Loma 281: Module 1 Lesson 1 Questions and Answers with complete solution

Risk - the possibility of an unexpected loss speculative risk - can result in a gain, a loss four risk management techniques - avoid the risk control the risk accept the risk transfer the risk Two basic types of life insurance product - life insurance: the insurer promises to pay a death benefit when a a named person dies Annuity: in return for recv a premium, an insurer promises to make periodic payments. Risk Pooling - spreading the cost of the relatively few anticipated losses among all insured. Parties involved in insurance transaction - applicant policyowner insured beneficiary characteristics of an insurable risk - the risk must be a pure risk loss must occur by chance loss must be definite in time and amount the loss must be significant the loss rate must be predictableloss cannot be catastrophic to the insurer law of large numbers - predict loses based on this value underwriters - evaluate proposed risks and assign them to classes