New Mexico Life and Health Exam
Insurable Risk - CORRECT ANSWER-The more closely a risk align with the following
characteristics, the more insurable it is: Due to chance, measurable/predictable, it is
based upon a large enough pool, so that the law of large numbers allows for the
accurate prediction of loss, and there must be a significant potential for economic loss.
Methods of Handling Risk - CORRECT ANSWER--Avoidance
-Retention
-Sharing
-Reduction
Exposure - CORRECT ANSWER-A measure of vulnerability of loss, usually expressed
in dollars or units, to which an insurance rate is applied.
Hazard - CORRECT ANSWER-A specific situation that introduces or increases the
probability of occurrence of a loss.
The conditions that increase risk or the chance of a loss occurring: - CORRECT
ANSWER-Physical - arise from material, structural, or operation features of a risk
situation.
Moral - The Insured's habits.
Morale - Careless attitude on the part of the insured that increased the chance of loss.
Legal - Court of legislative actions increases the risk of loss.
Insurance - CORRECT ANSWER-A method of spreading the result of financial loss
among a large number people.
Life Insurance - CORRECT ANSWER-A contract under which one party (the insurer) in
consideration of the premium payment, agrees to pay an amount stipulated in the
contract to a designated person (the beneficiary) upon the occurrence of a contingency
defined in the contract (usually that of death).
Indemnity - CORRECT ANSWER-The concept that insurance should restore the
insured, in whole or in part, to the condition he enjoyed before the loss.
Risk - CORRECT ANSWER-The uncertainty of financial loss.
The 3 Types of Risk - CORRECT ANSWER-1) Pure Risk - there is only a chance of
loss and there is no possibility of gain.
2) Speculative Risk - involves both an uncertainty of loss and of gain.
3) Insurable Risk
, Peril - CORRECT ANSWER-The cause of a potential loss.
Loss - CORRECT ANSWER-The happening of the event for which insurance pays.
The 4 Elements of a Legal Contract - CORRECT ANSWER-1) Offer and Acceptance
2) Consideration
3) Legal Purpose
4) Competent Parties
Estoppel - CORRECT ANSWER-The concept that, once a fact has been admitted to be
true by a previous action, it can no longer be denied to be true.
Aleatory - CORRECT ANSWER-Equal value not given to both parties.
Contract of Adhesion - CORRECT ANSWER-Prepared by one party - courts interpret
against the one who prepared it.
Contract of Utmost Good Faith - CORRECT ANSWER-Truthfulness and integrity on bot
parties = trust.
Benefits of Life Insurance - CORRECT ANSWER-Cash Accumulation & Liquidity,
Survivor Protection, Estate Conservation, Pre-arrangement or Pre-needs policies,
Security, and Timeliness and Certainty.
Problems with Investment Plans - CORRECT ANSWER-Time factor - can't complete a
plan if you die prematurely.
Spend factor - most plans are hard to put money in east to take out.
Fluctuation factor - no guarantees in most investment plans.
Living Benefits of Permanent Life Insurance - CORRECT ANSWER--Cash values
-Potential retirement income
-Withdrawals
-Dividends Property
Human Life Value Approach - CORRECT ANSWER-This approach calculates the
capitalized value of an individual's earning ability into the future.
Needs Approach - CORRECT ANSWER-How much life insurance is needed by
surviving dependents to cover their needs and expenses, and also any expenses that
result from the death of the insured.
Capital conservation - CORRECT ANSWER-This method derives income only from
interest gained on the principal. It generates income indefinitely.
Insurable Risk - CORRECT ANSWER-The more closely a risk align with the following
characteristics, the more insurable it is: Due to chance, measurable/predictable, it is
based upon a large enough pool, so that the law of large numbers allows for the
accurate prediction of loss, and there must be a significant potential for economic loss.
Methods of Handling Risk - CORRECT ANSWER--Avoidance
-Retention
-Sharing
-Reduction
Exposure - CORRECT ANSWER-A measure of vulnerability of loss, usually expressed
in dollars or units, to which an insurance rate is applied.
Hazard - CORRECT ANSWER-A specific situation that introduces or increases the
probability of occurrence of a loss.
The conditions that increase risk or the chance of a loss occurring: - CORRECT
ANSWER-Physical - arise from material, structural, or operation features of a risk
situation.
Moral - The Insured's habits.
Morale - Careless attitude on the part of the insured that increased the chance of loss.
Legal - Court of legislative actions increases the risk of loss.
Insurance - CORRECT ANSWER-A method of spreading the result of financial loss
among a large number people.
Life Insurance - CORRECT ANSWER-A contract under which one party (the insurer) in
consideration of the premium payment, agrees to pay an amount stipulated in the
contract to a designated person (the beneficiary) upon the occurrence of a contingency
defined in the contract (usually that of death).
Indemnity - CORRECT ANSWER-The concept that insurance should restore the
insured, in whole or in part, to the condition he enjoyed before the loss.
Risk - CORRECT ANSWER-The uncertainty of financial loss.
The 3 Types of Risk - CORRECT ANSWER-1) Pure Risk - there is only a chance of
loss and there is no possibility of gain.
2) Speculative Risk - involves both an uncertainty of loss and of gain.
3) Insurable Risk
, Peril - CORRECT ANSWER-The cause of a potential loss.
Loss - CORRECT ANSWER-The happening of the event for which insurance pays.
The 4 Elements of a Legal Contract - CORRECT ANSWER-1) Offer and Acceptance
2) Consideration
3) Legal Purpose
4) Competent Parties
Estoppel - CORRECT ANSWER-The concept that, once a fact has been admitted to be
true by a previous action, it can no longer be denied to be true.
Aleatory - CORRECT ANSWER-Equal value not given to both parties.
Contract of Adhesion - CORRECT ANSWER-Prepared by one party - courts interpret
against the one who prepared it.
Contract of Utmost Good Faith - CORRECT ANSWER-Truthfulness and integrity on bot
parties = trust.
Benefits of Life Insurance - CORRECT ANSWER-Cash Accumulation & Liquidity,
Survivor Protection, Estate Conservation, Pre-arrangement or Pre-needs policies,
Security, and Timeliness and Certainty.
Problems with Investment Plans - CORRECT ANSWER-Time factor - can't complete a
plan if you die prematurely.
Spend factor - most plans are hard to put money in east to take out.
Fluctuation factor - no guarantees in most investment plans.
Living Benefits of Permanent Life Insurance - CORRECT ANSWER--Cash values
-Potential retirement income
-Withdrawals
-Dividends Property
Human Life Value Approach - CORRECT ANSWER-This approach calculates the
capitalized value of an individual's earning ability into the future.
Needs Approach - CORRECT ANSWER-How much life insurance is needed by
surviving dependents to cover their needs and expenses, and also any expenses that
result from the death of the insured.
Capital conservation - CORRECT ANSWER-This method derives income only from
interest gained on the principal. It generates income indefinitely.
