TX GENERAL LINES LIFE, ACCIDENT, AND
HEALTH EXAM PREP | COMPREHENSIVE
STUDY GUIDE, PRACTICE QUESTIONS,
CORRECT ANSWERS AND EXAM REVIEW
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
,risk chance of loss
pure risk: only the possibility of loss
- no chance of gain with a pure risk
- only pure risks are inusrable
- ex) untimely death & serious illness/disability
speculative risk: result in either loss or gain
- ex) gambling and investing in the stock market
- because they include a chance of gain, speculative risks are not insurable
loss unplanned reduction in economic value
direct loss: immediate result of an event involving an insured peril
indirect loss: loss that results from direct loss
loss exposure and exposure units loss exposure: being subject to a possible loss
the amount of loss exposure facing an insurer has a direct bearing on the premium it
charges for a policy
loss exposure measured by the number of exposure units assigned to the insured by the
insurer during the underwriting process
- risk (and premium) associated with any insurance policy based on number of exposure
units assigned (exposure units are the basis for each applicant's premium)
ex)
During their working years, coal miners are generally exposed to a greater risk of death,
accidents, and serious illness than insurance agents and brokers. Thus, life and health
insurers assign more exposure units to coal miners than they do to insurance producers.
All other factors being equal, this translates into a higher premium for coal miners than
insurance producers
,peril and hazard peril: direct cause of a loss and the event that insurance protects against
- life and health insurance covered perils include: death, disability, and sickness
hazard: condition that increases the chance of loss due to a peril or increases the severity
of a loss
- ex) smoking, poor diet, and excessive alcohol consumption are health hazards that
increase the likelihood of illness or early death
- 3 categories:
(1) moral hazards: character weaknesses, habits, and risky activities that increase
possibility of loss
- underwriters look for clues that suggest the applicants lifestyle could result in a loss
(DUI convictions for drinking and driving, excessive alcohol consumption, smoking, and
reckless drug use)
-conscious willingness to defraud insurers [lying on an application or claim form and
adverse selection (tendency of someone at a high risk of loss to try to buy insurance) are
considered moral hazard]
(2) morale hazards: state of mind or attitudes that create an indifference to loss
- ex) disregarding one's health (being overweight or inactive), driving recklessly, and less
careful
(3) physical hazards: physical conditions that increase chance of loss
- ex) working in dangerous conditions (coal mining or heavy construction) and engaging
in dangerous activities (rock climbing)
- ex) chronic diseases (diabetes and emphysema) that increases chance of death
- as a means of identifying physical hazards, insurers require life and health insurance
applicants to answer the questions about their work and personal activities (and undergo
medical exams as part of the application process)
, risk management techniques risk avoidance
- ex) refusing to operate a vehicle after drinking alcoholic beverages is a practical way to
avoid the peril of injury or death that may result from driving while under the influence
risk reduction:
- if avoiding a risk is impractical, it may be possible to reduce exposure to its related
hazards
- ex) exercising regularly, avoiding poor health habits, and eating a balanced diet can
reduce the risk of illness and premature death from heart disease, cancer, and diabetes
risk retention
- acceptance of risk and dealing with a loss using personal funds
- works well for small financial losses
- going without insurance is example of risk retention
- use of deductibles in health insurance is a risk retention device (deductibles shift small
losses to the policyowner, leaving insurance to cover more serious losses)
risk sharing
- people who shared a common risk banded together and chipped in to compensate a
member of group who suffered a covered loss
risk transfer
- transfer the loss to a 3rd party
- basis for most insurance
- in exchange for paying a premium, an individual or business can transfer the risk of loss
to a insurance company
- should a covered loss occur, the insurer will compensate the insured for the value of
loss up to policy limits
HEALTH EXAM PREP | COMPREHENSIVE
STUDY GUIDE, PRACTICE QUESTIONS,
CORRECT ANSWERS AND EXAM REVIEW
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
,risk chance of loss
pure risk: only the possibility of loss
- no chance of gain with a pure risk
- only pure risks are inusrable
- ex) untimely death & serious illness/disability
speculative risk: result in either loss or gain
- ex) gambling and investing in the stock market
- because they include a chance of gain, speculative risks are not insurable
loss unplanned reduction in economic value
direct loss: immediate result of an event involving an insured peril
indirect loss: loss that results from direct loss
loss exposure and exposure units loss exposure: being subject to a possible loss
the amount of loss exposure facing an insurer has a direct bearing on the premium it
charges for a policy
loss exposure measured by the number of exposure units assigned to the insured by the
insurer during the underwriting process
- risk (and premium) associated with any insurance policy based on number of exposure
units assigned (exposure units are the basis for each applicant's premium)
ex)
During their working years, coal miners are generally exposed to a greater risk of death,
accidents, and serious illness than insurance agents and brokers. Thus, life and health
insurers assign more exposure units to coal miners than they do to insurance producers.
All other factors being equal, this translates into a higher premium for coal miners than
insurance producers
,peril and hazard peril: direct cause of a loss and the event that insurance protects against
- life and health insurance covered perils include: death, disability, and sickness
hazard: condition that increases the chance of loss due to a peril or increases the severity
of a loss
- ex) smoking, poor diet, and excessive alcohol consumption are health hazards that
increase the likelihood of illness or early death
- 3 categories:
(1) moral hazards: character weaknesses, habits, and risky activities that increase
possibility of loss
- underwriters look for clues that suggest the applicants lifestyle could result in a loss
(DUI convictions for drinking and driving, excessive alcohol consumption, smoking, and
reckless drug use)
-conscious willingness to defraud insurers [lying on an application or claim form and
adverse selection (tendency of someone at a high risk of loss to try to buy insurance) are
considered moral hazard]
(2) morale hazards: state of mind or attitudes that create an indifference to loss
- ex) disregarding one's health (being overweight or inactive), driving recklessly, and less
careful
(3) physical hazards: physical conditions that increase chance of loss
- ex) working in dangerous conditions (coal mining or heavy construction) and engaging
in dangerous activities (rock climbing)
- ex) chronic diseases (diabetes and emphysema) that increases chance of death
- as a means of identifying physical hazards, insurers require life and health insurance
applicants to answer the questions about their work and personal activities (and undergo
medical exams as part of the application process)
, risk management techniques risk avoidance
- ex) refusing to operate a vehicle after drinking alcoholic beverages is a practical way to
avoid the peril of injury or death that may result from driving while under the influence
risk reduction:
- if avoiding a risk is impractical, it may be possible to reduce exposure to its related
hazards
- ex) exercising regularly, avoiding poor health habits, and eating a balanced diet can
reduce the risk of illness and premature death from heart disease, cancer, and diabetes
risk retention
- acceptance of risk and dealing with a loss using personal funds
- works well for small financial losses
- going without insurance is example of risk retention
- use of deductibles in health insurance is a risk retention device (deductibles shift small
losses to the policyowner, leaving insurance to cover more serious losses)
risk sharing
- people who shared a common risk banded together and chipped in to compensate a
member of group who suffered a covered loss
risk transfer
- transfer the loss to a 3rd party
- basis for most insurance
- in exchange for paying a premium, an individual or business can transfer the risk of loss
to a insurance company
- should a covered loss occur, the insurer will compensate the insured for the value of
loss up to policy limits
