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Exam FX Chapter 1: General Insurance Exam Questions and Answers
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Exam FX Chapter 1: General Insurance Exam Questions and Answers
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Exam FX Chapter 1: General InsuranceExam Questions and Answers
Agent/Producer - - a legal representative of an insurance company; the
classification of producer usually includes agents and brokers; agents are the
agents of the insurer
- Applicants (or proposed insured) - - a person applying for insurance
- Broker - - an insurance producer not appointed by an insurer and is
deemed to represent the client
- Insurance Policy - - a contract between a policyowner (and/or insured) and
an insurance company which agrees to pay the insured or the beneficiary for
loss caused by specific events
- Insured - - the person covered by the insurance policy. This person may or
may not be the policyowner
- Insurer (principal) - - the company who issues an insurance policy
- Policyowner - - the person entitled to exercise the rights and privileges in
the policy
- Premium - - the money paid to the insurance company for the insurance
policy
- Reciprocity/Reciprocal - - a mutual interchange of rights and privileges
- Insurance - - transfers the risk of loss from an individual or business entity
to an insurance company, which in turn spreads the costs of unexpected
losses to many individuals.
- 4 types of insurance transactions - - Solicitation
Negotiations
Sale (effectuation of a contract of insurance)
Advising an individual concerning coverage of claims
- Risk - - the uncertainty or change of a loss occurring.
, - Pure Risk - - situations that can only result in a loss or no change. There is
no opportunity for financial gain. Pure risk is the only type of risk that
insurance companies are willing to accept
- Speculative Risk - - involves the opportunity for either loss or gain. An
example would be gambling. These types of risks are not insurable.
- Hazards - - conditions or situations that increase the probability of an
insured loss occurring.
- Physical hazards - - are individual characteristics that increase the
chances of the cause of loss. Examples are derived from physical conditions,
past medical history, or a condition at birth (blindness).
- Moral Hazards - - hazards are tendencies towards increased risk.
- Morale Hazards - - arise from a state of mind that causes indifference to
loss, such as carelessness. Actions taken without forethought may cause
physical injuries.
- Perils - - the causes of loss insured against in an insurance policy
- Loss - - defined as the reduction, decrease or disappearance of value of
the person or property insured in a policy, caused by a named peril.
- Avoidance - - eliminating exposure to a loss.
- Retention - - the planned assumption of risk by an insured through the use
of deductibles, co-payments, or self-insurance. It is also known as "self-
insurance" when the insured accepts the responsibility for the loss before the
insurance company pays.
- Purposes of retention - - To reduce expenses and improve cash flow
To increase control of claim reserving and claims settlements
To fund for losses that cannot be insured
- Sharing - - a method of dealing with risk for a group of individual persons
or businesses with the same or similar exposure to loss to share the losses
that occur within that group.
- Reduction - - includes installing smoke detectors, having an annual
physical to detect health problems early, or making a change in our lifestyles
to lessen the possibility or severity of a loss.
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