Iowa Life and Health Insurance Test
Risk Pooling - (correct Answer) - A group sharing the possibility of a loss. Risk transferred from individual
to group.
Law of Large Numbers - (correct Answer) - The principle that the larger the number of individual risks in
a group, the more certainty there is as to the amount of loss incurred in any period. This is based on the
science of probability and the experience of mortality and morbidity statistics.
Speculative Risk - (correct Answer) - Involves the chance of both loss or gain.
Pure Risk - (correct Answer) - Involves only the chance of loss, no possibility of a gain or profit.
Peril - (correct Answer) - Immediate specific event that causes a loss.
Hazard - (correct Answer) - Anything that increases the likelihood of loss through peril.
Physical Hazard - (correct Answer) - a physical condition that increases the frequency or severity of loss
Moral Hazard - (correct Answer) - When the actions of the insured increase the likelihood that a loss will
happen
Morale Hazard - (correct Answer) - A condition of carelessness or indifference that increases the
frequency or severity of loss.
Which type of risk is insurable? Pure or speculative? - (correct Answer) - Pure only because speculative
involves a chance of gain.
Reciprocal Insurer - (correct Answer) - Insurance company characterized by the fact its policyholders
insure the risks of other policyholders.
Reinsurer - (correct Answer) - an arrangement by which an insurance company transfers or sells a
portion of the risk to another insurer.
Domestic Insurer - (correct Answer) - An insurance company that conducts business in the state of
incorporation.
Foreign Insurer - (correct Answer) - An insurer licensed to operate in a state but incorporated in another
state.
Alien Insurer - (correct Answer) - An insurer domiciled in a country other than the United States.
Twisting - (correct Answer) - A form of misrepresentation in which an agent persuades an insured/owner
to cancel, lapse, or switch policies, even when it's to the insured's disadvantage.
Misrepresentation - (correct Answer) - A false statement or lie about an insureds policy or a policy of a
competitor.
Misuse of Premiums - (correct Answer) - Diverting premiums for personal use.
Rebating - (correct Answer) - when the insurer offers money or something of value in return for the
customers service
, NAIC - (correct Answer) - National Association of Insurance Commissioners, an organization composed of
insurance commissioners from all 50 states, the District of Columbia and the 4 U.S territories, formed to
resolve insurance regulatory issues.
Warranty - (correct Answer) - statement made by applicant to be totally true
Representation - (correct Answer) - a statement made by the applicant that he or she believes to be true
to the best of their knowledge
Valued Contract - (correct Answer) - Pays a stated amount in the event of a loss
Indemnity Contract - (correct Answer) - pays an amount equal to the loss
Waiver - (correct Answer) - the voluntary relinquishment of a known legal right
Estoppel - (correct Answer) - A legal impediment to denying a fact or restoring a right that has been
previously waived.
Which of the following is the authority an insurer gives to it's agents by means of a contract?
A. Implied
B. Expressed
C. General - (correct Answer) - B
An insurance company only has how many years to challenge the validity of a life insurance contract? -
(correct Answer) - 2 years
Term Life Insurance - (correct Answer) - Insurance that provides financial protection from losses resulting
from a death during a definite period, or term.
Whole Life Insurance - (correct Answer) - Insurance that is kept in force for a person's entire life and pays
a benefit upon the person's death, whenever that may be.
At age 100 what happens to a whole life policy if the policy holder is still living? - (correct Answer) - The
policy is paid out as a living benefit and the policy terminates as this is when the cash value of the policy
equals the death benefit amount.
Term Life Insurance - (correct Answer) - Insurance that provides financial protection from losses resulting
from a death during a definite period, or term.
Whole Life Insurance - (correct Answer) - Insurance that is kept in force for a person's entire life and pays
a benefit upon the person's death, up until age 100.
Endowment Policy - (correct Answer) - An insurance product that pays out a lump sum after a specified
term or if the insured person dies before the end of the term. Endowment policies are often used as a
way of saving over the long term.
Ron an insured under a $100,000 life insurance policy dies during the grace period, what happens
considering he has not yet paid the premium? - (correct Answer) - Benefits are paid out to beneficiary,
Risk Pooling - (correct Answer) - A group sharing the possibility of a loss. Risk transferred from individual
to group.
Law of Large Numbers - (correct Answer) - The principle that the larger the number of individual risks in
a group, the more certainty there is as to the amount of loss incurred in any period. This is based on the
science of probability and the experience of mortality and morbidity statistics.
Speculative Risk - (correct Answer) - Involves the chance of both loss or gain.
Pure Risk - (correct Answer) - Involves only the chance of loss, no possibility of a gain or profit.
Peril - (correct Answer) - Immediate specific event that causes a loss.
Hazard - (correct Answer) - Anything that increases the likelihood of loss through peril.
Physical Hazard - (correct Answer) - a physical condition that increases the frequency or severity of loss
Moral Hazard - (correct Answer) - When the actions of the insured increase the likelihood that a loss will
happen
Morale Hazard - (correct Answer) - A condition of carelessness or indifference that increases the
frequency or severity of loss.
Which type of risk is insurable? Pure or speculative? - (correct Answer) - Pure only because speculative
involves a chance of gain.
Reciprocal Insurer - (correct Answer) - Insurance company characterized by the fact its policyholders
insure the risks of other policyholders.
Reinsurer - (correct Answer) - an arrangement by which an insurance company transfers or sells a
portion of the risk to another insurer.
Domestic Insurer - (correct Answer) - An insurance company that conducts business in the state of
incorporation.
Foreign Insurer - (correct Answer) - An insurer licensed to operate in a state but incorporated in another
state.
Alien Insurer - (correct Answer) - An insurer domiciled in a country other than the United States.
Twisting - (correct Answer) - A form of misrepresentation in which an agent persuades an insured/owner
to cancel, lapse, or switch policies, even when it's to the insured's disadvantage.
Misrepresentation - (correct Answer) - A false statement or lie about an insureds policy or a policy of a
competitor.
Misuse of Premiums - (correct Answer) - Diverting premiums for personal use.
Rebating - (correct Answer) - when the insurer offers money or something of value in return for the
customers service
, NAIC - (correct Answer) - National Association of Insurance Commissioners, an organization composed of
insurance commissioners from all 50 states, the District of Columbia and the 4 U.S territories, formed to
resolve insurance regulatory issues.
Warranty - (correct Answer) - statement made by applicant to be totally true
Representation - (correct Answer) - a statement made by the applicant that he or she believes to be true
to the best of their knowledge
Valued Contract - (correct Answer) - Pays a stated amount in the event of a loss
Indemnity Contract - (correct Answer) - pays an amount equal to the loss
Waiver - (correct Answer) - the voluntary relinquishment of a known legal right
Estoppel - (correct Answer) - A legal impediment to denying a fact or restoring a right that has been
previously waived.
Which of the following is the authority an insurer gives to it's agents by means of a contract?
A. Implied
B. Expressed
C. General - (correct Answer) - B
An insurance company only has how many years to challenge the validity of a life insurance contract? -
(correct Answer) - 2 years
Term Life Insurance - (correct Answer) - Insurance that provides financial protection from losses resulting
from a death during a definite period, or term.
Whole Life Insurance - (correct Answer) - Insurance that is kept in force for a person's entire life and pays
a benefit upon the person's death, whenever that may be.
At age 100 what happens to a whole life policy if the policy holder is still living? - (correct Answer) - The
policy is paid out as a living benefit and the policy terminates as this is when the cash value of the policy
equals the death benefit amount.
Term Life Insurance - (correct Answer) - Insurance that provides financial protection from losses resulting
from a death during a definite period, or term.
Whole Life Insurance - (correct Answer) - Insurance that is kept in force for a person's entire life and pays
a benefit upon the person's death, up until age 100.
Endowment Policy - (correct Answer) - An insurance product that pays out a lump sum after a specified
term or if the insured person dies before the end of the term. Endowment policies are often used as a
way of saving over the long term.
Ron an insured under a $100,000 life insurance policy dies during the grace period, what happens
considering he has not yet paid the premium? - (correct Answer) - Benefits are paid out to beneficiary,
