Arizona Personal Lines Prep Exam Questions And Guaranteed Pass Answers.
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Course
Arizona Life and Health Insurance
Institution
Arizona Life And Health Insurance
Insurance - Answer Transfer of risk of loss From an individual or business entity to an insurance company. Which in turn spreads the costs of loss.
Person - Answer Individual, business entity, association, organization, society, partnership, trust, or corporation.
Risk - Answer Uncer...
Arizona Personal Lines Prep Exam
Questions And Guaranteed Pass
Answers.
Insurance - Answer Transfer of risk of loss From an individual or business entity to an insurance
company. Which in turn spreads the costs of loss.
Person - Answer Individual, business entity, association, organization, society, partnership, trust, or
corporation.
Risk - Answer Uncertainty or chance of loss occurring.
What are the 2 types of Risk and which one is insurable ? - Answer Pure Risk; Insurable and
Speculative; Not insurable
Exposure - Answer Unit of measure used to determine rates charged for insurance coverage.
Homogeneous - Answer Large number of units, with the same or similar exposure loss.
Hazards - Answer Conditions or situations that increase the probability of an insured loss occurring.
What are the 3 types of Hazards ? - Answer Physical, moral, morale
Physical - Answer Individual characteristics; physical condition, past medical history, or condition at
birth.
Moral - Answer Knowing right from wrong, but choosing wrong; Lying or committing a wrongful act.
Morale - Answer State of mind that causes indifference to loss; Attitude towards things, carelessness.
,Perils - Answer Cause of loss insured against.
Loss - Answer Reduction, decrease, or disappearance of value of the person or property, that is
insured.
What are the methods to handling a risk ? - Answer Avoidance, retention, sharing, reduction, and
transfer.
Avoidance - Answer Eliminating exposure of loss. For example; afraid of dying in a car crash, choose to
never drive.
Retention - Answer Planned assumption of risk, which the insured takes responsibility for through
deductibles, co-payments, or self-insurance.
What is the purpose of Retention ? - Answer The purpose of retention is to reduce expenses and
improve cash flow, increase control of claim reserving and claims settlements, and fund for losses that
can't be insured.
Sharing (Reciprocal Exchange Agreement) - Answer A method of dealing with risk for an individual or
group with the same or similar exposure by sharing the losses.
Reduction - Answer Attempt to lessen the possibility or severity of a loss.
Transfer - Answer The other party will borne the responsibility of the loss and expenses.
5 elements of insurable risk - Answer Due to chance, definite and measurable, statistically predictable,
not catastrophic, and randomly selected and large loss exoposure.
What is adverse selection ? - Answer Insuring of risks that are more prone to losses than the average
risk. Used in order to protect insurance companies.
, Law of Large Numbers - Answer The larger number of people with similar exposure to loss, more
predictable losses will be.
Reinusracne - Answer Contract under which one company indemnifies another company for part of all
liabilities.
What is the purpose of reinsurance ? - Answer To protect insurers ( company ) against catastrophic
losses.
What are the 2 parties in a reinsurance contract called and their roles ? - Answer Ceding Insurer;
insurance company receiving insurance from another company. Assuming insurer; insurance company
covering the other. ( Reinsurer )
Facultative Reinsurance ( Agreement ) - Answer When reinsurance is purchased on a specific policy.
Underwrite each application separately.
Automatic Reinsurance ( Agreement ) - Answer Reinsurer is bound to accept all risks ceded to it.
Predetermined, blanket arrangement. Aka; Reinsurance Treaty.
What is an insurer ? - Answer Any person or company engaged as the principal party in the business of
entering an insurance contract.
What are the types of insurers ? - Answer There's 2 types; Private or Government
What are the major differences between the two ? - Answer Government programs are funded with
taxes and serve national and state social purposes. Private policies are funded by premiums.
Private Insurers - Answer May be authorized to transact insurance by state insurance department.
Classification of Private Insurance companies - Answer Ownership, authority to transact, location,
marketing and distribution system, or rating.
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