Chapter 1: Basic Principles of Life and Health Insurance

Question 1

Actuarial Department

Answer 1

Department that calculates rates/prices, reserves, and dividends for insurance policies

Question 2

Adjuster

Answer 2

Person who investigates claims and decides if they should be settled or denied (if the insurance company should pay them)

Question 3

Alien Insurer

Answer 3

Insurer that is based in another country

Question 4

Admitted Insurer (aka Authorized Insurer)

Answer 4

Insurer that is approved to do business in a given state

Question 5

Agent

Answer 5

Individual or organization that is authorized to sell insurance on behalf of insurance companies. Can bind coverage

Question 6

Broker

Answer 6

Person who helps customers find insurance but is not authorized to bind coverage as they are not an agent

Question 7

Captive Insurer

Answer 7

Created by a business to insure itself

Question 8

Certificate of Authority

Answer 8

State license that allows a company to sell insurance

Question 9

Claims Department

Answer 9

Department that is responsible for processing, investigating and paying claims

Question 10

Divisible Surplus

Answer 10

Amount of earnings that are paid to policy owners as dividends after the insurance company sets aside the funds needed to cover reserves, operating expenses, and general business purposes.

Question 11

Domestic Insurer

Answer 11

Insurer that is based in the state that they are authorized to work in

Question 12

Foreign Insurer

Answer 12

Insurer whose office is in a different state than the state they are authorized to do business in

Question 13

Fraternal Benefit Society

Answer 13

Non-profit organization that provides insurance to their members

Question 14

Independent Insurance Agency

Answer 14

Agency that sells insurance through many different companies. Unlike a captive agency, they are not limited to one insurance company.

Question 15

Insurance

Answer 15

Transfer of risk through pooling or accumulation of funds in case something bad happens

Question 16

Insured

Answer 16

Customer who receives insurance protection under an insurance policy.

Question 17

Insurer

Answer 17

The insurance company itself

Question 18

Lloyd’s of London

Answer 18

This is NOT an insurer but a group of individuals and companies that underwrite unusual insurance policies

Question 19

Marketing Division

Answer 19

The division responsible for promoting insurance and acquiring potential clients through ads

Question 20

Monoline Insurer

Answer 20

Insurance carrier that only sells one type of insurance.

Question 21

Multi-Line Insurer

Answer 21

Insurance carrier that sells multiple types of insurance (home, auto, life, etc.)

Question 22

Mutual Insurance Company

Answer 22

Insurance company that’s characterized by having no capital stock, being owned by their policy owners, and typically issuing participating insurance.

Question 23

Non-Admitted (Unauthorized) Insurer

Answer 23

Insurer that is NOT approved to sell insurance in that state

Question 24

Nonparticipating Policy

Answer 24

Policy that’s typically issued by stock companies. This type of policy doesn’t allow policy owners to participate in dividends or to elect the board of directors

Question 25

Participating Policy

Answer 25

This is an insurance policy that pays policy dividends to policy owners. By receiving dividends, policy owners are allowed to share in the company's divisible surplus and elect the company’s board of directors.

Question 26

Personal Producing General Agency (PPGA)

Answer 26

Agency that represents one or more specific insurers. Sells insurance for specific companies but doesn't manage agents

Question 27

Policy Owner

Answer 27

Person who buys and controls the insurance (typically the insured)

Question 28

Private (Commercial) Insurer

Answer 28

Insurance company that is owned by private citizens or groups. NOT government-owned.

Question 29

Producer

Answer 29

General term for individual who is licensed to sell or talk about insurance

Question 30

Proposed Insured

Answer 30

This is the person whose life would be covered by an insurance policy. (before approval; see: insured)

Question 31

Public Adjuster

Answer 31

The person who acts on behalf of a consumer who’s settling an insurance claim

Question 32

Reciprocal Insurer

Answer 32

Unincorporated organization in which all members insure one another

Question 33

Reinsurance

Answer 33

When one insurance company helps cover the risks of another

Question 34

Reinsurer

Answer 34

A company that insures insurance companies.

Question 35

Risk Retention Group

Answer 35

A group of similar businesses that join together to self-insure against liability risks they all face

Question 36

Sales Department

Answer 36

Department that acquires clients through one-on-one meetings in which they help consumers complete applications.

Question 37

Self-Insurer

Answer 37

A company that pays for its own losses rather than using an insurance company to manage risks

Question 38

Service Representatives

Answer 38

Customer service reps who don’t sell insurance

Question 39

Solicitors

Answer 39

Individuals who set up sales meetings for insurance agents

Question 40

Stock Insurance Company

Answer 40

insurance company that’s owned by a group of stockholders (or shareholders). Usually doesn't pay dividends

Question 41

Surplus Lines Insurance

Answer 41

Non-traditional insurance that’s only available from a surplus lines insurer. This type of insurance provides coverage for substandard or unusual risks and is not available through private or commercial carriers.

Question 42

Underwriting Department

Answer 42

Department that’s responsible for reviewing applications and deciding whether to approve or reject them

Question 43

Concept of Insurance

Answer 43

The transfer of risk from one party to another through a legal contract

Question 44

Principle of Indemnity

Answer 44

States that the goal of the policy is to “restore” an insured to the same financial position they were in before the insured loss occurred. Also holds to the principle that the insured shall not profit or gain from their loss