AFLAC INSURANCE EXAM PREP 2
QUESTIONS AND ANSWERS
Adverse selection - Correct Answers -selection against the company. Includes tendency
of people with higher risk to seek or continue insurance to a greater extent than those
with little or less risk. Also policyowners to take advantage pf favorable options in
contracts
Hazard - Correct Answers -any factor, condition, or situation that creates an increased
possibility that a peril will actually occur
Homogeneous Exposure Units - Correct Answers -units are similar objects of insurance
that are exposed to the same group of perils
Indemnity Contract - Correct Answers -attempt to return the insured to their original
financial position
Law of large numbers - Correct Answers -fundamental principle of insurance that the
larger the number of individuals risks combined into a group, the more certainty there is
predicting the degree of loss incurred in a given period
Loss - Correct Answers -Unintentional decrease in the value of an asset due to peril
Loss exposure - Correct Answers -risk of a possible loss
moral hazard - Correct Answers -hazard brought on by the effect of personal reputation,
character, associates, personal living habits, financial responsibility, and environment as
distinguished from physical health upon an individual general insurability
morale hazard 2 - Correct Answers -hazard arising from indifference to loss because of
the existence of insurance. associated with having a careless attitude.
peril - Correct Answers -immediate specific event causing loss and giving rise to risk
Physical hazard - Correct Answers -physical or tangible conditions existing in a manner
that makes a loss more likely to occur
risk reduction - Correct Answers -takes place when the chances of a loss are lessened,
or the severity of a potential loss is minimized
QUESTIONS AND ANSWERS
Adverse selection - Correct Answers -selection against the company. Includes tendency
of people with higher risk to seek or continue insurance to a greater extent than those
with little or less risk. Also policyowners to take advantage pf favorable options in
contracts
Hazard - Correct Answers -any factor, condition, or situation that creates an increased
possibility that a peril will actually occur
Homogeneous Exposure Units - Correct Answers -units are similar objects of insurance
that are exposed to the same group of perils
Indemnity Contract - Correct Answers -attempt to return the insured to their original
financial position
Law of large numbers - Correct Answers -fundamental principle of insurance that the
larger the number of individuals risks combined into a group, the more certainty there is
predicting the degree of loss incurred in a given period
Loss - Correct Answers -Unintentional decrease in the value of an asset due to peril
Loss exposure - Correct Answers -risk of a possible loss
moral hazard - Correct Answers -hazard brought on by the effect of personal reputation,
character, associates, personal living habits, financial responsibility, and environment as
distinguished from physical health upon an individual general insurability
morale hazard 2 - Correct Answers -hazard arising from indifference to loss because of
the existence of insurance. associated with having a careless attitude.
peril - Correct Answers -immediate specific event causing loss and giving rise to risk
Physical hazard - Correct Answers -physical or tangible conditions existing in a manner
that makes a loss more likely to occur
risk reduction - Correct Answers -takes place when the chances of a loss are lessened,
or the severity of a potential loss is minimized
