Virginia Life, Health and Annuities Exam with
100% Verified Answers
Insurance - - transfer of risk Page | 1
RIsk - - uncertainty/possibility of a loss
Two types of risk - - Pure and Speculative
Speculative Risk - - chance of loss or gain; not insurable
Pure Risk - - chance of loss only; can be insured
Exposure - - risks for which the insurance company would be liable
Peril - - cause of loss
Hazard (there are 3 types) - - something that causes an increase in the chance of
loss
Physical Hazard - - the hazard can be seen
Moral Hazard - - a belief that intentionally causing a loss is acceptable
Morale Hazard - - carelessness
,Methods of Handling Risk (STARR) - - Sharing, Transfer, Avoidance, Reduction,
Retention
Page | 2
Contract (policy) - - an agreement between the insured and the insurer
1st party - - Insured (customer)
2nd party - - insurer, insurance company
Law of Large Numbers - - larger the group; the more accurate losses can be
predicted
Characteristics of risks that can be insured (CANHAM) - - Calculable, affordable,
non-catastrophic, homogeneous, accidental, measurable
Adverse Selection - - risks that have a greater than average chance of loss
Reinsurance - - an insurance company (the ceding company) paying another
insurance company (reinsurer) to take some of the companies risk of catastrophic loss
Facultative - - the reinsurer evaluates each risk before allowing the transfer
Treaty - - the reinsurer accepts the transfer according to an agreement called a treaty
,Stock Insurer - - - publically owned by stockholders/shareholders
- if the company makes money, a taxable dividend from the profits may be paid to the
stockholders/shareholders
- issues non-par policies Page | 3
Mutual Insurer - - -Owned by the policyholders (customers)
-If the company is profitable, can return excess premium to its policyholders--nontaxable
dividend
-Issues participating policies.
Fraternal Insurer - - -provides insurance and other benefits
-must be a member of the society to get the benefits
Reciprocal Insurer - - -unincorporated
-members are assessed the amount they have to pay if a loss to any member of the group
occurs
-run by an attorney-in-fact
Lloyd's Association - - insurance provided by individual underwriters not companies
Risk Retention Group - - Liability insurance company created for policyholders from
the same industry. Example--car dealers RRG--only car dealers can be policyholders
Risk Purchasing Group - - a group of businesses from the same industry joining
together to buy liability insurance from an insurance company. The RPG is NOT the
insurance company
, Self-insurance - - a business that pays its own claims
Page | 4
Residual Market - - insurance from the state or federal government
Insurance Company Location - - Domestic-state where company is incorporated
Foreign- any state or U.S. territory other than the state where incorporated
Alien- incorporated in any country other than the USA
Certificate of Authority - - state license for an insurance company
Admitted or Authorized - - state requires the insurance company to have a Certificate
of Authority
Non-Admitted - - unauthorized-insurance company not required to have a Certificate
of Authority from the state
Surplus Lines - - - Insurance sold by unauthorized/non-admitted insurers; if on the
state's approved list of surplus insurers
- Can only be sold to certain high risk insureds
- Cannot be sold solely for a cheaper rate than licensed/admitted insurers
Financial Strength Rating - - a report card of the company
Methods of Marketing - - - Independent
100% Verified Answers
Insurance - - transfer of risk Page | 1
RIsk - - uncertainty/possibility of a loss
Two types of risk - - Pure and Speculative
Speculative Risk - - chance of loss or gain; not insurable
Pure Risk - - chance of loss only; can be insured
Exposure - - risks for which the insurance company would be liable
Peril - - cause of loss
Hazard (there are 3 types) - - something that causes an increase in the chance of
loss
Physical Hazard - - the hazard can be seen
Moral Hazard - - a belief that intentionally causing a loss is acceptable
Morale Hazard - - carelessness
,Methods of Handling Risk (STARR) - - Sharing, Transfer, Avoidance, Reduction,
Retention
Page | 2
Contract (policy) - - an agreement between the insured and the insurer
1st party - - Insured (customer)
2nd party - - insurer, insurance company
Law of Large Numbers - - larger the group; the more accurate losses can be
predicted
Characteristics of risks that can be insured (CANHAM) - - Calculable, affordable,
non-catastrophic, homogeneous, accidental, measurable
Adverse Selection - - risks that have a greater than average chance of loss
Reinsurance - - an insurance company (the ceding company) paying another
insurance company (reinsurer) to take some of the companies risk of catastrophic loss
Facultative - - the reinsurer evaluates each risk before allowing the transfer
Treaty - - the reinsurer accepts the transfer according to an agreement called a treaty
,Stock Insurer - - - publically owned by stockholders/shareholders
- if the company makes money, a taxable dividend from the profits may be paid to the
stockholders/shareholders
- issues non-par policies Page | 3
Mutual Insurer - - -Owned by the policyholders (customers)
-If the company is profitable, can return excess premium to its policyholders--nontaxable
dividend
-Issues participating policies.
Fraternal Insurer - - -provides insurance and other benefits
-must be a member of the society to get the benefits
Reciprocal Insurer - - -unincorporated
-members are assessed the amount they have to pay if a loss to any member of the group
occurs
-run by an attorney-in-fact
Lloyd's Association - - insurance provided by individual underwriters not companies
Risk Retention Group - - Liability insurance company created for policyholders from
the same industry. Example--car dealers RRG--only car dealers can be policyholders
Risk Purchasing Group - - a group of businesses from the same industry joining
together to buy liability insurance from an insurance company. The RPG is NOT the
insurance company
, Self-insurance - - a business that pays its own claims
Page | 4
Residual Market - - insurance from the state or federal government
Insurance Company Location - - Domestic-state where company is incorporated
Foreign- any state or U.S. territory other than the state where incorporated
Alien- incorporated in any country other than the USA
Certificate of Authority - - state license for an insurance company
Admitted or Authorized - - state requires the insurance company to have a Certificate
of Authority
Non-Admitted - - unauthorized-insurance company not required to have a Certificate
of Authority from the state
Surplus Lines - - - Insurance sold by unauthorized/non-admitted insurers; if on the
state's approved list of surplus insurers
- Can only be sold to certain high risk insureds
- Cannot be sold solely for a cheaper rate than licensed/admitted insurers
Financial Strength Rating - - a report card of the company
Methods of Marketing - - - Independent
