WEBCE Prep Exam Life Insurance|Latest Update
Graded A+
Risk Management
using strategies to reduce the amount of risk
Risk
The chance of loss from an event that cannot be entirely controlled
Pure risk
The possibility of loss with no chance of gain. That which can result only in a loss to the person at risk.
Speculative risk
Chance of loss or gain
loss
unplanned reduction in economic value. can be either direct or indirect.
Underwriting
The process that determines if the risk proposed for insurance should be accepted or rejected.
peril
A condition that involves either danger or risk and is the cause of a loss.
hazard
a condition that increases the number of or severity of loss
Risk Avoidance
avoiding an act that would create a risk
Risk Retention
Choosing to use assets to pay for any losses if the risk becomes a reality
risk sharing
One of the oldest ways to manage risks; similar to buying insurance in that a part of the risk is
transferred to others
Risk transfer
An individual or business transfers the risk of loss to an insurance company in return for a premium
insurable risk
An applicant is an insurable risk to the insurer if he or she meets certain criteria for insurability; if
these criteria are met, then the applicant is insurable.
,Law of Large Numbers
A method of predicting future losses with great accuracy.
mortality
Is the rate of death in the target population; it is a significant factor in calculating life insurance
premiums
morbidity
Used by insurers in pricing health insurance policies. Indicates the average number of persons at
various ages who can be expected to become disabled because of illness or accident.
adverse selection
The tendency of those who most need insurance to buy insurance. Those who don't have as much of
a need for a particular type of insurance are less likely to buy it
Stock insurance companies
Owned by stockholders these companies pay dividends, when declared, to their stockholders
Mutual insurance companies
Owned by policyowners; mutual companies have no stockholders
policy dividend
An amount returned to the owner of a participating insurance policy out of an insurance company's
surplus funds.
self-insurers
Refers to a large company that is willing and financially able to retain certain risks and to self-fund for
that purpose.
Fraternal Benefit Society
An organization composed of individuals who typically share a common ethnic or religious affiliation.
Fraternal insurance companies
nonprofit organizations that are affiliated with a fraternal society and operate under a special section
of the insurance laws of the state in which they are domiciled.
Surplus Lines Insurance
not a type of insurance company or product, but a market for insurance that is not available through
any admitted companies in a state.
Reinsurance
An insurer that sells insurance to the public enters into agreement with another insurance company
to accept some of its risks
, admitted insurer
A company that has received a certificate of authority from the state. This certificate permits the
company to transact insurance within the state. It certifies that the company has met the state's
requirements for conducting the business of insurance.
Domestic Insurance Company
The insurance company's domicile (home office) is its state of incorporation. Insurers doing business
in the state in which they are domiciled.
Foreign Insurance Company
Any company that does business in a state other than the one in which it is domiciled.
Alien Insurance Company
A company that is incorporated in a country outside the United States and is doing business in the
United States
Fiduciary
A person holding funds or valuable property for the benefit of another person. Generally held to a
higher standard of care with respect to the held property
Express Authority
The authority given to an agent by the contract between the agent and the insurer
implied authority
insurers allow their producers to engage in many sales-related activities not expressly listed in any
agreement but that are recognized as essential to the job.
Apparent Authority
The appearance or the assumption of authority based on the actions, words, or deeds of the principal
or because of circumstances the principal created.
rebate
The giving of anything of significant value to induce someone to buy insurance
Buyer's Guide
A type of disclosure to an insurance applicant that explains the applicant's rights and responsibilities
with regard to the insurance coverage.
offer
acceptance
consideration
competent parties
legal purpose
Bonus: what are five elements to a legal contract?
contract of adhesion
Graded A+
Risk Management
using strategies to reduce the amount of risk
Risk
The chance of loss from an event that cannot be entirely controlled
Pure risk
The possibility of loss with no chance of gain. That which can result only in a loss to the person at risk.
Speculative risk
Chance of loss or gain
loss
unplanned reduction in economic value. can be either direct or indirect.
Underwriting
The process that determines if the risk proposed for insurance should be accepted or rejected.
peril
A condition that involves either danger or risk and is the cause of a loss.
hazard
a condition that increases the number of or severity of loss
Risk Avoidance
avoiding an act that would create a risk
Risk Retention
Choosing to use assets to pay for any losses if the risk becomes a reality
risk sharing
One of the oldest ways to manage risks; similar to buying insurance in that a part of the risk is
transferred to others
Risk transfer
An individual or business transfers the risk of loss to an insurance company in return for a premium
insurable risk
An applicant is an insurable risk to the insurer if he or she meets certain criteria for insurability; if
these criteria are met, then the applicant is insurable.
,Law of Large Numbers
A method of predicting future losses with great accuracy.
mortality
Is the rate of death in the target population; it is a significant factor in calculating life insurance
premiums
morbidity
Used by insurers in pricing health insurance policies. Indicates the average number of persons at
various ages who can be expected to become disabled because of illness or accident.
adverse selection
The tendency of those who most need insurance to buy insurance. Those who don't have as much of
a need for a particular type of insurance are less likely to buy it
Stock insurance companies
Owned by stockholders these companies pay dividends, when declared, to their stockholders
Mutual insurance companies
Owned by policyowners; mutual companies have no stockholders
policy dividend
An amount returned to the owner of a participating insurance policy out of an insurance company's
surplus funds.
self-insurers
Refers to a large company that is willing and financially able to retain certain risks and to self-fund for
that purpose.
Fraternal Benefit Society
An organization composed of individuals who typically share a common ethnic or religious affiliation.
Fraternal insurance companies
nonprofit organizations that are affiliated with a fraternal society and operate under a special section
of the insurance laws of the state in which they are domiciled.
Surplus Lines Insurance
not a type of insurance company or product, but a market for insurance that is not available through
any admitted companies in a state.
Reinsurance
An insurer that sells insurance to the public enters into agreement with another insurance company
to accept some of its risks
, admitted insurer
A company that has received a certificate of authority from the state. This certificate permits the
company to transact insurance within the state. It certifies that the company has met the state's
requirements for conducting the business of insurance.
Domestic Insurance Company
The insurance company's domicile (home office) is its state of incorporation. Insurers doing business
in the state in which they are domiciled.
Foreign Insurance Company
Any company that does business in a state other than the one in which it is domiciled.
Alien Insurance Company
A company that is incorporated in a country outside the United States and is doing business in the
United States
Fiduciary
A person holding funds or valuable property for the benefit of another person. Generally held to a
higher standard of care with respect to the held property
Express Authority
The authority given to an agent by the contract between the agent and the insurer
implied authority
insurers allow their producers to engage in many sales-related activities not expressly listed in any
agreement but that are recognized as essential to the job.
Apparent Authority
The appearance or the assumption of authority based on the actions, words, or deeds of the principal
or because of circumstances the principal created.
rebate
The giving of anything of significant value to induce someone to buy insurance
Buyer's Guide
A type of disclosure to an insurance applicant that explains the applicant's rights and responsibilities
with regard to the insurance coverage.
offer
acceptance
consideration
competent parties
legal purpose
Bonus: what are five elements to a legal contract?
contract of adhesion
