Super Exam Prep Manual - Life Insurance

Front 1

Loss Reserve

Back 1

Created from part of the premiums to pay claims (losses).

*Insurance companies keep part of premium to pay claims

Front 2

Three Types of Losses

Back 2

1) Property loss

2) Liability loss

3) Human loss; death or disability

Front 3

Peril

Back 3

Cause of loss.

Front 4

Hazard

Back 4

Circumstances that increase the likelihood or severity of a loss.

*Moral hazard, dishonest

*Morale hazard, indifference or apathetic

Front 5

Risk

Back 5

Uncertainty of loss

1) Pure risk

2)Speculative risk

**S.T.A.R.R. - Know for Exam

Front 6

Transfer of Risk

Back 6

Principle of all insurance. Risk transfer will not eliminate the risk, but will relieve the insured from possible financial losses.

Front 7

Social Insurance

Back 7

Under jurisdiction of state or federal government. Minimum floor of income.

Front 8

Social Security Act

Back 8

1) Retirement benefits

2) Survivor benefits

3) Disability income benefits

4) Medicare

Front 9

Social Security system

Back 9

a compulsory unfunded program.

Fully Insured: 40 quarters (10 yrs)

Front 10

Insurance policies

Back 10

Two party contracts

Front 11

Insurable Interest

Back 11

Person applying for insurance must have "family blood" or financial (business) interest in the insured. In life insurance, insurable interest only has to exist at time of application, but not at time of death of the insured.

Front 12

Indemnity

Back 12

To restore in whole or in part.

Front 13

Unilateral Contracts

Back 13

Only one side has to fulfill contract.

Front 14

Conditional Contracts

Back 14

Both sides have duties & obligations

Front 15

Aleatoric Contracts

Back 15

Dollars values exchanged almost always are unequal.

Front 16

Contracts of Adhesion

Back 16

Stick to contract. Court will favor plaintiff, if there is any unclear wording in the contract.

Front 17

Group Insurance

Back 17

Usually no insurability required.

*Employer/sponsor

*Master policy

*Employee, certificate of insurance.

Front 18

True Group

Back 18

10 or more in a group for favorable premium rates.

Front 19

Probationary Period/Waiting Period

Back 19

Purpose - to avoid providing immediate coverage for people who join the group after the effective date of the policy. Unmarried children (19 or 24, if in school) now up to age 26. Child who is incapable of self support because of disability or physical or mental impairment must be covered indef. Newborns from the moment of birth.

Front 20

Non-Contributory

Back 20

100%

Front 21

Contributory

Back 21

75% (of all eligible employees)

Front 22

Types of Insurance

Back 22

1)Stock Ins. companies

2)Mutual Ins. companies (policy dividends)

"demutualization"

3)Fraternal Benefits Societies

Front 23

Distribution Systems

Back 23

1) Direct response; prospective clients call, e-mails, reply cards and gets agent help.

2)Non-insurance sponsors; banks, credit card companies.

Front 24

Structure of Insurance Companies

Back 24

1)Marketing and sales

2)Actuarial dept.

3)Underwriting dept.

4)Claims dept.

Front 25

The Client

Back 25

Insured, "covered" by the policy; Policyholder has "control" of the policy; Beneficiary "entitled" to receive death benefit.

Front 26

Underwriting

Back 26

Selecting and classifying risk.

Front 27

Law of Large Numbers

Back 27

The larger the group they study, the more predictable the outcome.

Front 28

What is a Third Party Contract?

Back 28

A donee beneficiary can sue the promisor directly to enforce the promise. ... A donee beneficiary is when a contract is made expressly for giving a gift to a third party, the third party is known as the donee beneficiary. The most common donee beneficiary contract is a life insurance policy.