215 Insurance License Exam Test Questions and Answer Graded A+
risk pooling spreading risk over a large group of people
law of large numbers larger the group, the more certain the predictions
speculative risk not insurable - involves both chance of loss or gain
pure risk insurable - involves chance of loss, never gain or profit
event causing loss
peril
Ex: fire, death, accident, windstorm, disease
any factor that gives rise to peril or increase likelihood of
hazard
a loss from a peril
physical hazard slippery floor, blindness, deafness, past medical history
intentional act, tendencies to take risks;
moral hazard
Ex: alcoholism, drugs, dishonesty
carelessness, inditterence
morale hazard
Ex: driving recklessly with no fear of injury
avoiding the risk, don't do anything
risk avoidance
Ex: choosing not to drive, fly or invest (not practical)
reducing the risk of a loss
risk reduction Ex: installing smoke detectors, quit smoking, don't test and
drive
self-insure, setting up fund to ottset your losses; should
risk retention
be limited to what you can easily attord to pay
purchasing insurance, best way; transferring risk from an
risk transfer
individual to an insurance company
tendency for less favorable insurance risks to seek and
adverse selection continue insurance to greater extent than other risks
Ex: people in poor health
economic value measured in part by future earnings po-
human life value
tential
1/7
, 215 Insurance License Exam Test Questions and Answer Graded A+
needs base approach how much money needed if death occurs today
private organization owned by stockholders; in business
stock insurers
to make profit for stockholders
corporation owned by policyholders; issue participating
mutual insurers
policies that pay policy dividends
association of individuals and companies that underwrite
lloyds of london insurance; coverage for unusual or high risks
Ex: kidnap or ransom, disability for professional athletes
reinsurers insurer for insurers
mutual insurance company formed to insure those in
risk retention group same business, occupation, or profession
Ex: dentists, engineers, pharmacists
charitable, social, nonprofit, lodge system, representative
form of government whose membership is based on re-
fraternal benefit society ligion, nationality, or ethnic lines; began on assessment
bassi to help poorer members but now issues insurance
certificates and annuities similar to commercial insurers
industrial; small face amounts of insurance issued; premi-
home service insurers
ums collected weekly by selling agent
sell medical and hospital care services, not insurance
service provider
Ex: BCBS
fixed premium paid in advance; treatment from physicians
hmo and hospitals contracted; known for stressing preventive
care and early treatment
group (ex: employer or union) arranges discounts from
ppo
select health care providers
agent represent insurance company
broker represent client
2/7
risk pooling spreading risk over a large group of people
law of large numbers larger the group, the more certain the predictions
speculative risk not insurable - involves both chance of loss or gain
pure risk insurable - involves chance of loss, never gain or profit
event causing loss
peril
Ex: fire, death, accident, windstorm, disease
any factor that gives rise to peril or increase likelihood of
hazard
a loss from a peril
physical hazard slippery floor, blindness, deafness, past medical history
intentional act, tendencies to take risks;
moral hazard
Ex: alcoholism, drugs, dishonesty
carelessness, inditterence
morale hazard
Ex: driving recklessly with no fear of injury
avoiding the risk, don't do anything
risk avoidance
Ex: choosing not to drive, fly or invest (not practical)
reducing the risk of a loss
risk reduction Ex: installing smoke detectors, quit smoking, don't test and
drive
self-insure, setting up fund to ottset your losses; should
risk retention
be limited to what you can easily attord to pay
purchasing insurance, best way; transferring risk from an
risk transfer
individual to an insurance company
tendency for less favorable insurance risks to seek and
adverse selection continue insurance to greater extent than other risks
Ex: people in poor health
economic value measured in part by future earnings po-
human life value
tential
1/7
, 215 Insurance License Exam Test Questions and Answer Graded A+
needs base approach how much money needed if death occurs today
private organization owned by stockholders; in business
stock insurers
to make profit for stockholders
corporation owned by policyholders; issue participating
mutual insurers
policies that pay policy dividends
association of individuals and companies that underwrite
lloyds of london insurance; coverage for unusual or high risks
Ex: kidnap or ransom, disability for professional athletes
reinsurers insurer for insurers
mutual insurance company formed to insure those in
risk retention group same business, occupation, or profession
Ex: dentists, engineers, pharmacists
charitable, social, nonprofit, lodge system, representative
form of government whose membership is based on re-
fraternal benefit society ligion, nationality, or ethnic lines; began on assessment
bassi to help poorer members but now issues insurance
certificates and annuities similar to commercial insurers
industrial; small face amounts of insurance issued; premi-
home service insurers
ums collected weekly by selling agent
sell medical and hospital care services, not insurance
service provider
Ex: BCBS
fixed premium paid in advance; treatment from physicians
hmo and hospitals contracted; known for stressing preventive
care and early treatment
group (ex: employer or union) arranges discounts from
ppo
select health care providers
agent represent insurance company
broker represent client
2/7
