MN Life & Health Insurance | 422 Questions And Answers Already Passed!!

Insurance - Transfer of risk to the Insurer Speculative Risk - Risk that can have either gains or losses Pure Risk - Risk that can only see losses Loss - Reduction in the value of something Exposure - Risks the Insurance company is exposed to Peril - Cause of loss Hazard - Anything that increases the likelihood of loss through peril Physical Hazard - Mechanical cause of harm (wet floor) Moral Hazard - Character cause of harm (dishonesty) Morale Hazard - Mindset cause of harm (carelessness) How can you Handle Risk? - STARR Share the Loss Transfer the Risk Avoid Risk Retain the Loss Reduce the chances of LossElements of Insurable Risk - CANHAM Calculable Affordable Non-Catastrophic Homogenous Accidental Measurable Adverse Selection - People who are high risk are more likely to have insurance Reinsurance - The process of an insurance company sharing the risk they bought Facilitative Reinsurance - Equal share of risk Treaty Reinsurance - Full transfer of risk (must meet certain criteria) Stock Insurance Company - Owned by Shareholders. Dividends go to Shareholders Mutual Insurance Company - Owned by policy holders. Dividends go to policy holders Fraternal Benefit Company - Insurance through membership. Policies are called Certificates. Additional assessable charges could be used if the company doesn't have enough money. NOT FOR PROFIT Reciprocal Insurer - Un-incorperated arrangement where subscribers are assessed the amount they have to pay if a loss to any member occurs. No premiums. Ran by an attorney in factRisk Retention Group - Insurance company created for policyholders from the same industry meant to spread out the risk amongst multiple groups Lloyd's Association - Insurance provided by individual underwriters, which generally focus on specific/unusual risk (arm for a basketball player)