Term
| Which of the following situations would create insurable interest? |
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Definition
| *A lender in the life of a borrower *A individual in his or her own life A student on the life of the peson providing financial support for a college education. Love, blood or business relationships determine insurable interest. An employee can always get another job |
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Term
| An example of a moral (not Morale) hazard in relation to a life insurance application would be: |
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Definition
Misstating your health history to an insurance company
Most people think that lying is wrong. the insurance company must have correct information to assign the correct risk classification that will generate enought premium to cover the risk. |
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Term
| The process of an insurance policy by a consumer is the process of risk |
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Definition
transfer.
Getting someone else to handle the risk(an insurance company) because the risk is to large for the consumer to handle on their own. |
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Term
| Facing a personal risk of loss and having lawful and substantial economic interest I the safety or preservation of the subject of the insurance is the definition of: |
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Definition
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Term
| The concept of the “law of large numbers” is helpful to insurance companies and insured’s since it provides accuracy in predicting the losses of: |
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Definition
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Term
| An example of a morale hazard in relation to a life insurance application would be |
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Definition
| an individual has an indifferent attitude about participating in activities that may be damaging to his health. Morale is associated with an indifference to the outcome of an action. Ex: driving to fast |
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Term
T/F
The industry's application of the "law of large numbers" is beneficial to insureds because it enables the insurers to increase the accuracy of their predictions for the loss experience of an individual insured |
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Definition
| False, predictions are for large numbers only. Predictions can be made for a group of exposure units |
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Term
T/F
A possibility of loss must exist for a risk to be an "ideally insurable risk" |
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Definition
| true. the only losses that are insurable are ones where there is only a possibility of a loss and not the possibility of gain |
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Term
| The concept of "adhesion" refers to |
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Definition
a court making a decision in favor of an insured because there was unclear wording in the policy
Since the insurance company has lawyers that write life insurance contract language, the court will always side with the insured if the language is unclear. They willrequire the insurance company "stick to" or adhere to the contracts. |
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Term
| The company in which the policyholders receive dividends when there is a profit is a |
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Definition
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Term
| The purpose of an insurance company's underwriting department is to |
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Definition
| classify and select risks. This is the definition and purpose |
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Term
T/F
An agent legally represents the principal, can deliver payments to the principal and can be assumed to have the knowledge of the principal |
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Definition
| True. The word principal means "the company" Once appointed by a company, the agent does all of the things listed |
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Term
T/F
An agent has no duty to an insurer if the angent is part of the "field force" |
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Definition
| False, because a field force is defiend as agents for a company. Agents have a duty to the insurer to act as the eyes and ears of the insurer. |
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Term
T/F
Policy dividends will be larger for a participating policy as compared to a non-par policy and policy dividens are considered "return of excess premiums paid" |
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Definition
| True. These are characteristics of participating policies |
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Term
| The person whose life is covered by a life policy is the |
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Definition
| insured. The applicant and policy owner could be any number of people. The person who is covered is the insured. |
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Term
| The purpose of an insurance company's underwriting department is to |
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Definition
| select and classify risks. This describes the function |
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Term
| Define Direct Response Marketing System |
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Definition
| Purchasing travel accident insurance from a vending machine at an airport. The insured buys directly from the company without the services of an agent |
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Term
| The mass marketing system that uses the mail as a method to rech people and promote interest in insurance products is |
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Definition
| direct response. Mail used as a marketing system is always direct response |
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Term
| T/F Non-insurance sponsors do not sell insurance |
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Definition
| False. Credit card companies and banks solicit for insurance on a regular basis |
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Term
T/F
Master policies are issued to the insureds group insurance |
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Definition
| false. Master policies are issued to the employer |
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Term
| A contributory plan allows: |
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Definition
| a person a no insurability requirement, along with lower than individual rate premiums. Generally, group plans do not require anyone on the plan to prove insurability (employee of ramily members) and group rates are always lower than individual rates. |
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Term
| Who must be covered in a non-contributory health plan |
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Definition
| all entitled employees. Non-contributory plans require 100% participation. |
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Term
| T/F When referrig to group insurance participation, non-contributory requires 100% coverage and contributory requires 75% coverage |
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Definition
| True. This is the definition of non-contributory and contributory coverage |
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Term
| What is provided to the owner of a group life insurance policy |
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Definition
| master contract. The owner of the group policy always receives the master contract |
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Term
| a probationary period is best described as a |
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Definition
| form of waiting period to receive benefits. This is the definition of a probationary period |
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Term
| T/F By definition, the united states is not an insurer |
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Definition
| false. The US government is the largest insurer in the US |
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Term
| what is a false statementabout social security (OASDHI) |
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Definition
| The benefits received are closely related to the contributions made, actuarially speaking and there is no relationship between the amount of money one contributes and the benefits received |
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Term
| Lawrence is a "fully insured" worker. If he were to die leaving his 40 year old spouce and 12 year old son, would his surviving spouse be entitled to receive monthly benefits for the remainder of her life? |
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Definition
| No, that is the black out period. The spouse would only receive benefits for a limited period of time, not hte rest of her life. |
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Term
| There are four types of benefits given by the Social Security system. Three are disability, medicare and survivors. What is the fourth benefit |
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Definition
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Term
| Group health insurance can provide protectionno only to the insured, but also to dependents of the insured. Can parents be considered dependents |
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Definition
| Yes. Parents are one of the categories of dependents. |
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