Primerica Focused exam (basic principals)
insurance is the transfer of
Risk Insurance is the transfer of financial responsibility associated with a potential of a loss (risk) to an insurance company.
a peril is most easily defined as
The cause of loss insured against
The protection of an insurer from adverse selection is provided in part by?
a profitable distribution from of exposures. The profitable distribution of exposures, which balances poor risks and preferred risks with standard risks in the middle, protects insurers from adverse selection.
Units with the same or similar exposure to loss are referred to as
homogeneous
What do individuals use to transfer their risk of loss to a larger group?
insurance Insurance is the mechanism whereby an insured is protected against loss by a specified future contingency or peril in return for the present payment of premium. Because many other individuals with the same or similar risk of loss are paying premiums, funds are available to indemnify those who actually suffer that loss.
Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
law of large numbers.
The growing tendency of individuals to file lawsuit and to claim tremendous amounts for alleged damages is known as
legal hazard
a set of legal or regulatory conditions that affect an insurers ability to collect premiums commensurate with the level of risks incurred would be considered a/an
legal hazard
a person who does not lock the door or does not repair leaks shows an indifferent attitude. This person presents what type of hazard?
morale. A morale hazard is someone who has an indifferent attitude towards an insurance company. He is careless or irresponsible because he knows his loss will be covered by insurance.
the risk of loss may be classified as
pure risk and speculative risk. Pure risks involve the probability or possibility of loss with no chance for gain. Pure risks are generally insurable. Speculative risks involve uncertainty as to whether the final outcome will be gain or loss. Speculative risks are generally uninsurable.
which of the following insurance would be considered risk-sharing a arrangement?
reciprocal.
which of the following is not a goal of risk retention?
to minimize the insured's level of liability in the event of loss