Insurance Exam Key Concepts UPDATED ACTUAL
Questions and CORRECT Answers
Adverse selection Insuring of risks that are more prone to losses than
the average risk.
Agent/Producer A legal representative of an insurance company;
the classification of producer usually includes
agents and brokers; agents are the agents of the
insurer.
Applicant or proposed insured A person applying for insurance.
Beneficiary A person who receives the benefits of an insurance
policy.
Broker An insurance producer not appointed by an insurer
and is deemed to represent the client.
Indemnity Main principle of insurance, meaning that the
insured cannot recover more than their loss; the
purpose of insurance is to restore the insured to
the same position as before the loss.
, Insurance policy A contract between a policyowner (and/or insured)
and an insurance company which agrees to pay the
insured or the beneficiary for loss caused by
specific events.
Insured The person covered by the insurance policy. This
person may or may not be the policyowner.
Insurer (principal) The company who issues an insurance policy.
Law of large numbers The larger the number of people with a similar
exposure to loss, the more predictable actual
losses will be.
Policyowner The person entitled to exercise the rights and
privileges in the policy.
Premium The money paid to the insurance company for the
insurance policy.
Reciprocity/Reciprocal A mutual interchange of rights and privileges.
Risk The uncertainty or chance of a loss occurring.
Pure risk Situations that can only result in a loss or no
change; there is no opportunity for financial gain.
Speculative risk Involves the opportunity for either loss or gain; an
example is gambling.
Questions and CORRECT Answers
Adverse selection Insuring of risks that are more prone to losses than
the average risk.
Agent/Producer A legal representative of an insurance company;
the classification of producer usually includes
agents and brokers; agents are the agents of the
insurer.
Applicant or proposed insured A person applying for insurance.
Beneficiary A person who receives the benefits of an insurance
policy.
Broker An insurance producer not appointed by an insurer
and is deemed to represent the client.
Indemnity Main principle of insurance, meaning that the
insured cannot recover more than their loss; the
purpose of insurance is to restore the insured to
the same position as before the loss.
, Insurance policy A contract between a policyowner (and/or insured)
and an insurance company which agrees to pay the
insured or the beneficiary for loss caused by
specific events.
Insured The person covered by the insurance policy. This
person may or may not be the policyowner.
Insurer (principal) The company who issues an insurance policy.
Law of large numbers The larger the number of people with a similar
exposure to loss, the more predictable actual
losses will be.
Policyowner The person entitled to exercise the rights and
privileges in the policy.
Premium The money paid to the insurance company for the
insurance policy.
Reciprocity/Reciprocal A mutual interchange of rights and privileges.
Risk The uncertainty or chance of a loss occurring.
Pure risk Situations that can only result in a loss or no
change; there is no opportunity for financial gain.
Speculative risk Involves the opportunity for either loss or gain; an
example is gambling.
