WISCONSIN LIFE EXAM FX STUDY GUIDE
agent/producer - Answers :legal representative of insurance company
Applicant or proposed insured - Answers :a person applying for insurance
beneficiary - Answers :one who receives benefits of insurance policy
Death Benefit - Answers :The amount payable upon the death of the person whose life
is insured.
insurance policy - Answers :a written contract between the insured and an insurance
company that promises to pay for all or part of a loss
Insured - Answers :the person or business for which the insurer assumes the risk
Insurer (principal) - Answers :the company who issues an insurance policy
life insurace - Answers :coverage that pays the amount of money to the business in the
case of the owners death
Policyowner - Answers :the person entitled to exercise the rights and privileges in the
policy
Premium - Answers :A specific sum of money paid by the insured to the insurance
company in exchange for financial protection against loss.
Reciprocity - Answers :a mutual interchange of rights and privileges
insurance is a _________ of risk - Answers :transfer
risk - Answers :The chance of loss from an event that cannot be entirely controlled
Pure Risk - Answers :A situation in which there are only the possibilities of loss or no
loss
Speculative Risk - Answers :Chance of loss or gain
only _________ risks are insurable - Answers :pure
exposure - Answers :A unit of measure used to determine rates charged for insurance
coverage.
4 factors considered in determining rates - Answers :age of insured, medical history,
occupation, sex
,homogeneous - Answers :a large number of units having the same or similar exposure
to loss
Hazards - Answers :Conditions or situations that increase the probability of an insured
loss occurring.
Physical Hazard - Answers :individual characteristics that increase the chances of the
cause of loss (physical conditions - past medical history, condition at birth etc)
Moral Hazard - Answers :the tendency for people to behave in a riskier way or to renege
on contracts when they do not face the full consequences of their actions. Involves
evaluating the character and reputation of the proposed insured
Morale Hazard - Answers :A condition of carelessness or indifference that increases the
frequency or severity of loss.
peril - Answers :causes of loss insured against in an insurance policy
health insurance - Answers :Insurance that covers medical illness or injury.
Property Insurance - Answers :insures against the loss of physical property or the loss
of its income-producing abilities
Casualty Insurance - Answers :Insurance that provides monetary benefits to a business
that has experienced an unforeseen peril such as flood, fire, etc.
loss - Answers :The reduction, decrease, or disappearance of value of the person or
property insured in a policy, by a named peril insured against.
a ___________ is a chance that a loss will occur, a ________ increases the probability
od a loss, a ______ is the cause of a loss - Answers :risk, hazard, peril
Avoidance - Answers :eliminating exposure to a loss
retention - Answers :Planned assumption of risk by an insured through the use of
deductibles, co-payments, or self-insurance.
Purpose of retention - Answers :1) reduce expenses
2) increase control of claim reserving hand claims settlements
3)to fund for losses that cannot be insured
Sharing - Answers :A method of dealing with risk for a group of individual persons or
businesses with the same or similar exposure to loss who share the losses that occur
within that group.
reduction - Answers :lessens the possibility or severity of a loss
,transfer - Answers :move the risk so that the loss is borne by another party
elements of insurable risks - Answers :1. Due to chance
2. Definite and measurable
3. Statistically predictable
4. Not catastrophic
5. Randomly selected and large loss exposure
Due to chance - Answers :a loss that is outside the insured's control
Definite and measurable - Answers :A loss that is specific as to the cause, time, place
and amount. An insurer must be able to determine how much the benefit will be and
when it becomes payable.
Statistically predictable - Answers :Insurers must be able to estimate the average
frequency and severity of future losses and set appropriate premium rates.
Not catastrophic - Answers :Insurers need to be reasonably certain their losses will not
exceed specific limits.
Randomly selected and large loss exposure - Answers :There must be a sufficiently
large pool of the insured that represents a random selection of risks in terms of age,
gender, occupation, health and economic status, and geographic location.
Law of Large Numbers - Answers :the larger the number of people with a similar
exposure to loss, the more predictable actual losses will be
Adverse Selection - Answers :insuring of risks that are more prone to losses than the
average risk
private insurance companies can be classified in a variety of ways - Answers :1)
ownership
2) authority to transact business
3) location (domicile)
4)marketing and distribution
5) rating (financial strength)
Stock Company - Answers :A company or corporation whose capital is divided into
shares.
nonparticipating policy - Answers :policy owners do not share in profits or losses
Mutual Companies - Answers :Owned by the policy owners and issue participating
policies. Dividends are not guaranteed
, participating policy - Answers :policy owners are entitled to dividends which are a return
of excess premiums, nontaxable
Fraternal Benefit Society - Answers :An organization formed to provide insurance
benefits for members of an affiliated lodge, religious organization, or fraternal
organization with a representative form of government.
Lloyd's Association - Answers :Organizations that provide support facilities for
underwriters or groups of individuals that accept insurance risk.
Risk Retention Group (RRG) - Answers :is a liability insurance company owned by its
members. The purpose of it is to assume and spread all or part of the liability of its
group members
Risk Purchasing Group - Answers :An entity which offers insurance to groups of similar
businesses with similar exposures to risk.
reciprocal - Answers :Insurance resulting from an interchange of reciprocal agreements
of indemnity among persons known as subscribers.
insurance companies are classified according to the _______________ - Answers
:domicile (location of corporation)
domicle - Answers :location where an insurer is incorporated, not necessarily where the
insurer conducts business
insurance companies must obtain a _____________ before transacting insurance within
the state - Answers :certificate of authority
domestic insurer - Answers :An insurance company that is incorporated in the state.
Foreign Insurer - Answers :An insurance company that is incorporated in another state,
the District of Columbia, or territorial possession
Alien Insurer - Answers :An insurance company that is incorporated outside the United
States.
social insurance programs - Answers :government programs that pay benefits to retired
and disabled workers, their families, and the unemployed
social insurance program examples - Answers :social security, medicare, medicaid,
federal crop insurance and national flood insurance
govt programs are funded by __________ and serve national and state social purposes,
while private policies are funded by ____________ - Answers :taxes, premiums
agent/producer - Answers :legal representative of insurance company
Applicant or proposed insured - Answers :a person applying for insurance
beneficiary - Answers :one who receives benefits of insurance policy
Death Benefit - Answers :The amount payable upon the death of the person whose life
is insured.
insurance policy - Answers :a written contract between the insured and an insurance
company that promises to pay for all or part of a loss
Insured - Answers :the person or business for which the insurer assumes the risk
Insurer (principal) - Answers :the company who issues an insurance policy
life insurace - Answers :coverage that pays the amount of money to the business in the
case of the owners death
Policyowner - Answers :the person entitled to exercise the rights and privileges in the
policy
Premium - Answers :A specific sum of money paid by the insured to the insurance
company in exchange for financial protection against loss.
Reciprocity - Answers :a mutual interchange of rights and privileges
insurance is a _________ of risk - Answers :transfer
risk - Answers :The chance of loss from an event that cannot be entirely controlled
Pure Risk - Answers :A situation in which there are only the possibilities of loss or no
loss
Speculative Risk - Answers :Chance of loss or gain
only _________ risks are insurable - Answers :pure
exposure - Answers :A unit of measure used to determine rates charged for insurance
coverage.
4 factors considered in determining rates - Answers :age of insured, medical history,
occupation, sex
,homogeneous - Answers :a large number of units having the same or similar exposure
to loss
Hazards - Answers :Conditions or situations that increase the probability of an insured
loss occurring.
Physical Hazard - Answers :individual characteristics that increase the chances of the
cause of loss (physical conditions - past medical history, condition at birth etc)
Moral Hazard - Answers :the tendency for people to behave in a riskier way or to renege
on contracts when they do not face the full consequences of their actions. Involves
evaluating the character and reputation of the proposed insured
Morale Hazard - Answers :A condition of carelessness or indifference that increases the
frequency or severity of loss.
peril - Answers :causes of loss insured against in an insurance policy
health insurance - Answers :Insurance that covers medical illness or injury.
Property Insurance - Answers :insures against the loss of physical property or the loss
of its income-producing abilities
Casualty Insurance - Answers :Insurance that provides monetary benefits to a business
that has experienced an unforeseen peril such as flood, fire, etc.
loss - Answers :The reduction, decrease, or disappearance of value of the person or
property insured in a policy, by a named peril insured against.
a ___________ is a chance that a loss will occur, a ________ increases the probability
od a loss, a ______ is the cause of a loss - Answers :risk, hazard, peril
Avoidance - Answers :eliminating exposure to a loss
retention - Answers :Planned assumption of risk by an insured through the use of
deductibles, co-payments, or self-insurance.
Purpose of retention - Answers :1) reduce expenses
2) increase control of claim reserving hand claims settlements
3)to fund for losses that cannot be insured
Sharing - Answers :A method of dealing with risk for a group of individual persons or
businesses with the same or similar exposure to loss who share the losses that occur
within that group.
reduction - Answers :lessens the possibility or severity of a loss
,transfer - Answers :move the risk so that the loss is borne by another party
elements of insurable risks - Answers :1. Due to chance
2. Definite and measurable
3. Statistically predictable
4. Not catastrophic
5. Randomly selected and large loss exposure
Due to chance - Answers :a loss that is outside the insured's control
Definite and measurable - Answers :A loss that is specific as to the cause, time, place
and amount. An insurer must be able to determine how much the benefit will be and
when it becomes payable.
Statistically predictable - Answers :Insurers must be able to estimate the average
frequency and severity of future losses and set appropriate premium rates.
Not catastrophic - Answers :Insurers need to be reasonably certain their losses will not
exceed specific limits.
Randomly selected and large loss exposure - Answers :There must be a sufficiently
large pool of the insured that represents a random selection of risks in terms of age,
gender, occupation, health and economic status, and geographic location.
Law of Large Numbers - Answers :the larger the number of people with a similar
exposure to loss, the more predictable actual losses will be
Adverse Selection - Answers :insuring of risks that are more prone to losses than the
average risk
private insurance companies can be classified in a variety of ways - Answers :1)
ownership
2) authority to transact business
3) location (domicile)
4)marketing and distribution
5) rating (financial strength)
Stock Company - Answers :A company or corporation whose capital is divided into
shares.
nonparticipating policy - Answers :policy owners do not share in profits or losses
Mutual Companies - Answers :Owned by the policy owners and issue participating
policies. Dividends are not guaranteed
, participating policy - Answers :policy owners are entitled to dividends which are a return
of excess premiums, nontaxable
Fraternal Benefit Society - Answers :An organization formed to provide insurance
benefits for members of an affiliated lodge, religious organization, or fraternal
organization with a representative form of government.
Lloyd's Association - Answers :Organizations that provide support facilities for
underwriters or groups of individuals that accept insurance risk.
Risk Retention Group (RRG) - Answers :is a liability insurance company owned by its
members. The purpose of it is to assume and spread all or part of the liability of its
group members
Risk Purchasing Group - Answers :An entity which offers insurance to groups of similar
businesses with similar exposures to risk.
reciprocal - Answers :Insurance resulting from an interchange of reciprocal agreements
of indemnity among persons known as subscribers.
insurance companies are classified according to the _______________ - Answers
:domicile (location of corporation)
domicle - Answers :location where an insurer is incorporated, not necessarily where the
insurer conducts business
insurance companies must obtain a _____________ before transacting insurance within
the state - Answers :certificate of authority
domestic insurer - Answers :An insurance company that is incorporated in the state.
Foreign Insurer - Answers :An insurance company that is incorporated in another state,
the District of Columbia, or territorial possession
Alien Insurer - Answers :An insurance company that is incorporated outside the United
States.
social insurance programs - Answers :government programs that pay benefits to retired
and disabled workers, their families, and the unemployed
social insurance program examples - Answers :social security, medicare, medicaid,
federal crop insurance and national flood insurance
govt programs are funded by __________ and serve national and state social purposes,
while private policies are funded by ____________ - Answers :taxes, premiums
