Primerica Insurance Exam 2023 with 100% correct answers

nsurance A contract in which one party agrees to indemnify the insured party against loss, damage or liability from an unknown event. Insurance transfers The reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril. Risk The uncertainty or chance of a loss occurring. Pure risk Situations that can only result in a loss or no change Speculative risk The opportunity for either loss loss or gain. Hazards Conditions or situations that increase the probability of an insured loss occurring. Physical hazards Individual characteristics that increase the chances of the cause of loss. Moral hazards Tendencies towards increased risk. Morale hazards Arises from a state of mind that causes indifference to loss, such as carlessness Perils The causes of loss against in an insurance policy Exposure The unit of measure used to determine rates charged for insurance coverage. Factors: The age of the insured, insured medical history, occupation, and sex Avoidance Eliminating exposure to a loss. Retention The planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance. Purpose: To reduce expenses and improve cash flow, to increase control of claim reserving and claims settlement, to fund for losses that cannot be insured. Sharing Method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss to share share the losses that occur within that group. Reduction Attempt to lessen the possibility or severity of a loss. Transfer The risk of financial loss us assigned to another party. Law of large number The larger the number of people with a similar exposure to loss, the more predictable actual losses will be. Adverse selection The insuring of risks that are more prone to losses than the average risk.