Utah Health Insurance Exam Questions & Answers Already Graded A +

Certificate of Authority - License for insurance company to do business. This allows insurers to be considered ADMITTED or AUTHORIZED. Moral Hazard - Dishonesty or character defects in an individual that increase the frequency or severity of loss (Example: Applicant lies on insurance application) To be insurable, a risk must be - -due to chance -Definite and measurable -Statistically predictable -NOT catastrophic -Large loss exposure (large pool of randomly selected people/risks) Insurance - Transfer of risk. Types of risk - Pure and Speculative Pure Risk - A chance of loss or no loss, but no chance of gain. The ONLY type of insurable risk. Speculative Risk - Chance of loss or gain. CANNOT be insured. (Example: Buying stock in the stock market) Types of Hazards - Physical, Moral and Morale Physical Hazard - A physical condition that increases the chance of loss. Morale Hazard - Through carlessness or irresponsible actions an increase in the possibilty of a loss. (Example: Not cutting down a tree branch that might fall on your house because you have insurance if it does)Perils - causes of loss insured against in an insurance policy Avoidance - Eliminating exposure to a loss (not driving so you won't get in a car accident) retention - Planned assumption of risk through the use of deductibles, co-payments, or selfinsurance. reduction - Actions such as installing smoke detectors to reduce the risk of loss from fire or getting an annual physical to help prevent/detect health problems early. Transfer - Transferring the risk of loss to another company or entity. Insurance is the most common way to transfer risk. Adverse Selection - Tendency for poorer than average risks to seek insurance. Reinsurance - Insurance purchased by other Insurer(s) to spread or diversify risk; promotes industry stability. Ceding Insurer - The company transferring risk in a reinsurance arrangement. assuming insurer - reinsurer or company who is taking over the risk Stock Companies - -Owned by stockholders -nonparticipating (policy holders DO NOT share in profits or losses) Mutual Companies - -Owned by the policyowners -Participating (ploicyowners are entitled to dividends)-Dividends are NOT guaranteed Fraternal Benefit Societies - Must be nonprofit, have a lodge system (ie. religious organization), representative form of government and offer insurance to its members only. Domestic Insurer - An insurance company that conducts business in the state of incorporation. Foreign Insurer - An insurance company that is incorporated in another state. Alien Insurer - An insurance company that is incorporated outside the United States. Who does an agent represent? - The INSURER (insurance company) not the insured. Express Authority - The authority granted to an agent by means of the agent's written contract.. Implied Authority - the authority that the agent has that is not specifically listed in their contract, but is assumed to have to conduct business. (Required to be able to conduct business). Example: collecting premiums Apparent Authority - A third party's reasonable belief that an agent has authority to act on the principal's behalf. Based on the actions words, etc of the principal. Example: Using business cards or brochures Fiduciary Responsibility - -An ethical and legal obligation to perform a person's duties in a trustworthy manner. -Money related -Must not commingle funds -Forwarding premiums to the insurer/principal in a timely manner is an example of acting in a fiduciary capacity Parts of a contract - Offer, acceptance, consideration, and legal purposeConsideration - Exchanging something of value Insured's Consideration - 1. A truthful and complete application 2. Premium Payment Insurer's Consideration - Promise to pay qualifying claims Acceptance - UNDERWRITER approves a prepaid application. (An agent/producer CANNOT bind coverage, but they can accept an application) Legal Purpose - Insurable interest and consent 1. Must be of age (18+) 2. Cannot be high 3. Cannot be drunk 4. Must be mentall competent Contract of Adhesion - Take it or leave it agreements, where the insured has no say in the contract terms and conditions. Aleatory Contract - A contract where the values exchanged may not be equal but depend on an uncertain event Personal Contract - A contract between an individual and an insurer. unilateral contract - Only ONE of the parties is legally bound (the insurance company).Conditional Contract - Certain conditions must be met in order for policy to pay out. Ambiguities in Contract of Adhesion - Will always be interpreted in favor of the insured NOT the insurance company. indemnity - Allows the insured to collect only to the extent of financial loss and not gain financially. (Reimbursement) Utmost good faith - An obligation to act in complete honesty and to disclose all relevant facts. Representations - Are statements that are believed to be true, but are not guaranteed to be true. Example: If someone is asked if they have smoked in the past ten years, but they can't remember if it has been a full ten years since they quit, but they say yes anyway. Misrepresentations - Untrue statements on the application that could void the contract. Material Misrepresentation - A statement that, if discovered, would alter the underwriting decision of the insurance company. Fraud - An intentional material misrepresentation. (A lie) Warranty - An absolutely true statement upon which the validity of the insurance policy depends. Concealment - intentional withholding of material information Waiver - Voluntary relinquishment of a known legal right Estoppel - Prevents a person from re-asserting a right after it has been waived. (Legal consequence of waiver)Underwriting factors for individual health plans - 1. Physical/health condition of the insured 2. Moral and morale hazards 3. Occupation Group Health insurance underwriting - 1. Underwrites the group as a whole 2. Evidence of insurability is NOT required. Types of limited policies - 1. Accident only 2. travel accident 3. dread disease (ex. cancer, heart disease) 4. Accidental Death and Dismemberment Principal Sum (AD&D) - The full amount is paid out for permanent and total deafness, blindness, loss of speech, and dismemberment OR when death occurs within 90 days of an accident.