurance Company: Insurance company owned and controlled by a group of stockholders
whose investment in the company provides the safety margin necessary in the issuance of guaranteed fixed premium,
nonparticipating polices.
29. Surplus Lines Insurance: Nontraditional insurance only available from a surplus lines insurer. Offers
coverage for substandard or unusual risks not available through private or commercial carriers.
30. Underwriting Department: Dept. responsible for reviewing applications, approving or declining ap-
plications, and assigning risk classifications.
31. Adverse Selection: Selection against the company (Tendency of people with higher risks to seek out
insurance)
32. Hazard: Any factor that creates an increased possibility that a peril will occur
33. Homogeneous Exposure Units: Similar objects of insurance that are exposed to the same group of
perils
34. Indemnity Contract: Attempt to return the insured to their original financial position
35. Law of Large Numbers: The larger the number of individual risks combined into a group, the more
certainty there is in predicting the degree or amount of loss that will be incurred
36. Loss: Unintentional decrease in the value of an asset due to a peril
37. Loss Exposure: The risk of a possible loss
38. Moral Hazard: Hazard brought on by the effect of personal reputation, character, or personal living habits.
39. Peril: Immediate, specific event causing loss and giving rise to risk
40. Physical Hazard: Physical conditions existing in a manner that makes a lsos more likely to occur
41. Pure Risk: Type of risk that involves the chance of loss only (no opportunity to gain) INSURABLE
42. Risk: Uncertainty regarding loss, the probability of a loss occurring for an insured
, CA PSI Life, Health, and Sickness Exam
Study online at https://quizlet.com/_d71tj6
43. Risk Avoidance: Individuals evade risk entirely. Not doing something that could cause a loss
44. Risk Management: Process of analyzing exposures that create risk and designing programs to handle
them
45. Risk Pooling / Loss Sharing: Spread risks by sharing the possibility of loss over a large number of
people
46. Risk Reduction: Chances of a loss are lessened, or severity of a potential loss is minimized
47. Risk Retention: Act of analyzing the loss exposure presented by a risk and determining that the potential
loss is acceptable.
48. Risk Transfer: Act of shifting the responsibility of risk to another in the form of an insurance contract
49. Speculative Risk: Type of risk that involves the chance of both loss and gain (NOT INSURABLE)
50. Adhesion: A contract that has been prepared by one party (Insurance Co.) with no negotiation between the
applicant and insurer.
51. Agent: Represents themselves and the insurer at the time of application
52. Aleatory: Potential for an unequal exchange of value or consideration between both parties.
53. Apparent Authority: Appearance of the insurer providing the agent authority to perform unspecified tasks
54. Competent Party: One who is capable of understanding the contract being agreed to. (Must be of legal
competence)
Ex. Legal age, not influenced by drugs
55. Concealment: Failure to disclose a known material fact when applying for insurance
56. Conditional: Insurer's promise to pay benefits depends on the occurrence of an event covered by the contract
57. Consideration: Part of an insurance contract setting forth the amount of initial and renewal premiums and
frequency of future payments
58. Estoppel: Legal impediment (obstacle) to one party denying the consequences of its own actions or deeds.
59. Express Authority: Explicit authority granted to the agent by the insurer (Written in agent contract)
60. Fiduciary: Responsibility the insurance has to account for all premiums collected and provide sound financial
advice to clients.
61. Fraud: Deliberate knowledge of or intentional deceit to make false statements to be compensated by an
insurance co.
62. Implied Authority: Authority not explicitly granted to the agent in the contract, but which common sense
dictates the agent has.
Study online at https://quizlet.com/_d71tj6
1. What is an Actuarial Department: Dept. that calculates policy rates, reserves, and dividends
2. Alien Insurer: Insurer whose principal office and domiciled location is outside the country
3. Admitted (Authorized) Insurer: Insurer who has received a certificate of authority from a state's
department of insurance that authorizes them to conduct insurance business in that state.
4. Broker: Represents themselves and the insured (client)
5. Captive Insurer: Issuer established and owned by a parent firm for the purpose of insuring the parent firm's
loss exposure.
6. Certificate of Authority: license issued to an insurer by a dept. of insurance, which authorizes that
company to conduct insurance business in that particular state
7. Claims Department: Responsible for processing, investigating, and paying claims
8. Divisible Surplus: Amount of earnings paid to policyowners as dividends after the insurance company sets
aside funds required to cover reserves, operating expenses, and general business purposes.
9. Domestic Insurer: Insurer with its principal or home office in a state where it is authorized
10. Foreign Insurer: Insurer with its principal office or domicile location in a state different from the state it is
transacting insurance business
11. Fraternal Benefit Society: Nonprofit benevolent organizations that provide insurance to its members
12. Industrial Insurer: Primarily providing policies with small face amounts with weekly premiums
13. Insurance: Transfer of risk through the pooling or accumulation of funds
14. Insured: Customer receiving insurance protection under an insurance policy
15. Insurer: The insurance company
16. Lloyds of London: NOT an insurer, but a group of individuals and companies that underwrite unusual
insurance
17. Multi-line Insurer: Insurance Co. that provides a one-stop-shop for businesses or individuals seeking
coverage for all their insurance needs.
18. Mutual Insurance Company: Insurance Companies characterized by having no capital stock, being
owned by its policy owners, and usually issue participating insurance
19. Non-Admitted Insurer: Insurer who has not received a certificate of authority from a state's department
of insurance authorizing them to conduct insurance business in that state.
20. Nonparticipating Policy: (Typically issued by Stock Companies) Does not allow policyowners to partic-
ipate in dividends or electing the board of directors
21. Participating Plan: Insurance policy that allows policyowners to share in the company's earnings through
receipt of dividends and also elect the company's board of directors.
, CA PSI Life, Health, and Sickness Exam
Study online at https://quizlet.com/_d71tj6
22. Private (Commerical) Insurer: Companies owned by private citizens or groups that offer one or more
insurance lines (NOT government owned)
23. Reciprocal Insurer: Unincorporated organization in which all members insure one another
24. Reinsurance: Acceptance by one or more insurers (reinsurers) of a portion of the risk underwritten by another
insurer who has contracted for the entire coverage
25. Reinsurer: Company that provides financial protection to insurance companies
26. Risk Retention Group: Group-Owned liability insurer which assumes and spread product liability and
other forms of commercial liability risks among its members.
27. Self-Insurers: Establishes self-funded plan to cover potential losses instead of transferring the risk to an
insurance company
28. Stock Insurance Company: Insurance company owned and controlled by a group of stockholders
whose investment in the company provides the safety margin necessary in the issuance of guaranteed fixed premium,
nonparticipating polices.
29. Surplus Lines Insurance: Nontraditional insurance only available from a surplus lines insurer. Offers
coverage for substandard or unusual risks not available through private or commercial carriers.
30. Underwriting Department: Dept. responsible for reviewing applications, approving or declining ap-
plications, and assigning risk classifications.
31. Adverse Selection: Selection against the company (Tendency of people with higher risks to seek out
insurance)
32. Hazard: Any factor that creates an increased possibility that a peril will occur
33. Homogeneous Exposure Units: Similar objects of insurance that are exposed to the same group of
perils
34. Indemnity Contract: Attempt to return the insured to their original financial position
35. Law of Large Numbers: The larger the number of individual risks combined into a group, the more
certainty there is in predicting the degree or amount of loss that will be incurred
36. Loss: Unintentional decrease in the value of an asset due to a peril
37. Loss Exposure: The risk of a possible loss
38. Moral Hazard: Hazard brought on by the effect of personal reputation, character, or personal living habits.
39. Peril: Immediate, specific event causing loss and giving rise to risk
40. Physical Hazard: Physical conditions existing in a manner that makes a lsos more likely to occur
41. Pure Risk: Type of risk that involves the chance of loss only (no opportunity to gain) INSURABLE
42. Risk: Uncertainty regarding loss, the probability of a loss occurring for an insured
, CA PSI Life, Health, and Sickness Exam
Study online at https://quizlet.com/_d71tj6
43. Risk Avoidance: Individuals evade risk entirely. Not doing something that could cause a loss
44. Risk Management: Process of analyzing exposures that create risk and designing programs to handle
them
45. Risk Pooling / Loss Sharing: Spread risks by sharing the possibility of loss over a large number of
people
46. Risk Reduction: Chances of a loss are lessened, or severity of a potential loss is minimized
47. Risk Retention: Act of analyzing the loss exposure presented by a risk and determining that the potential
loss is acceptable.
48. Risk Transfer: Act of shifting the responsibility of risk to another in the form of an insurance contract
49. Speculative Risk: Type of risk that involves the chance of both loss and gain (NOT INSURABLE)
50. Adhesion: A contract that has been prepared by one party (Insurance Co.) with no negotiation between the
applicant and insurer.
51. Agent: Represents themselves and the insurer at the time of application
52. Aleatory: Potential for an unequal exchange of value or consideration between both parties.
53. Apparent Authority: Appearance of the insurer providing the agent authority to perform unspecified tasks
54. Competent Party: One who is capable of understanding the contract being agreed to. (Must be of legal
competence)
Ex. Legal age, not influenced by drugs
55. Concealment: Failure to disclose a known material fact when applying for insurance
56. Conditional: Insurer's promise to pay benefits depends on the occurrence of an event covered by the contract
57. Consideration: Part of an insurance contract setting forth the amount of initial and renewal premiums and
frequency of future payments
58. Estoppel: Legal impediment (obstacle) to one party denying the consequences of its own actions or deeds.
59. Express Authority: Explicit authority granted to the agent by the insurer (Written in agent contract)
60. Fiduciary: Responsibility the insurance has to account for all premiums collected and provide sound financial
advice to clients.
61. Fraud: Deliberate knowledge of or intentional deceit to make false statements to be compensated by an
insurance co.
62. Implied Authority: Authority not explicitly granted to the agent in the contract, but which common sense
dictates the agent has.
