Michigan Credit Insurance Study Guide Rated A+

Michigan Credit Insurance Study Guide Rated A+ Definintion of Insurance "A social device for transferring risk through an accumulation of funds" Policy A contract with the insurance company (insurer) that states what the policyowner (insured) must pay for and what they agree to cover if damage or loss occurs. Premium A set amount that must be paid for a Policy. Concept of Risk Risk evolves from uncertainty - the unpredictable chance occurrences of everyday life, which result in financial or economic loss. Life insurance addresses the financial impact of ____________. Premature Death Speculative Risk Involves the chance of winning or losing. It is a win-lose situation. Pure Risk Creates only financial loss. It's a lose-lose situation. Insurance only deals with _______ risk. Pure Ways to Manage Risk - Avoidance - Reduction - Retention - Sharing - Transfer Elements in Insurable Risks: The loss.. - Must Be Preictable - Must Be Definite - Must Be Due to Chance - Cannot Be Catastrophic - Exposure Must Be Large Law of Large Numbers The larger number of similar risks, the more accurate the prediction of loss will be over a period of time. Mortality Table Contains statistical information related to the probability of death occurring at specific ages. Mortality Expense The cost of death protection. Stock Insurance Company Owned by its stockholders, policyholders DO NOT participate in dividends. Mutual Insurance Company Owned by policyholders, policyholders DO participate in dividends. Fraternal Benefit Society Promotes social and charitable activities, markets insurance products to its members.