Chapter 12

Front 1

Disability income insurance

Back 1

-replaces lost income.

-payment of periodic income benefits if unable to work bc of accident or illness

Front 2

Medical expense insurance

Back 2

-Covers the cost of medical care due to accident or illness

-pays or reimburses medical bills incurred

Front 3

Covered peril

Back 3

Accidents or injuries that are covered by health insurance.

Front 4

License requirements

Back 4

-know health benefits of SS and Medicare

-know various mandatory and optional provisions in health insurance contracts

-have sound understanding of underwriting principles

Front 5

Insurance

Back 5

The transfer of risk from one party (applicant) to another (insurer) through the pooling of funds. Reduces uncertainty in regards to financial loss.

Front 6

Risk

Back 6

Uncertainty with regard to financial loss

Front 7

Speculative risk

Back 7

Not a risk that can be insured. Opportunity for financial loss or gain (ie sports betting).

Front 8

Risk managemrnt

Back 8

A process of treating/managing exposure to loss. Risk can be reduced or managed by buying an insurance contract

Front 9

Steps to risk management

Back 9

1. Detect potential loss

2. Select a method or tool to reduce risk

3. Execute a course of action

4. Periodically review measures taken.

Front 10

Exposure

Back 10

A hazardous condition brought about by the nature of the activities of an insured

Front 11

Peril

Back 11

The cause of a loss

Front 12

Hazard

Back 12

A condition present that increases the chance of a loss. Ex. Reckless driving, icy stairs

Front 13

Elements of insurable risk

Back 13

1. Accidental

2. Measurable

3. Definable

Front 14

Law of large numbers

Back 14

A mathematical law of probability stating that the larger number of occurrences (ex. Number of Lives covered), the more predictable losses will be.

Front 15

Homogenous units

Back 15

Similar risks. The larger the number, the more predictability.

Front 16

Insurable risk (requirements)

Back 16

1. Must be big enough to cause financial hardship (ex death)

2. Not be catastrophic

3. Cost of coverage (premium) must not be unreasonable

4. Loss must be accidental

Front 17

Premium

Back 17

The cost of coverage

Front 18

Methods of managing risk

Back 18

1. Avoidance of risk

2. Retention (ie a deductible)

3. Reduction

4. Sharing

5. Transfer

Front 19

Transfer of risk

Back 19

Most popular method of risk management. Transferring risk to insurer by purchasing an insurance policy.

Front 20

Insurance

Back 20

Thr transfer of risk from one party to another by accumulating (pooling) funds (ie premiums)

Reduces risk with regard to financial loss.

Front 21

Speculative risk

Back 21

Not a risk that can be insured bc there is a chance for financial loss or gain. Ex. Sports betting.