Chapter 1

Question 1

insuring of risks that are more prone to losses than the average risk

Answer 1

Adverse selection

Question 2

a legal representative of an insurance company; the classification of producer usually includes agents and brokers; agents are the agents of the insurer

Answer 2

Agent producer

Question 3

a person applying for insurance

Answer 3

Applicant or proposed insured

Question 4

— a person who receives the benefits of an insurance policy

Answer 4

Beneficiary

Question 5

the amount paid upon the death of the insured in a life insurance policy

Answer 5

Death benefit

Question 6

intentional misrepresentation or deceit with the intent to induce a person to part with something of value

Answer 6

Fraud

Question 7

a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events

Answer 7

Insurance policy

Question 8

person covered by the insurance policy; may or may not be the policyowner

Answer 8

Insured

Question 9

the company who issues an insurance policy

Answer 9

Insurer(principal)

Question 10

policy termination due to nonpayment of premium

Answer 10

Lapse

Question 11

Coverage on human lives

Answer 11

Life insurance

Question 12

the person entitled to exercise the rights and privileges in the policy

Answer 12

Policyowner

Question 13

the money paid to the insurance company for the insurance policy

Answer 13

Premium

Question 14

a transfer of risk of loss from an individual or a business entity to an insurance company, which, in turn, spreads the costs of unexpected losses to many individuals. If there were no insurance mechanism, the cost of a loss would have to be borne solely by the individual who suffered the loss.

Answer 14

Insurance

Question 15

includes any of the following (by mail or any other means):

Solicitation;
Negotiations;
Sale (effectuation of a contract of insurance); and
Advising an individual concerning coverage or claims.

Answer 15

Insurance transactions

Question 16

Know this!

Answer 16

Insurance is the transfer of risk of loss. The cost of an insured’s loss is transferred over to the insurer and spread among other insureds.