General Basics

Question 0

Fixed Annuities

Answer 0

Contract offering a guaranteed rate of interest and a guaranteed return of principal for the term of the contract

Question 1

Credit Life

Answer 1

Policy to pay off or reduce the balance of a loan or debt in the event of the insured’s death

Question 2

Group Life

Answer 2

Life Insurance provided for members of a group. Normally a group of employees, any group not formed to buy a group policy. Lower cost because of reduction of admin expenses per life. Tax advantages

Question 3

Insurable Interest

Answer 3

Life Insurance policy on someone else’s life

Question 4

Permanent Life

Answer 4

Life Insurance policy including both a death and cash value component

Question 5

Temporary Life

Answer 5

Death protection for a period or term

Question 6

Universal Life

Answer 6

Flexible-premium, adjustable benefit life insurance policy that accumulates account value. Allows insured to change the amount of insurance as needs change

Question 7

Variable Annuities

Answer 7

Issued by Insurance Company giving investor the flexibility to select from a variety of investment fund options. Earnings tax deferred. Agent must be registered with the Financial Industry Regulatory Authority in CA

Question 8

Variable Life

Answer 8

Form of whole life insurance providing death benefits and/or cash values based on a taxdeferred investment protfolio

Question 9

Insurance

Answer 9

Contract to indemnify another against loss

Question 10

Loss

Answer 10

Reduction in the value of an asset

Question 11

CIC

Answer 11

CA Insurance Code developed by the Legislature

Question 12

CCR

Answer 12

California Code of Regulations - Overseen by CA Insurance Commissioner

Question 13

Risk

Answer 13

Possibility (uncertainty) that a loss might occur

The uncertainty about loss that exists whenever more than one outcome is possible

Question 14

Pure Risk

Answer 14

Chance of loss, no possibility of gain

Question 15

Speculative risk

Answer 15

creating a risk offering the opportunity for gain and loss (e.g. gambling)

Question 16

Peril

Answer 16

cause of loss

Question 17

Hazard

Answer 17

something that increases the risk

Question 18

Moral hazard
Morale Hazard
Physical Hazard

Answer 18

Moral - Attitudes and habits of an individual (dishonest)
Morale - indifference or apathy (careless)
Physical Hazard - tangible characteristics of a risk increasing the chance of loss (overweight, risky vocation)

Question 19

Mortality Table

Answer 19

How many people in each age group will die this year

Developed by the National Association of Insurance Commissioners

Question 20

Loss Exposure

Answer 20

A condition that could result in a loss

Question 21

3 methods of gathering Risk Exposure information

Answer 21

1) Application
2) Physical Exam or Inspections
3) Consumer Credit Report

Question 22

Predicting Insurable Risks

Answer 22

Large comparison of homogeneous units
Monetary value of the loss
Uncertainty of loss
Creates an economic hardship
Exclusions - catastrophic perils (e.g. earthquake, hurricane, flood, war, nuclear risks

Question 23

Insurable Event

Answer 23

unknown event which may damage a person

Question 24

Insurable Interest

Answer 24

someone or thing that would benefit if that person or thing continues to live (personal life, spouse, business, employee)

Question 25

Principle of Indemnity

Answer 25

Restores the insured person in whole or in part, to the condition prior to the loss

Question 26

Underwriting

Answer 26

examining and accepting or rejecting insurance risks

Question 27

Agent Underwriter

Answer 27

front-line or field agent gathering information needed to access risk

Question 28

Home Office Underwriter

Answer 28

Person in the office accessing the information gathered and determining acceptability of the risk

Question 29

Adverse Selection

Answer 29

Protecting the insurance company from clients taking advantage of the potential of excessive claims. e.g. 1) Taking a job to qualify for insurance they otherwise would not qualify for, 2) Suicide coverage, 3) Exclusion of catastrophic events

Question 30

Contract Law

Answer 30

Agreement between insurer and the insured legally enforceable obligation to make all benefit payments for which premiums have been paid

Question 31

Indemnify

Answer 31

Making an insured whole again after a loss | Restoring to condition before loss

Question 32

Rescission

Answer 32

Insurer voids an insurance contract due to an intentionally fraudulent omission by the insured of a material fact.

Question 33

Annuity

Answer 33

Agreement by insurer to spread out payments over time. Used to liquidate an estate over time

Question 34

Annuitant

Answer 34

The party receiving the benefits of an annuity

Question 35

Single premium immediate annuity

Answer 35

Lump sum purchase with payouts starting next month

Question 36

Single premium deferred annuity

Answer 36

Single investment with payments beginning until an agreed on age

Question 37

Fixed Annuity

Answer 37

Fixed rate of return

Question 38

Variable Annuity

Answer 38

Monthly payouts during the payout period will change with the market