Georgia Life, Accident, & Sickness Exam Study Guide Graded A+

Insurance - Answer-A social device for spreading the chance of financial loss among a large number of people. A method of transferring risks to the insurance company. Risk - Answer-Shared by all those people buying like coverage's Types of Risk? - Answer-Speculative and Pure Speculative Risk - Answer-Gambling. Insurance DOES NOT cover this. Insurance is not meant to provide the opportunity for a gain. Pure Risk - Answer-The type of loss insurance covers Valued Contract - Answer-Pays stated amount in the event of the occurrence. EX: Life Insurance Reimbursement Contract - Answer-Based on the loss you will be paid back a certain amount. EX: Health Insurance, Disability Insurance, Auto Insurance Description of Insurance - Answer-A large uncertain loss (death, disability) is exchanged for a small certain loss (premium). The agreement is between the insurer (the company) and the policy owner (may or may not be the insured) is established in a legal contract, called a policy. The contract promises to pay a claim if a loss occurs. If a loss occurs the beneficiary will file a claim. Who is involved with a Policy? - Answer-Applicant, Policy Owner, Insured, Beneficiary, Insurer, Third party contract Applicant - Answer-Person applying for insurance Policy Owner - Answer-Pays the bill. Has all ownership of rightsInsured - Answer-Person whose life is covered in the policy Beneficiary - Answer-The person named to receive the proceeds upon the death of the insured. (THIS CAN BE ANYONE YOU WANT) Insurer - Answer-The company Third Party Contract - Answer-A policy that is owned by someone other than the insured. EX: a husband buys insurance on his wife or a parent buys insurance on a child. What creates risk? - Answer-Peril and Hazard Peril - Answer-Is the cause of the loss. EX: fire, flood, accident Hazard - Answer-Anything that increases the chance of loss Moral Hazard - Answer-liar, misrepresents oneself (Ends in an L for LIAR) Morale Hazard - Answer-bad attitude, careless, a risk taker (ends in an E attitude ends in an E) EX: speeding ticket, DUI, bad credit Method of Managing Risks - Answer-Transfer Buying Insurance - Answer-The risk of the loss is transferred to the insurer and it is shared by other insured's that have similar characteristics, like age, sex, occupation Two basic concepts of insurance? - Answer-Pooling Concept and Law of Large Numbers Pooling Concept - Answer-Looking at a group of people who share similar characteristics to make predictionsLaw of Large Numbers - Answer-the larger the group, the more accurate the prediction. The Mortality Table - Answer-In use is The Commissioners Standard Ordinary Table. Tracks life expectancy to age 120. Exposure Unit - Answer-The person or property being considered Indemnify - Answer-Returns one to the economic position enjoyed prior to the loss, but restricts one from making a profit from the loss Contestable Clause - Answer-Suicide in the first two years is not covered. The insurer will return premium only, with no interest. Incontestable - Answer-After two years the life insurance contract for suicide and for fraud is over and the claim will be paid. In Health Insurance, Fraud is ______________ - Answer-FOREVER