Exam (elaborations)
LOMA 281 QUESTIONS AND ANSWERS
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LOMA 281 QUESTIONS AND ANSWERS
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LOMA 281 QUESTIONS AND ANSWERSWaiver of premium for payor benefit - answers- insurer waives renewal premiums if the
policy owner, rather than the insured, dies or becomes totally disabled (must provide
evidence of insurability)
Contracts of indemnity - answers- base benefits on the actual amount of the financial
loss that results from a covered event when it occurs, subject to maximum limits (other
than life insurance)
Valued contract - answers- life insurance policies which state the benefit payable at the
time of the policy issue
Retrocessionaire - answers- the reinsurer that assumes all or part of the reinsurance
risk accepted by another reinsurer
Stock insurer - answers- - can issue shares of stock
- owned by stockholders, who have voting rights in the company
- stockholders may receive shares of operating profits known as stock dividends
Market conduct regulation - answers- regulation of the practices of insurers in regard to
four areas of operation: sales practices, underwriting practices, claims practices, and
bad-faith actions.
Mccarran-ferguson act - answers- states that while the federal government has
authority to regulate the insurance industry, it would not exercise its right if the
insurance industry was regulated effectively and adequately on the state level.
Dodd-frank act - answers- created the federal insurance office (fio) with authority to
monitor the insurance industry
The life and health insurance guaranty association - answers- state's association
covers the company's benefits up to state-mandated maximums (usually up to $300k)
should the insurance company go insolvent
Unilateral contract - answers- contract in which only one party makes a legally
enforceable promise when entering into the contract
Bilateral contract - answers- both parties make legally enforceable promises
Commutative contract - answers- parties agree to exchange specified items or services
that are equal in value
Aleatory contract - answers- one party exchanges something of value for the other
party's conditional promise
, Bargaining contract - answers- both parties set the terms and conditions
Contracts of adhesion - answers- one party sets the contract terms that the other party
must accept or reject outright
Voidable contract - answers- contract under which one party has the right to avoid their
obligations under the contract and the other party is bound by the terms of the contract
Void contract - answers- contract that does not meet all legal requirements
Mutual assent - answers- all parties to the contract have an understanding of the terms
and agree to those terms
Insurable interest - answers- any financial interest in life or property such that, if the life
or property were lost or harmed, the insured would suffer financially
Requirement for a valid contract - answers- - mutual assent
- legally adequate consideration
- lawful purpose
- contractual capacity
Mutual insurer - answers- - owned by policyowners
- policyowners have membership rights (voting rights)
- policyowners may periodically receive an amount of money known as a policy dividend
Fraternal benefit society - answers- - owned by members of fraternal lodge system
- provides social and insurance benefits only to fraternal members of their families
- legally required to have a representative form of government
Solvency regulation - answers- -assets must be sufficient to offset liabilities
-calculation of reserves
-premium to surplus ratio
-investment types and quality
-annual statement must be filed
-guaranty funds
Surrender benefit - answers- the amount of the cash value that a policyowner is entitled
to receive upon surrender of the policy
Cost of benefits - answers- all of the insurer's potential benefit payments multiplied by
the expected probability that each benefit will be payable
Simple interest - answers- interest on the original principal only
Compound interest - answers- interest on both the principal and the accrued interest
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