Chapters 1-4

Question 1

One party’s agreement to the offer of another party. Usually takes place when the policy is issued.

Answer 1

Acceptance

Question 2

An unforeseen, unexpected, and unintended event that results in bodily injury

Answer 2

Accident

Question 3

An Insurance Policy under which benefits are payable in case of illness or accident

Answer 3

Accident and Health Insurance

Question 4

A policy that provides payment if the insured dies from an accident, accidentally severs a limb, or accidentally and permanently loses eyesight

Answer 4

Accidental Death and Dismemberment (AD&D)

Question 5

Mathematician hired by an insurance company to apply probabilities and statistical analysis to risks and premiums

Answer 5

Actuary

Question 6

An insurance company rep who seeks to determine the extent of the company’s liability when a claim is submitted

Answer 6

Adjuster

Question 7

The tendency of insureds who present a higher probability of loss to purchase or renew insurance more often than those who present a lower probability of loss

Answer 7

Adverse Selection

Question 8

A person licensed by the state insurance authority to sell insurance products.

Answer 8

Agent

Question 9

When one party’s offer is accepted by another party

Answer 9

Agreement

Question 10

A contract condition where only one party may obtain greater value under the agreement than the other party

Answer 10

Aleatory

Question 11

An insurance company organized and incorporated outside of the US, that is, organized under laws of foreign nation.

Answer 11

Alien Insurer

Question 12

A person apply for a policy

Answer 12

Applicant

Question 13

The legal transfer of a policyowner’s rights in an insurance policy to another party

Answer 13

Assignment

Question 14

Current or present age of insured

Answer 14

Attained Age

Question 15

A type of policy assignment under which the assignee receives full control over the policy and also full rights to its benefits. It is also called permanent assignment.

Answer 15

Absolute Assignment

Question 16

To give up a right or privilege

Answer 16

Waiver

Question 17

A statement that one guarantees to be materially and substantially true

Answer 17

Warranty

Question 18

The process through which the underwriter evaluates risk and
determines premium category.

Answer 18

Underwriting

Question 19

An insurance company employee who has been trained to evaluate prospective applicants for insurance policies.

Answer 19

Underwriter

Question 20

A person who is considered a higher risk due to medical condition, occupation, or dangerous habits/hobbies.

Answer 20

Substandard Risk

Question 21

An insurance company owned by stockholders

Answer 21

Stock Insurer

Question 22

A person who is considered average risk

Answer 22

Standard risk

Question 23

Applicants who cannot qualify for standard insurance rates due to existing health impairments. Policies are issued with rated-up premiums or exclusions riders.

Answer 23

Special Risk Class

Question 24

Uncertainty of loss

Answer 24

Risk

Question 25

The responsibility of the underwriter to determine which risks are insurable and acceptable to the insurance company

Answer 25

Risk Selection

Question 26

A statement that one believes to be materially and substantially to be true

Answer 26

Representation

Question 27

Stipulations and conditions in the policy that state both the insurance company's and policyowner's rights and obligations

Answer 27

Provisions

Question 28

A person licensed by the state authority to sell insurance products.

Answer 28

Producer

Question 29

The cost of insurance

Answer 29

Premium

Question 30

A person who is entitled to a lower premium rate due to an indication of longevity or unimpaired life; such as excellent physical condition or low risk occupation.

Answer 30

Preferred

Question 31

A company owned by policyholders

Answer 31

Mutual Insurer

Question 32

Calculated by an actuary using two factors -- (1) risk minus (2) investment income. Loading is not a factor.

Answer 32

Net premium

Question 33

The incidence or extent of illness, injury, or disability in a defined population

Answer 33

Morbidity

Question 34

The incidence or extent of death in a defined population.

Answer 34

Mortality

Question 35

A listing of mortality experience of individuals by age. It permits an actuary to calculate how long a male or female of a given age group may be expected to live.

Answer 35

Mortality Table

Question 36

Insurance company: deliberate or false representation of the policy, including terms and benefits. Applicant: a deliberate false representation of the health or other condition of the insured

Answer 36

Misrepresentaion

Question 37

Nonprofit organization that collects medical data for life and health insurance companies

Answer 37

Medical Information Bureau (MIB)

Question 38

A mathematical principle of probability stating that actual losses in a given category of inurance will come closer to a predictable number as the number of policies issued increases.

Answer 38

Law of Large Numbers

Question 39

A fundamental insurance concept in which the insured should not profit, but be restored in part, by payment, repair, or replacement.

Answer 39

Indemnity

Question 40

A federal law that allows credit for coverage of a preexisting condition when changing from one group plan to another

Answer 40

Health Insurance Portability and Accountability Act (HIPAA)

Question 41

Social insurance programs such as medicare & medicaid, provided by the state or federal government

Answer 41

Government Insurer

Question 42

An insurance company organized and incorporated in a state and selling policies to residents of other states.

Answer 42

Foreign Insurer

Question 43

To deliberately attempt to deceive another for financial gain

Answer 43

Fraud

Question 44

An insurance company organized and incorporated in a state and selling policies of residents of that state.

Answer 44

Domestic Insurer

Question 45

A policy owner's share of divisible surplus paid by a participating policy

Answer 45

Dividend

Question 46

Extra money resulting from the insurance company's savings in mortality, interest earnings, and/or reductions in operational expenses which can be divided equitably among the company's policyholders or stockholders

Answer 46

Divisible Surplus