Nebraska Life and Health Insurance Exam Questions and Answers Already Passed

Nebraska Life and Health Insurance Exam Questions and Answers Already Passed What is Insurance? a contract in which 1 party (insurance company) agrees to indemnify (make whole) the insured party against loss, damage, or a liability arising from an unknown event. What is life insurance? a policy that protects survivors from losses suffered after an insured's death What does insurance do? transfers the risk of loss from an individual or business entity to an insurance company which spreads out costs of unexpected losses to many individuals What is risk? uncertainty or chance of a loss occurring Pure risk refers to sutuations that can only result in a loss or no change, no opportunity for financial gain What type of risk do insurance companies accept? pure risk Speculative risk involves opportunity for loss or gain Hazard conditions or situation that increase probability of an insured loss occurring Physical hazard individual characteristics that increase the chances of the cause of loss Example of a physical hazard past medical history, existing conditions, (blindness) Moral hazard tendencise towards increased risk. moral hazards inclove evaluating character of insured example of moral hazard applicants who may lie on an application for insurance or in the past have submitted fraudulent claims against an insurer Morale hazard similar to moral hazards, except that they arise from a state of mind that causes indifference to loss, such as carelessness example of morale hazard actions taken without forethought may cause physical injuries Peril perils are causes of loss insured against in an insurance policy Life Insurance insures against the financial loss caused by the premature death of the insured Health Insurance insures against mediacal expenses and/or loss of income caused by the insured's sickness or accidental injury Property Insurance insures against the loss and/or damage of property and resulting in liabilities Loss reduction, decrease or dissappearance of value of the person or property insured in a policy, caused by a named peril. Insurance provides means to transfer loss Exposure is a unity of measure used to determine rates charged for insurance companies What are factors considered in determining rates for life insurance? age of insured, medical history, occupation, sex Homogeneous large # of units having the same or similar exposure to loss Avoidance (method of handling risk) eliminating exposure to a loss Example of avoidance avoid being killed in an airplane crash by not riding on airplanes (not practical) Retention (method of handling risk) is planned assumption of risk by insured through use of deductibles, co-payments, or self-insurance What is the purpose of retention? 1. to reduce expenses, increase cash flow 2. to increase control of claim reserving and claims settlements 3. to fund losses that cannon be insured Sharing (method of handling risk) method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss to share the loss that occurs within that group What is a formal risk sharing agreement? A reciprocal insurance exchange Reciprocal insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers Risk Retention Group (RRG) is a liability insurance company owned by its members. What is the purpose of a risk retention group?