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29 Cards in this Set
- Front
- Back
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What is a chance of financial loss with both the possibility of loss or gain, and is not insurable.
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Speculative Risk
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What is a chance of financial loss with no possibility of gain, and can be insured?
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Pure Risk
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What are the 5 elements required to make a pure risk insurable?
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*The loss must be accidental
*The loss must have a set cause, time and $ amount. * There must be an economically feasible premium *The insurance must exclude catastrophic loss exposure. (war or nuclear) *The insurer must be able to predict the chance of loss using the "Law of Large Numbers" |
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What Mathematical principle is used to predict future losses? |
Law of Large Numbers |
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Risk Management is the process of:
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Identifying exposures to risks and deciding how to handle them to minimize their hardship.
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Decreasing the financial risk by lowering the exposure to hazard is what Risk Management technique?
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Reduction
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When a person assumes the financial risk such as paying a deductible, co-pay or self-insuring this is:
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Retention |
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When you eliminate the exposure to a financial risk this is:
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Avoidance
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When and individual shares a personal risk with a large pool of people this is:
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Transference
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What is an insurance policy
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A legally binding contract between the insurance company and the policy owner that establishes the terms of the agreement.
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The person who applies to receive insurance benefits and agrees to pay a premium is referred to as:
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The Insured
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The insurance company who makes a promise to pay benefits during hardships is referred to as:
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Insurer
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The likelihood of dying during a given year is:
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Mortality
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A Mortality Table :
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*Assumes everyone is statistically dead at age 100.
*Predicts the probability of financial losses based on the number of deaths in a given year. |
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The price (cost or $ amount), quoted in thousands for insurance polices is known as:
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Rate
An example of a rate would be: The premium for $100,000 of life insurance at a rate of $2.00 would cost $200.00 annually |
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The portion of the rate which is projected to be paid out in insurance benefits or claims is called?
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Prospective Loss Cost AKA Loss Ratio
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What does attained age refer to?
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The current age of a person at the time of their application.
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What does and actuary do? |
They are a mathematician employed by the insurer who develops the rates for the insurance company. |
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What does an underwriter do? |
An employee of the insurer who *gathers information *analyzes exposures to risk *selects what risks the insurance company will accept |
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Who is a producer? |
A person required to be licensed to solicit, negotiate, or sell insurance on behalf of the insurer. AKA field underwriter or agent underwriter. |
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What are the characteristics of a Stock Insurance Company? |
*It is owned by shareholders *shareholders are entitled to the profits earned *shareholders elect the board of directors who hire the management of the company *they issue "nonparticipating" insurance policies because the policy owners do not get a share of profits. |
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What are the characteristics of a Mutual Insurance Company? |
*its owned by its policy owners *policy owners are entitled to the profits of the insurance company *They issue "participating" policies because the policy owners get a share of the profits in dividends. |
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What are the Characteristics of a Fraternal insurance company? AKA Fraternal Benefit Society |
*Formed from a society, order or lodge without stock *Not for profit *operate for the sole benefit of their members and beneficiaries |
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What are the characteristics of a Service Organization insurance company? |
*provide prepaid dental and medical care benefits. *pay benefits directly to the provider of medical services |
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What kinds of insurance are offered by the federal government? |
*medicare, medicaid, social security, FDIC *Flood, Crop, and Crime |
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What is a Domestic Insurer? |
An insurance company formed within a state and has their home office there. |
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What is a Foreign Insurer? |
An insurance company formed in a different state, with its home office in a different state that sells its policies in this state. |
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What is an Alien Insurer? |
An insurance company formed in a different country with its home office in a different country that sells its policies in this state. |
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What must an insurance company do in order to sell insurance within the state? |
Become an Authorized Insurer (Admitted) by getting a Certificate of Authority from the state. |
