Maryland State Health and Life Insurance Exam
Insurance CORRECT ANSWERS The device for transferring the chance of financial
loss among a large number of people.
Risk CORRECT ANSWERS The possibility or chance/occurrence of loss that may
occur.
Speculative Risk CORRECT ANSWERS A risk for which it is uncertain as to whether
the final outcome is a gain or loss. This type is NOT insurable.
Pure Risk CORRECT ANSWERS The probability or possibility of a loss with no chance
of gain. This type IS insurable.
Loss CORRECT ANSWERS The unintentional reduction, decrease, or disappearance
of value of a person or property insured by a policy.
Exposure CORRECT ANSWERS A measure of vulnerability of a loss, and is usually
expressed in dollars or units that are used to determine rates charged for insurance.
Exposure Units CORRECT ANSWERS Used in determining rates. i.e; Medical history,
age, sex, and occupation of an insured.
Hazards CORRECT ANSWERS Circumstances or conditions that increase the
possibility that a loss will take place. i.e; storing explosives in a home’s basement.
Physical Hazard CORRECT ANSWERS A hazard that cause one’s body to become
physically stressed and increase the chance of loss. i.e; lifestyle, slippery floors,
skydiving.
Moral Hazard CORRECT ANSWERS Hazards that are a result of maximizing behavior.
i.e; when a person is dishonest, creates a loss, or lies on an application.
Morale Hazard CORRECT ANSWERS Arise from in insured’s indifferent attitude to loss.
It’s a hazard that refers to “One’s State of Mind”. i.e; doesn’t lock doors, repair leaks, or
wear a seat belt while driving.
Perils CORRECT ANSWERS The causes of loss in an insurance policy: premature
death, and loss of income caused by sickness or accident. i.e; tornadoes, floods,
hurricane.
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