Utah Insurance Exam Prep Questions & Answers.
Risk - CORRECT ANSWER Chance of loss
Insurance - CORRECT ANSWER A contract in which one party agrees to indemnify the insured party against loss, damage or liability arising from an unknown event.
Pure risk - CORRECT ANSWER Chance of loss on...
Utah Insurance Exam Prep Questions &
Answers.
Risk - CORRECT ANSWER Chance of loss
Insurance - CORRECT ANSWER A contract in which one party agrees to indemnify the insured party
against loss, damage or liability arising from an unknown event.
Pure risk - CORRECT ANSWER Chance of loss only
Speculative - CORRECT ANSWER Chance of loss or gain
2 types of risk - CORRECT ANSWER Pure & speculative
Only risk insurance covers? - CORRECT ANSWER Pure
Exposure - CORRECT ANSWER Unit of measurement. Measures the amount of risk.
Hazard - CORRECT ANSWER Condition that INCREASES the chance of loss.
Types of hazards - CORRECT ANSWER Physical (can't be controlled) & moral (due to lack of character) &
morale (due to carelessness).
Which hazards does insurance cover? - CORRECT ANSWER Physical & Morale
Peril - CORRECT ANSWER Cause of loss (ex: homeowners- fire, wind, ect.)
Loss - CORRECT ANSWER Financial consequence. Reduction or decrease value.
,Methods of handling risk - CORRECT ANSWER 1. Sharing
2. Transfer
3. Avoidance
4. Retention
5. Reduction
STARR
Risk avoidance - CORRECT ANSWER Eliminate risk
Risk retention - CORRECT ANSWER -Keep (retain) the risk.
-Methods: deciding to not buy insurance. & Being self- insured. & having a deductible.
-reasons: save money & some risk cannot be insured.
Risk sharing - CORRECT ANSWER Similar parties share the losses that occur within the group. (Ex.
Neighbors forming an informal risk sharing group. Reciprocal insurance exchanges (farmers insurance)
Risk reduction - CORRECT ANSWER Taking action to lessen the risk. (Ex. Slow down when driving)
Risk transfer - CORRECT ANSWER Shifting the burden of risk to another party.
Elements of insurable risks- the risk of loss is insurable if... - CORRECT ANSWER - Due to chance
- Definite & measurable
- Large pool of risks (large numbers)
- Statistically predictable
- Not catastrophic (earthquakes, floods..)
-Random selection of risks
Adverse Selection - CORRECT ANSWER Natural tendency for higher risk people to want insurance &
keep insurance.
Reinsurance - CORRECT ANSWER Insurance for insurance companies
Originating company (ceding company) - CORRECT ANSWER -Sells a policy (policies) to a customer
-gives (cedes) part of the risk to another company
Reinsurer (assuming company) - CORRECT ANSWER -agrees to accept (assume part of the risk)
-will reimburse originating company for loss(s) per the agreement.
Classification of insurers - CORRECT ANSWER Stock companies
-owned by shareholders
-Issue nonparticipating policies
-Dividends go to shareholders
-Dividends are taxable.
Mutual companies
-Owned by policy owners (customers)
-Issue participating policies
-Dividends go to policy owners (customers)
Insurers - CORRECT ANSWER Admitted
-authorized
-have a certificate of authority
-approved to do business in Utah
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