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Life, Accident and Health - Michigan Study Guide with complete solutions
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Life, Accident and Health - Michigan Study Guide with complete solutions
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Life, Accident and Health - MichiganStudy Guide with complete solutions
Insurance Contract - Answer -Legal agreement between an insurance company and an
individual, where the insurer collects a premium from the insured in exchange for the
insurers promise to pay potential future benefits in the event of covered losses.
Risk Pooling - Answer -Combines similar losses from many people so that the average
loss over the entire group is relatively constant
Law of Large Numbers - Answer -States that as a group increases in size, it is easier to
predict the number of future losses over a certain period of time.
Actuaries - Answer -Mathematicians employed by insurance companies, who analyze
statistical data to determine mortality and morbidity rates.
Mortality - Answer -The rate at which people die.
Morbidity - Answer -The rate at which people get sick, injured, or disabled.
Risk - Answer -The possibility of a loss occurring.
Pure Risk - Answer -The only insurable risks and present a potential for loss such as
injury, illness, and death
Speculative Risk - Answer -Present the chance for loss or gain
Loss - Answer -The unintentional decrease in the value of an asset due to a peril.
Exposure - Answer -The condition of being prone to loss due to a hazard or uncertain
event
Peril - Answer -The cause of the loss and the event insured against
Life and Health insurance perils - Answer -Premature death, dependency during old
age, accident, and sickness
Hazard - Answer -Anything that increases the chance of loss occurring from a particular
peril
,The 4 types of hazards - Answer -Physical, moral, morale, and legal
Physical hazard - Answer -Physical characteristics which raise the loss potential for a
particular peril
Moral hazard - Answer -The predisposition, character, habits, and values of a person
which increase the chance of a loss occurring
Morale hazard - Answer -An insureds careless attitude, indifference or lack of
responsibility which increase the chance of a loss occurring
Legal hazard - Answer -The application of laws, regulations, and legal court rulings
which increase the chance or amount of loss
5 Methods of handling risk - Answer -Avoidance, retention, sharing, reduction and
transfer
Insurance - Answer -Risk Transfer
Adverse Selection - Answer -Demand for insurance coverage by people who are worse
than average risks and more likely to need and use the coverage
Reinsurance - Answer -Spreads risk from one insurer to one or more other insurers
Reinsurer - Answer -The insurer that accepts the additional risk
Primary Insurer - Answer -The insurer that gives the risk to the reinsurer
Competent parties Indemnity - Answer -"To make whole" provide benefit of payments to
restore the insureds economic loss
Limit of liability - Answer -The total amount the insurer will pay for an insured risk
Premium - Answer -Set cost of insurance coverage paid by the policyholder to the
insurer
Deductible - Answer -The amount the insured must pay before the insurer will pay a
claim
Coinsurance - Answer -A cost-sharing mechanism between the insurer and insured in
medical insurance, where for a certain range of coverage the insurer agrees to pay a
large percentage of the expenses and the insured is responsible for paying the
remainder
, Claim - Answer -The insured's notification to the insurer that a payment is requested for
a covered loss
Life insurance - Answer -protects against the risk of premature death
Health insurance - Answer -Protects against the severity of financial loss due to illness,
disease, short or long-term disability, wages lost while ill or disabled, and medical
expenses
Annuities - Answer -Protects against the risk of living longer than expected and provides
guaranteed life income to protect against the risk of depleting retirement funds
Property Insurance - Answer -Protects against the risk of damage and destruction to all
types of property
Casualty Insurance - Answer -Protects against the risk of legal liability for injury, death,
disability, damage and destruction to property
Credit Insurance
Credit Life/Credit Health - Answer -Protects against the risk that a person in debt,
termed debtor, cannot repay the debt to the creditor because of accident, sickness,
disability or death
Variable - Answer -Comprised of variable life and variable annuities.
Invests premium dollars in securities, which carry more risk due to price fluctuations
Securities license and life insurance producer license - Answer -Requirement of selling
variable products
Stock Companies - Answer -Incorporated companies owned by thier stockholders, who
are paid their share of the company's profit through dividends
Mutualization - Answer -Transformation of a stock insurer into a mutual insurer
Demutualization - Answer -Transformation of a Mutual insurer to a stock insurer
Mutual Companies - Answer -Commercial insurers owned by their policyholders.
Mutual Companies lack capital stock, and profits are paid via dividends to policyholders
Participating insurers - Answer -Issue dividends to policyholders
Noncommercial organizations or Service Providers - Answer -Service organizations that
provide prepaid health plans for medical, surgical, and hospital expenses
Subscribers - Answer -Service provider members
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