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Indiana Life and Health Insurance Exam Latest Updated.
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Indiana Life and Health Insurance Exam Latest Updated.
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Indiana Life and Health Insurance ExamLatest Updated
Insurance - answer-A contract that transfers the risk of financial loss from an individual
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bor business to an insurer
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Risk - answer-Uncertainty about whether a loss will occur
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Speculative Risk - answer-Possibility of a loss or gain. Not insured.
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Pure Risk - answer-Possibility of experiencing loss. Covered by insurance.
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Loss - answer-The reduction in the value of an asset
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Exposure - answer-Risk assumed by an insurer and the amount that the insurer is
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responsible to pay out at any given time. Expressed in units
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Peril - answer-Cause of loss
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Hazard - answer-Anything that increases the chance that loss will occur
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Physical Hazard - answer-A physically identifiable hazard
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Moral Hazard - answer-Hazard that arises from someone's character
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Morale Hazard - answer-Hazard that arise from a state of mind or careless attitude
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Acronym of Methods for Handling Risk - answer-STARR
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S in STARR - answer-Risk Sharing - Two or more individuals agree to pay a portion of
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loss occurred by someone in the group
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T in STARR - answer-Transfer of Risk - What happens with insurance. Insurer agrees to
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pay if individual or business has a loss
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A in STARR - answer-Risk Avoidance - Eliminating a particular risk by not engaging in a
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certain activity
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, 1st R in STARR - answer-Risk Reduction - Lessening the chance that loss will occur, or
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lessening the extent of a loss that does occur
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2nd R in STARR - answer-Risk Retention - The individual pays for the loss
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Law of Large Numbers - answer-The larger the group - the more accurate losses can be
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predicted
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Acronym for Risks that can be Insured - answer-CANHAM
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C in CANHAM - answer-Calculable - Premiums must be calculable based upon prior
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loss statistics for that particular risk
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1st A in CANHAM - answer-Affordable - The premium for transferring risk should be
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affordable to the average consumer
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N in CANHAM - answer-Non-catastrophic - Insurance cannot cover events that cause
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widespread losses to large numbers of insureds at the same time
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H in CANHAM - answer-Homogeneous - The individual risks that an insurer covers
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must be similar, homogeneous, in regard to factors that affect the chance of loss
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2nd A in CANHAM - answer-Accidental - Insurance must involve risk
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M in CANHAM - answer-Measurable - It must be possible to estimate loss as a dollar
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amount
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Adverse Selection - answer-Tendency for higher-risk individuals to get and keep
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insurance more than individuals who represent an average level of risk
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Underwriting - answer-The extensive evaluation of information related to a particular risk
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Reinsurance - answer-An insurance company pays another insurance company to take
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some of the company's risk of catastrophic loss
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Ceding Insurer - answer-Company reducing its risk in reinsurance
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Reinsurer - answer-Company assuming risk in reinsurance
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Facultative Insurance - answer-The reinsurer evaluates each risk before allowing the
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transfer to be made from the ceding company
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Treaty Reinsurance - answer-The reinsurer accepts all risks of a certain type from the
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ceding company
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