Texas Life and Health Insurance
Questions and Answers Rated A
Insurance - ANSWER-Contractual coverage binding the insurer (insurance company) to
indemnify (compensate for loss) the insured (people or businesses) against a specified
loss in return for money (premiums).
Law of Large Numbers - ANSWER-What insurance is based on. The bigger the
observed sample, the more accurate the predicted results.
Life insurance pools growth and distribution of money to satisfy two goals: - ANSWER-
1. Pay benefits to survivors of someone who dies while covered.
2. Providing distribution of benefits by lump sum or with guaranteed lifetime payments
Indemnification - ANSWER-Concept of restoring individuals to the same financial
position they were at before a loss occurred.
Agent/Producer - ANSWER-Individual who is state-licensed to solicit and sell insurance
for one or more insurance companies. He/She must be authorized by an insurer
(principal) to act on its behalf.
Insured - ANSWER-Individual who is insured or has insurance taken out on or for them
for a specific interest.
Named Insured - ANSWER-Person(s) listed as insured in the Declarations page.
First Named Insured - ANSWER-first person listed who gets renewal/policy change
notices
Other Insured - ANSWER-1. Any member of the insured household who is a relative or
is under 21
2. A child or parent living with the insured is included, regardless of age
3. Other members of the insured household who are under 21 years of age
Additional Insured - ANSWER-an individual or entity who, other than the named
insured, qualifies as an insured person under the policy.
Policyowner - ANSWER-Person who:
1. Applies for a policy
2. Takes responsibility for premium payment
3. Has the right to cash values, dividends, and policy proceeds
4. Has the ability to change beneficiaries and other policy particulars
, Accident - ANSWER-an undesirable, unforseen, and unintended event that is
identifiable as to time and place
Occurance - ANSWER-an event, including continuous and repeated exposure to
conditions, which results in bodily injury or property damage neither expected nor
intended from the standpoint of the insured
Endowment - ANSWER-Cash from life insurance payable to the policyholder at policy
maturity
Final Expenses - ANSWER-the financial costs related to dying: funeral and medical
expenses, debts, taxes and administrative expenses
National Association of Insurance Commissioners (NAIC) - ANSWER-All state directors
or commissioners are members of the NAIC, but the group has no official legislative
powers. They try to standardize insurance laws throughout the country by
recommending model legislation in each commissioners home state.
Maslow's Hierarchy of Needs - ANSWER-1. Physiological
2. Security
3. Affiliation
4. Esteem
5. Self-actualization
Must be met before approaching someone about buying insurance.
Risk - ANSWER-Probability or uncertainty that a loss will occur, Greater the risk, higher
the premium.
Pure Risk - ANSWER-Involves the probability or possibility of loss with no chance for
gain. (You can't gain anything from your house burning down.)
Speculative Risk - ANSWER-a risk for which it is uncertain whether the final outcome
will be a gain or a loss. Typically uninsurable. (They don't sell insurance for shady
investments)
Exposure - ANSWER-measure of vulnerability to loss, usually expressed in dollars or
units to which an insurance rate is applied
Hazard - ANSWER-condition that increases the chance for loss or the severity of loss
Physical Hazard - ANSWER-physical hazards are created by the use, condition, or
occupancy of property, such as damaged steps or worn tires.
Moral Hazard - ANSWER-Created by the insured's habits, dishonesty or criminal
activity. Situation where one party gets involved in a risky event knowing that it is
protected against the risk and the other party will incur the cost. (insurance fraud)
Questions and Answers Rated A
Insurance - ANSWER-Contractual coverage binding the insurer (insurance company) to
indemnify (compensate for loss) the insured (people or businesses) against a specified
loss in return for money (premiums).
Law of Large Numbers - ANSWER-What insurance is based on. The bigger the
observed sample, the more accurate the predicted results.
Life insurance pools growth and distribution of money to satisfy two goals: - ANSWER-
1. Pay benefits to survivors of someone who dies while covered.
2. Providing distribution of benefits by lump sum or with guaranteed lifetime payments
Indemnification - ANSWER-Concept of restoring individuals to the same financial
position they were at before a loss occurred.
Agent/Producer - ANSWER-Individual who is state-licensed to solicit and sell insurance
for one or more insurance companies. He/She must be authorized by an insurer
(principal) to act on its behalf.
Insured - ANSWER-Individual who is insured or has insurance taken out on or for them
for a specific interest.
Named Insured - ANSWER-Person(s) listed as insured in the Declarations page.
First Named Insured - ANSWER-first person listed who gets renewal/policy change
notices
Other Insured - ANSWER-1. Any member of the insured household who is a relative or
is under 21
2. A child or parent living with the insured is included, regardless of age
3. Other members of the insured household who are under 21 years of age
Additional Insured - ANSWER-an individual or entity who, other than the named
insured, qualifies as an insured person under the policy.
Policyowner - ANSWER-Person who:
1. Applies for a policy
2. Takes responsibility for premium payment
3. Has the right to cash values, dividends, and policy proceeds
4. Has the ability to change beneficiaries and other policy particulars
, Accident - ANSWER-an undesirable, unforseen, and unintended event that is
identifiable as to time and place
Occurance - ANSWER-an event, including continuous and repeated exposure to
conditions, which results in bodily injury or property damage neither expected nor
intended from the standpoint of the insured
Endowment - ANSWER-Cash from life insurance payable to the policyholder at policy
maturity
Final Expenses - ANSWER-the financial costs related to dying: funeral and medical
expenses, debts, taxes and administrative expenses
National Association of Insurance Commissioners (NAIC) - ANSWER-All state directors
or commissioners are members of the NAIC, but the group has no official legislative
powers. They try to standardize insurance laws throughout the country by
recommending model legislation in each commissioners home state.
Maslow's Hierarchy of Needs - ANSWER-1. Physiological
2. Security
3. Affiliation
4. Esteem
5. Self-actualization
Must be met before approaching someone about buying insurance.
Risk - ANSWER-Probability or uncertainty that a loss will occur, Greater the risk, higher
the premium.
Pure Risk - ANSWER-Involves the probability or possibility of loss with no chance for
gain. (You can't gain anything from your house burning down.)
Speculative Risk - ANSWER-a risk for which it is uncertain whether the final outcome
will be a gain or a loss. Typically uninsurable. (They don't sell insurance for shady
investments)
Exposure - ANSWER-measure of vulnerability to loss, usually expressed in dollars or
units to which an insurance rate is applied
Hazard - ANSWER-condition that increases the chance for loss or the severity of loss
Physical Hazard - ANSWER-physical hazards are created by the use, condition, or
occupancy of property, such as damaged steps or worn tires.
Moral Hazard - ANSWER-Created by the insured's habits, dishonesty or criminal
activity. Situation where one party gets involved in a risky event knowing that it is
protected against the risk and the other party will incur the cost. (insurance fraud)
