WEBCE Prep Life Insurance Exam Questions
and Answers with Verified Solutions | Latest
Updated 2026
Risk Management using strategies to reduce the amount of
risk
Risk The chance of loss from an event that
cannot
be entirely controlled
Pure risk The possibility of loss with no chance of
gain.
That which can result only in a loss to the
person at risk.
Speculative risk Chance of loss or gain
loss unplanned reduction in economic value.
can
be either direct or indirect.
Underwriting The process that determines if the risk
proposed for insurance should be
accepted or
rejected.
,peril A condition that involves either danger or
risk
and is the cause of a loss.
hazard a condition that increases the number of or
severity of loss
Risk Avoidance avoiding an act that would create a risk
Risk Retention Choosing to use assets to pay for any
losses if
the risk becomes a reality
risk sharing One of the oldest ways to manage risks;
similar
to buying insurance in that a part of the
risk is
transferred to others
Risk transfer An individual or business transfers the risk
of
loss to an insurance company in return for
a
premium
insurable risk An applicant is an insurable risk to the
insurer if
he or she meets certain criteria for
insurability;
if these criteria are met, then the applicant
is
insurable.
, Law of Large Numbers A method of predicting future losses with
great
accuracy.
mortality Is the rate of death in the target population;
it is
a significant factor in calculating life
insurance
premiums
morbidity Used by insurers in pricing health
insurance
policies. Indicates the average number of
persons at various ages who can be
expected
to become disabled because of illness or
accident.
adverse selection The tendency of those who most need
insurance to buy insurance. Those who
don't
have as much of a need for a particular
type of
insurance are less likely to buy it
Stock insurance companies Owned by stockholders these companies
pay
dividends, when declared, to their
stockholders
Mutual insurance companies Owned by policyowners; mutual
companies
have no stockholders
and Answers with Verified Solutions | Latest
Updated 2026
Risk Management using strategies to reduce the amount of
risk
Risk The chance of loss from an event that
cannot
be entirely controlled
Pure risk The possibility of loss with no chance of
gain.
That which can result only in a loss to the
person at risk.
Speculative risk Chance of loss or gain
loss unplanned reduction in economic value.
can
be either direct or indirect.
Underwriting The process that determines if the risk
proposed for insurance should be
accepted or
rejected.
,peril A condition that involves either danger or
risk
and is the cause of a loss.
hazard a condition that increases the number of or
severity of loss
Risk Avoidance avoiding an act that would create a risk
Risk Retention Choosing to use assets to pay for any
losses if
the risk becomes a reality
risk sharing One of the oldest ways to manage risks;
similar
to buying insurance in that a part of the
risk is
transferred to others
Risk transfer An individual or business transfers the risk
of
loss to an insurance company in return for
a
premium
insurable risk An applicant is an insurable risk to the
insurer if
he or she meets certain criteria for
insurability;
if these criteria are met, then the applicant
is
insurable.
, Law of Large Numbers A method of predicting future losses with
great
accuracy.
mortality Is the rate of death in the target population;
it is
a significant factor in calculating life
insurance
premiums
morbidity Used by insurers in pricing health
insurance
policies. Indicates the average number of
persons at various ages who can be
expected
to become disabled because of illness or
accident.
adverse selection The tendency of those who most need
insurance to buy insurance. Those who
don't
have as much of a need for a particular
type of
insurance are less likely to buy it
Stock insurance companies Owned by stockholders these companies
pay
dividends, when declared, to their
stockholders
Mutual insurance companies Owned by policyowners; mutual
companies
have no stockholders
