Key Concepts in Life Insurance And Annuities Questions
With Accurate Answers.
Risk retention group - accurate answers-A group-owned insurance company
that is formed to assume and spread the liability risks of its members.
Fair Credit Reporting Act - accurate answers-A Federal law requiring an
individual to be informed if that individual is being investigated by an
inspection company.
Policyholders - accurate answers-Individuals who elect the governing body of
a mutual insurance company.
Participating policy - accurate answers-A policy that pays dividends to its
policyholders.
Dividends - accurate answers-Payments made to policyholders from a
participating insurance policy derived from the company's divisible surplus.
Risk transfer - accurate answers-The process of a business becoming
incorporated, which shifts the risk from individuals to the corporation.
Risk avoidance - accurate answers-Not doing a business deal after deciding it
would be too risky.
Law of large numbers - accurate answers-A principle stating that larger
groups provide better loss predictions, allowing for more accurate predictions
of group losses.
Pure risk - accurate answers-A type of risk that involves the potential for loss
with no possibility for gain.
Reinsuring risks - accurate answers-A method by which an insurance
company minimizes exposure to loss.
Insurable risk - accurate answers-A type of risk that can be covered by
insurance, such as pure risk.
,Participating insurance policy - accurate answers-A policy where
policyowners are entitled to receive dividends.
Self-insuring - accurate answers-An example of risk retention where an
individual or business assumes the risk themselves.
Group losses - accurate answers-Losses that can be predicted based on past
experience according to the law of large numbers.
Individual losses - accurate answers-Losses that cannot be predicted with the
same accuracy as group losses according to the law of large numbers.
Risk assumption - accurate answers-Taking on the risk of loss without
transferring it to another party.
Mutual insurance company - accurate answers-An insurance company owned
by its policyholders.
Captive insurer - accurate answers-An insurance company created to insure
the risks of its parent company or group.
Speculative risk - accurate answers-A type of risk that involves the possibility
of both loss and gain.
Operational risk - accurate answers-The risk of loss resulting from inadequate
or failed internal processes, people, and systems.
Adverse risk - accurate answers-A risk that can lead to negative outcomes,
often associated with moral hazards.
Morale risk - accurate answers-A risk that arises from an individual's
carelessness or indifference to loss.
Reinsurance - accurate answers-One way insurers deal with catastrophic loss.
Exposure - accurate answers-A condition that increases the possibility of
financial loss.
Hazard - accurate answers-A condition that increases the possibility of loss.
, Peril - accurate answers-A condition that can cause a loss.
Risk - accurate answers-The possibility of loss.
Hold-harmless clause - accurate answers-An example of risk transfer.
Contract - accurate answers-Consists of an offer, acceptance, and
consideration.
Warranty - accurate answers-The part of a life insurance policy guaranteed to
be true.
Agent authority - accurate answers-What an agent is authorized to do on
behalf of his company.
Policy of adhesion - accurate answers-Can only be modified by the insurance
company.
Interpretation of complicated language - accurate answers-In a contract of
adhesion, it would be in favor of the insured.
Insurance contracts - accurate answers-Known as conditional because certain
future conditions or acts must occur before any claims can be paid.
Investor-Originated Life Insurance - accurate answers-An arrangement that
allows one to bypass insurable interest laws.
Insurable interest - accurate answers-Must exist at the inception of the
contract for a life insurance contract to be valid.
Representations - accurate answers-Statements made on an insurance
application believed to be true to the best of the applicant's knowledge.
Unilateral Insurance Policy - accurate answers-An insurance policy where
only the insurance company makes legally enforceable promises.
With Accurate Answers.
Risk retention group - accurate answers-A group-owned insurance company
that is formed to assume and spread the liability risks of its members.
Fair Credit Reporting Act - accurate answers-A Federal law requiring an
individual to be informed if that individual is being investigated by an
inspection company.
Policyholders - accurate answers-Individuals who elect the governing body of
a mutual insurance company.
Participating policy - accurate answers-A policy that pays dividends to its
policyholders.
Dividends - accurate answers-Payments made to policyholders from a
participating insurance policy derived from the company's divisible surplus.
Risk transfer - accurate answers-The process of a business becoming
incorporated, which shifts the risk from individuals to the corporation.
Risk avoidance - accurate answers-Not doing a business deal after deciding it
would be too risky.
Law of large numbers - accurate answers-A principle stating that larger
groups provide better loss predictions, allowing for more accurate predictions
of group losses.
Pure risk - accurate answers-A type of risk that involves the potential for loss
with no possibility for gain.
Reinsuring risks - accurate answers-A method by which an insurance
company minimizes exposure to loss.
Insurable risk - accurate answers-A type of risk that can be covered by
insurance, such as pure risk.
,Participating insurance policy - accurate answers-A policy where
policyowners are entitled to receive dividends.
Self-insuring - accurate answers-An example of risk retention where an
individual or business assumes the risk themselves.
Group losses - accurate answers-Losses that can be predicted based on past
experience according to the law of large numbers.
Individual losses - accurate answers-Losses that cannot be predicted with the
same accuracy as group losses according to the law of large numbers.
Risk assumption - accurate answers-Taking on the risk of loss without
transferring it to another party.
Mutual insurance company - accurate answers-An insurance company owned
by its policyholders.
Captive insurer - accurate answers-An insurance company created to insure
the risks of its parent company or group.
Speculative risk - accurate answers-A type of risk that involves the possibility
of both loss and gain.
Operational risk - accurate answers-The risk of loss resulting from inadequate
or failed internal processes, people, and systems.
Adverse risk - accurate answers-A risk that can lead to negative outcomes,
often associated with moral hazards.
Morale risk - accurate answers-A risk that arises from an individual's
carelessness or indifference to loss.
Reinsurance - accurate answers-One way insurers deal with catastrophic loss.
Exposure - accurate answers-A condition that increases the possibility of
financial loss.
Hazard - accurate answers-A condition that increases the possibility of loss.
, Peril - accurate answers-A condition that can cause a loss.
Risk - accurate answers-The possibility of loss.
Hold-harmless clause - accurate answers-An example of risk transfer.
Contract - accurate answers-Consists of an offer, acceptance, and
consideration.
Warranty - accurate answers-The part of a life insurance policy guaranteed to
be true.
Agent authority - accurate answers-What an agent is authorized to do on
behalf of his company.
Policy of adhesion - accurate answers-Can only be modified by the insurance
company.
Interpretation of complicated language - accurate answers-In a contract of
adhesion, it would be in favor of the insured.
Insurance contracts - accurate answers-Known as conditional because certain
future conditions or acts must occur before any claims can be paid.
Investor-Originated Life Insurance - accurate answers-An arrangement that
allows one to bypass insurable interest laws.
Insurable interest - accurate answers-Must exist at the inception of the
contract for a life insurance contract to be valid.
Representations - accurate answers-Statements made on an insurance
application believed to be true to the best of the applicant's knowledge.
Unilateral Insurance Policy - accurate answers-An insurance policy where
only the insurance company makes legally enforceable promises.
