Purpose of Life and Health Insurance

When an insurer has a large amount of risks that are less favorable, this is know as: A. Adverse selection B. Above average risk C. Bigger risk exposure D. Standard risk insurers are accustom to

A. Adverse selection

Most new life insurance is purchased by individuals through... A. Insurance Agents B. Group Policies C. Insurance regulatory office D. Department of Financial Services

A. Insurance Agents

When would a participating life insurance policy be higher than a nonparticipating policy? A. Premium B. Interest rate C. Lump sum settlement D. Surrender value

A. Premium

The risk of loss maybe classified as? A. Pure risk and speculative risk B. Certain risk and uncertain risk C. Named risk and Unnamed Risk D. High risk and low risk

A. Pure risk and speculative risk

When all members of a group are sharing the death benefit of another member of the group, this is referred to as: A. Risk Pooling B. Insurance C. Law of Large Numbers D. Treatment of a Risk

A. Risk Pooling

What type of risk is best described by: "Chance of a loss and a gain? A. Speculative Risk B. Pure Risk C. Uncertainty of risk D. Property risk

A. Speculative Risk

Moral hazards are: A. Tendencies that people may have that increase risk and the chance of loss. B. They arise from an attitude or state of mind causing indifference to loss C. Individual characteristics that increase the change of peril D. Degree of potential loss

A. Tendencies that people may have that increase risk and the chance of loss.

What risk technique is used when buying insurance? A. Transfer B. Avoidance C. Reduction D. Retention

A. Transfer

The ________ an insured group becomes, the more likely the reported losses will equal the statistical probability of loss for that particular class. A. More active B. Larger C. Smaller D. Older

B. Larger

The risk management technique used to prevent a specific loss by not exposing yourself to that activity is called? A. Sharing B. Avoidance C. Transfer D. Reduction

B. Avoidance

The following are examples of "Treatment of Risk EXCEPT: A. Purchasing Insurance B. Fire in a building C. Installing a smoke alarm D. Choosing not to drive

B. Fire in a building

Transferring risk of loss to a larger group of individuals that has similar exposures is called? A. Risk Taking B. Insurance C. Diversification D. Hedging

B. Insurance

A study predicting how many people will die within a certain age group - within a period of time is known as... A. Death analysis B. Law of large numbers C. Risk pooling D Spreading the risk

B. Law of large numbers

Not locking the doors or not repairing leaks shows an indifferent attitude. This represents what type of hazard? A. Moral B. Morale C. Physical D. Legal

B. Morale

Which of the following types of risk is insurable? A. Speculative B. Pure C. Good D. Moral

B. Pure

Minimizing a known risk by changing your lifestyle can be an example of? A. Risk retention B. Risk reduction C. Risk transference D. Rick avoidance

B. Risk reduction

Risk defined in insurance is best described as: A. Uncertainty of a loss B. Uncertainty regarding a financial loss is.... C. Predictable loss D. Cause of a loss

B. Uncertainty regarding a financial loss is....

A legally binding contract that sets for the the company's promise and obligations is.... A. Binder B Insurance Certificate C. Insurance Policy D. Proof Certificate

C. Insurance Policy

Elements of Insurable risk includes all of the following except: A. Loss must be definite and measurable B. Loss cannot be catastrophic C. Loss cannot be due to a change D. Loss must be large

C. Loss cannot be due to a chance

All of the following actions could be described as risk avoidance EXCEPT? A. Refusing to scuba dive B. Taking a flu shot each year C. Paying insurance premiums when due D. Refusing to invest in the stock market

C. Paying insurance premiums when due

What is the label given to causes of loss that are insured in both life and health insurance policies? A. Hazards B. Risks C. Perils D. Losses

C. Perils

Treatment of a risk includes all of the following EXCEPT: A. Risk Avoidance B. Risk Reduction C. Risk Allowance D. Risk Retention

C. Risk Allowance

All of the following are "Hazards" EXCEPT: A. Physical conditions such as blindness or deafness (Physical Hazard) B. Tendencies that people have that increase risk and the chance of loss such as Alcoholism and drug addiction (Moral Hazard) C. Individua tendencies giving rise from an attitude or state of mind (Morale Hazard) D. A study of a large group of people over a large period of time (Law of Large Numbers)

D. A study of a large group of people over a large period of time

All of the following could be a definition or example of a "Peril" EXCEPT: A. Fire loss B. Cause of a loss C. A specific event causing loss and giving risk to risk D. Moral Hazard

D. Moral Hazard

Being self-insured is an example of risk: A. Transference B. Avoidance C. Reduction D. Retention

D. Retention

Hazard includes all of the following EXCEPT: A. Physical Hazard B. Moral Hazard C. Morale Hazard D. Risk Hazard

D. Risk Hazard

Sharing the possibility of a loss by "prefunding" with a large group of people is.... A. Law of large numbers study B. Independent funding C. Pre-funded account D. Risk pooling

D. Risk pooling

Insured started a program where he walks, and jogs each morning, eating healthy. What "Treatment of the Risk" would this be considered? A. Risk transfer B. Risk avoidance C. Risk retention D. Risk reduction

D. Risk reduction

When not wearing a Rolex watch, it is kept in a safety deposit box at the bank. This would be an example of? A. Risk retention B. Risk avoidance C. Risk transfer D. Risk reduction

D. Risk reduction

For the purpose of insurance, risk is defined as? A. The certainty of loss B. The cause of loss C. An event that increases the amount of loss D. The uncertainty or chance of loss

D. The uncertainty or chance of loss

Drug addiction is an example of? A. Morale hazard B. Moral hazard C. Physical hazard D. risk avoidance

Moral hazard