General Section: Cram Course # 1

Question 1

In health insurance, the rate at which accident, sickness or disability will occur.

Answer 1

Morbidity

Question 2

The rate at which people die.

Answer 2

Mortality

Question 3

The unintentional decrease in value of an asset due to a peril.

Answer 3

Loss

Question 4

Spreading a risk over a large group of people, by substituting a small cost for a large unknown risk (economic risk of dying).

Answer 4

Risk Pooling or Loss Sharing

Question 5

What do we call the predicting of the approximate number of deaths or the likelihood of disability that will occur among a certain group during a certain period?

Answer 5

Law of large numbers

Question 6

The item insured in the policy.

Answer 6

Exposure unit

Question 7

The uncertainty regarding financial loss.

Answer 7

Risk

Question 8

What type of risk involves both the chance of loss or gain? (Ex. Gambling)

Answer 8

Speculative Risk- NOT Insurable

Question 9

What type of risk has only the chance of loss? (Ex. injury, illness, and death)

Answer 9

Pure Risk- Insurable

Question 10

The condition of being prone to loss due to a hazard or uncertain event.

Answer 10

Exposure

Question 11

Three basic types of Hazards

1) _________- blind, family traits
2) _________- stealing, smoking, habits that increase the probability of loss
3) _________- jay walking, careless, the attitude, state of mind (It’s insured so why worry, whatever)

Answer 11

Physical
Moral
Morale

Question 12

Six elements of Insurable Risk that make Pure Risks Insurable:

1) LOSS must be due to ___________
2) LOSS must be definite and __________
3) LOSS exposure to be insured must be __________
4) LOSS exposure must be __________ __________
5) LOSS must be ___________
6) LOSS cannot be __________

Answer 12

1) Chance
2) Measurable
3) Large
4) Randomly Selected
5) Predictable
6) Catastrophic

Question 13

The immediate specific event that causes a loss.

Answer 13

Peril

Question 14

What gives rise to a peril?

Answer 14

A Hazard

Question 15

What kind of hazard is it when an employee takes merchandise without paying for it?

Answer 15

Moral

Question 16

What kind of hazard is it when you are late for an appointment?

Answer 16

Morale

Question 17

The application of laws, regulations, and legal court rulings which increase the chance or amount of loss.

Answer 17

Legal Hazard

Question 18

The total amount the insurer will pay for an insured risk.

Answer 18

Limit of liability

Question 19

Five options to handle risk (ARRTS)

1) A- _________ (don’t fly)
2) R- _________ (smoke alarm)
3) R- _________ (self insured)
4) T- _________ (buys insurance)
5) S- _________ (Copayment/Coinsurance)

Answer 19

1) Avoidance
2) Reduction
3) Retention
4) Transference
5) Sharing

Question 20

What is a company called that helps an insurance company transfer a portion of its risk?

Answer 20

Reinsurer

Question 21

What type of company has the purpose to make a profit for the stockholder?

• Structured the same as any corporation
• Pays NO dividends to policyholders

Answer 21

Stock Company

Question 22

What type of company is owned by its Policy holders?

• Issues participating and non participating policies
• Pays its policyholders dividends

Answer 22

Mutual Company

Question 23

A refund of Over Payment (partial over payment being returned to policy owner)

Answer 23

Dividends

Question 24

____________ is also known as Debit Insurer/Industrial Insurance (small face amounts, cash accepted as premiums, more expensive)

Answer 24

Home Service Insurance

Question 25

Insurance which offers coverage to people through the individual market.

Answer 25

Private Insurers

Question 26

The entity that assumes the insured's risk. Synonymous with insurance company.

Answer 26

Insurer

Question 27

The person who is covered under the insurance policy.

Answer 27

Insured

Question 28

The person who has all the ownership rights under the policy, pays premiums, and accepts the policy when delivered.

Answer 28

Policy Holder or Policy Owner

Question 29

A Company doing business in the state in which it is incorporated.

Answer 29

Domestic Insurer

Question 30

A Company licensed to do business in a state in which it is not incorporated.

Answer 30

Foreign Insurer

Question 31

A Company licensed to do business in a country outside the U.S.

Answer 31

Alien Insurer

Question 32

Yes or No If a company is licensed in the state where it is incorporated, does it need to be licensed in the states where it does business?

Answer 32

YES

Question 33

People who sell, solicit and negotiate insurance. It is an all-encompassing term which includes agents and brokers.

Answer 33

Producers

Question 34

Illegally converting another person's funds for your own use.

Answer 34

Embezzlement

Question 35

Who regulates the insurance industry?

Answer 35

The States

Question 36

An international misrepresentation or concealment of material fact made by one party in order to cheat another party out of something that has economic value.

Answer 36

Fraud

Question 37

What elements are needed for contracts to be legally valid and binding? (HINT: LOCCA)

Answer 37

``` Legal purpose Offer Consideration- exchange of values Competent parties Acceptance ```

Question 38

Name three groups of people who are NOT competent to enter a legal contract.

Answer 38

1) Minors 2) Mentally impaired 3) Under influence of alcohol or drugs

Question 39

A medical condition, whether physical or mental, resulting from accident or sickness preventing a person from being able to work.

Answer 39

Disability

Question 40

The rights and responsibilities of all parties of the contract.

Answer 40

Conditions

Question 41

What is it called when values exchanged are not equal? (Ex. $50 premium/$100,000 Death Benefit)

Answer 41

Aleatory

Question 42

What is it called when only one party prepares the contract? (Basically policyowner is stuck with the contract as it is)

Answer 42

Adhesion

Question 43

_________ is the type of contract that only reimburses or pays the amount of loss.

Answer 43

Indemnity

Question 44

What is it called when information is believed to be true? (Ex. Statements made by the client on application in relation to thier health)

Answer 44

Representation

Question 45

What is it called when information is guaranteed to be true?

Answer 45

Warranty

Question 46

What is it called when both parties are trusted to reveal relevant facts?

Answer 46

Utmost Good Faith

Question 47

What kind of contract pays a stated amount in the event of loss?

Answer 47

Valued Contract

Question 48

_________ is when an applicant fails to disclose known material facts.

Answer 48

Concealment

Question 49

Who must sign an application?

Answer 49

Insured Policy Owner Agent *All three must sign

Question 50

This form is filled out by the agent and includes information about the proposed insured's health history, occupation, and background.

Answer 50

Application

Question 51

They select, classify, and rate risks.

Answer 51

Underwriters

Question 52

A _________ is considered a field underwriter.

Answer 52

Agent

Question 53

Name the 4 types of underwriting risks.

Answer 53

Preferred Standard Substandard Declined

Question 54

What risk category is a person that has above agerage health, above average lifestyle, and habits?

Answer 54

Preferred Risk

Question 55

What risk category is a person that poses a higher risk to the insurer than standard risks.

Answer 55

Substandard Risk

Question 56

Underwriting classification in which individuals are in average physical condition with average lifestyles and habits for people of their respective sex and age group.

Answer 56

Standard Risk

Question 57

Underwriting classification in which risk is uninsurable because the applicant poses too great a risk for the insurer to provide coverage.

Answer 57

Declined Risk

Question 58

The process that insurers use to select, classify, and rate risks so that they accurately reflect the amount of risk undertaken.

Answer 58

Underwriting

Question 59

What are the five reports an underwriter could use in determining an applicants insurability?

Answer 59

Medical Report MIB- Collection of complete medical history Special Questionnaire- for dangerous activities Inspection Report Credit Report

Question 60

Who completes the medical report?

Answer 60

Physician or Paramedic (Either One)

Question 61

What is the purpose of the MIB?

Answer 61

Holds down insurance costs

Question 62

The MIB helps prevent ________.

Answer 62

Fraud

Question 63

The buyer's guide and policy summary must be given to the insured __________ or at __________. No Exceptions.

Answer 63

prior to or at policy delivery

Question 64

The insurer's costs which include: acquistion costs, staff salaries, retirement, contingency funds, and claims payments.

Answer 64

Expenses

Question 65

The person who is covered under the policy.

Answer 65

Insured

Question 66

The insured's notification that a payment is requested for a covered loss.

Answer 66

Claim

Question 67

Less than favorable insurance risks (such as people in poor health) to seek or continue insurance to a greater extent than people in good health.

Answer 67

Adverse Selection

Question 68

Method used to establish premium rates for group health plan members, based on the claims experience of the group.

Answer 68

Experience Rating

Question 69

____________ insurance companies write more than one line of insurance.

Answer 69

Multi-line

Question 70

Most common type of group insurance: | * each year policy is renewed based on previous years claims.

Answer 70

Annuable Renewable Term Policy

Question 71

What is a policy called that is issued for Group Insurance?

Answer 71

Master Contract

Question 72

Employees/Members that are covered by Group Insurance receive a ____________.

Answer 72

Certificate of Insurance

Question 73

How many employees must participate in a non-contributory plan?

Answer 73

100% of eligible employees, they all must ne insured.

Question 74

How many employees must participate in a contributory plan?

Answer 74

at least 75% of eligible employees must participate.