Actuarial Science Vocabulary (correct answers)
Speculative risk correct answers A risk that involves three possible outcomes: loss,
gain, or no change. ( example: stocks)
pure risk correct answers A risk that involves no possibility of gain. There is either a loss
or no loss. (example: possibility you will become disabled. You can only insure pure
risk.
risk management correct answers The practice of identifying risk, assessing risk, and
dealing with risk. We can do four things: avoid risk, control risk, accept risk, and transfer
risk.
premium correct answers A specified amount of money that an insurer receives in
exchange for its promise to provide a policy benefit when a specific loss occurs.
personal risk correct answers The risk of economic loss associated with death, poor
health, and outliving one's savings.
contract of indemnity correct answers An insurance policy under which the amount of
the policy benefit payable for a covered loss is based on the actual amount of financial
loss that results from the loss, as determined at the time of loss.
claim correct answers a request for payment under the terms of an insurance policy
valued contract correct answers An insurance policy that specifies the amount of the
benefit that will be payable when a covered loss occurs, regardless of the actual amount
of the loss that was incurred
face amount correct answers The amount payable under a life insurance policy if the
insured person dies while the policy is in force.
loss rate correct answers The rate at which covered losses are expected to occur in a
specified group of insureds
probability correct answers The likelihood that a given event will occur in the future
law of large numbers correct answers states that, typically, the more times we observe
a particular event, the more likely it is that our observed results will approximate the
"true" probability that the event will occur
mortality tables correct answers Charts that display the incidence of death, by age,
among a given group of people
morbidity tables correct answers Charts that display the incidence of sickness and
accidents, by age, among a given group of people.
, reinsurance correct answers A type of insurance that one insurance company
purchases from another insurance company in order to transfer risks on insurance
policies that the ceding company issued
cede correct answers To obtain reinsurance on insurance policies by transferring all or
part of the risk to a reinsurer
retention limit correct answers The maximum amount of insurance that an insurer is
willing to carry at its own risk on any one life
retrocession correct answers A transaction in which a reinsurers cedes a portion of its
risks to another reinsurer.
self-insurance correct answers A risk management technique by which a person or
business accepts financial responsibility for losses associated with specific risks.
policy correct answers A written document that contains the terms of the agreement
between the insurance company and the owner of the policy.
policy benefit correct answers A specified amount of money that the insurance company
agrees to pay when a specific loss occurs. can also be called policy proceeds
applicant correct answers the person or business that applies for an insurance policy
policyowner correct answers the person or business that owns the insurance policy
insured correct answers the person whose life or health is insured under an insurance
policy
third-party policy correct answers An insurance policy that one person purchases
insurance on the life of another person
beneficiary correct answers the person or party the owner of the policy names to
receive the policy benefit if the event insured against occurs
insurable interest correct answers the policyowner likelihood that a policyowner or
beneficiary of an insurance policy will suffer a genuine loss or detriment should the
event insured against occur
antiselection correct answers The tendency of individuals who believe they have a
greater-than-average likelihood of loss tend to seek insurance protection to a greater
extent than do those who believe they have an average or a less-than-average
likelihood of loss. Primary reason that insurers need to carefully review each application
to assess properly the degree of risk the company will be assuming if it issues the
requested policy
Speculative risk correct answers A risk that involves three possible outcomes: loss,
gain, or no change. ( example: stocks)
pure risk correct answers A risk that involves no possibility of gain. There is either a loss
or no loss. (example: possibility you will become disabled. You can only insure pure
risk.
risk management correct answers The practice of identifying risk, assessing risk, and
dealing with risk. We can do four things: avoid risk, control risk, accept risk, and transfer
risk.
premium correct answers A specified amount of money that an insurer receives in
exchange for its promise to provide a policy benefit when a specific loss occurs.
personal risk correct answers The risk of economic loss associated with death, poor
health, and outliving one's savings.
contract of indemnity correct answers An insurance policy under which the amount of
the policy benefit payable for a covered loss is based on the actual amount of financial
loss that results from the loss, as determined at the time of loss.
claim correct answers a request for payment under the terms of an insurance policy
valued contract correct answers An insurance policy that specifies the amount of the
benefit that will be payable when a covered loss occurs, regardless of the actual amount
of the loss that was incurred
face amount correct answers The amount payable under a life insurance policy if the
insured person dies while the policy is in force.
loss rate correct answers The rate at which covered losses are expected to occur in a
specified group of insureds
probability correct answers The likelihood that a given event will occur in the future
law of large numbers correct answers states that, typically, the more times we observe
a particular event, the more likely it is that our observed results will approximate the
"true" probability that the event will occur
mortality tables correct answers Charts that display the incidence of death, by age,
among a given group of people
morbidity tables correct answers Charts that display the incidence of sickness and
accidents, by age, among a given group of people.
, reinsurance correct answers A type of insurance that one insurance company
purchases from another insurance company in order to transfer risks on insurance
policies that the ceding company issued
cede correct answers To obtain reinsurance on insurance policies by transferring all or
part of the risk to a reinsurer
retention limit correct answers The maximum amount of insurance that an insurer is
willing to carry at its own risk on any one life
retrocession correct answers A transaction in which a reinsurers cedes a portion of its
risks to another reinsurer.
self-insurance correct answers A risk management technique by which a person or
business accepts financial responsibility for losses associated with specific risks.
policy correct answers A written document that contains the terms of the agreement
between the insurance company and the owner of the policy.
policy benefit correct answers A specified amount of money that the insurance company
agrees to pay when a specific loss occurs. can also be called policy proceeds
applicant correct answers the person or business that applies for an insurance policy
policyowner correct answers the person or business that owns the insurance policy
insured correct answers the person whose life or health is insured under an insurance
policy
third-party policy correct answers An insurance policy that one person purchases
insurance on the life of another person
beneficiary correct answers the person or party the owner of the policy names to
receive the policy benefit if the event insured against occurs
insurable interest correct answers the policyowner likelihood that a policyowner or
beneficiary of an insurance policy will suffer a genuine loss or detriment should the
event insured against occur
antiselection correct answers The tendency of individuals who believe they have a
greater-than-average likelihood of loss tend to seek insurance protection to a greater
extent than do those who believe they have an average or a less-than-average
likelihood of loss. Primary reason that insurers need to carefully review each application
to assess properly the degree of risk the company will be assuming if it issues the
requested policy
