PROMETRIC ARIZONA LICENSE EXAM - TERMS

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PROMETRIC ARIZONA LICENSE EXAM - TERMS

Actual Qs and Ans - Expert-Verified Explanation -Guaranteed passing score -31 Questions and Answers

-Format: Multiple-choice / Flashcard

Question 1: Person

Answer:

term meaning the individual or an insurer, association, organization society, partnership, business trust, corporation and entity, etc.

Question 2: Avoidance

Answer:

eliminating exposure to a loss

Question 3: Peril

Answer:

cause of loss insured against in an insurance policy. e.g life - insures against death. health - insures against medical expenses. property- insures against loss of property etc.

Question 4: Morale Hazards

Answer:

Arise from a state of mind that causes indifference to loss, such as carelessness

Question 5: Adverse Selection

Answer:

insuring of risks more prone to losses than the average risk.

Question 6: Agent/ Producer

Answer:

a legal representative of an insurance company; the classification of PRODUCER usually includes agents & brokers; AGENTS are the agents of the insurer.

Question 7: Not catastrophic

Answer:

Insurers need to be reasonably certain their losses will not exceed specific limits.

Question 8: Insurance Policy

Answer:

a contract between a policyowner (&/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events.

Question 9: Insurer (principal)

Answer:

the company who issues an insurance policy

Question 10: Premium

Answer:

the money paid to the insurance company for the insurance policy

Question 11: Randomly selected and large loss exposure

Answer:

There must be a sufficiently large pool of the insured that represents a random selection of risks in terms of age, gender, occupation, health and economic status, and geographic location.

Question 12: Reciprocity/ reciprocal

Answer:

a mutual interchange of rights and privileges.

Question 13: Retention

Answer:

Planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance.

The purpose of retention is :

1) to reduce expenses and improve cash flow.2)to increase control of claim reserving and claim settlements &

3) to fund for losses that cannot be insured.

Question 14: Policyowner

Answer:

the person entitled to exercise the rights and privileges in the policy.

Question 15: Due to chance

Answer:

a loss that is outside the insured's control

Question 16: Risk ( Speculative)

Answer:

involves the opportunity for either loss or gain. AN example of speculative risk is gambling. These types of risks are not insurable.

Question 17: Property Insurance

Answer:

insures against the loss of physical property or the loss of its income-producing abilities

Question 18: Sharing

Answer:

A method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss who share the losses that occur within that group.

Question 19: Definite and measurable

Answer:

A loss that is specific as to the cause, time, place and amount. An insurer must be able to determine how much the benefit will be and when it becomes payable.

Question 20: Reduction

Answer:

an attempt to lessen the possibility or severity of a loss. Like getting a physical to detect health problems early on, installing smoke detectors, etc.

Question 21: Casualty Insurance

Answer:

insures against the loss and/or damage of property and resulting liabilities

Question 22: Exposure

Answer:

A unit of measurement used to determine rates charged for insurance coverage. a large # of units having the same or similar exposure to loss are referred to as HOMOGENOUS. The basis of insurance is sharing risk between a large homogenous group with similar exposure to loss.

Question 23: Statistically predictable

Answer:

Insurers must be able to estimate the average frequency and severity of future losses and set appropriate premium rates.

Question 24: Transfer

Answer:

risk can be handled by transferring it so that the loss is borne by another party. Insurance is the most common method of transferring risk from an individual or group to an insurance company.

Question 25: Risk (Pure)

Answer:

Pure Risk : refers to situations that can only result in a loss or no change. There is no opportunity for financial gain. Pure risk is the only type of risk that insurance companies are willing to accept.

Question 26: Broker

Answer:

an insurer producer not appointed by an insurer and is deemed to represent the client.

Question 27: Insurance

Answer:

Transfers the risk of loss from an individual or business entity to an insurance company, which in turns spreads the costs of unexpected losses to many individuals.