Nebraska Life and Health Insurance Exam Questions and Answers 100% Pass

Nebraska Life and Health Insurance Exam Questions and Answers 100% Pass What is Insurance? - Answer- a contract in which 1 party (insurance company) agrees to indemnify (make whole) the insured party against loss, damage, or a liability arising from an unknown event. What is life insurance? - Answer- a policy that protects survivors from losses suffered after an insured's death What does insurance do? - Answer- transfers the risk of loss from an individual or business entity to an insurance company which spreads out costs of unexpected losses to many individuals What is risk? - Answer- uncertainty or chance of a loss occurring Pure risk - Answer- refers to sutuations that can only result in a loss or no change, no opportunity for financial gain What type of risk do insurance companies accept? - Answer- pure risk Speculative risk - Answer- involves opportunity for loss or gain Hazard - Answer- conditions or situation that increase probability of an insured loss occurring Physical hazard - Answer- individual characteristics that increase the chances of the cause of loss Example of a physical hazard - Answer- past medical history, existing conditions, (blindness) Moral hazard - Answer- tendencise towards increased risk. moral hazards inclove evaluating character of insured example of moral hazard - Answer- applicants who may lie on an application for insurance or in the past have submitted fraudulent claims against an insurer Morale hazard - Answer- similar to moral hazards, except that they arise from a state of mind that causes indifference to loss, such as carelessness example of morale hazard - Answer- actions taken without forethought may cause physical injuries Peril - Answer- perils are causes of loss insured against in an insurance policy Life Insurance - Answer- insures against the financial loss caused by the premature death of the insured Health Insurance - Answer- insures against mediacal expenses and/or loss of income caused by the insured's sickness or accidental injury Property Insurance - Answer- insures against the loss and/or damage of property and resulting in liabilities Loss - Answer- reduction, decrease or dissappearance of value of the person or property insured in a policy, caused by a named peril. Insurance provides means to transfer loss Exposure - Answer- is a unity of measure used to determine rates charged for insurance companies What are factors considered in determining rates for life insurance? - Answer- age of insured, medical history, occupation, sex Homogeneous - Answer- large # of units having the same or similar exposure to loss Avoidance (method of handling risk) - Answer- eliminating exposure to a loss Example of avoidance - Answer- avoid being killed in an airplane crash by not riding on airplanes (not practical) Retention (method of handling risk) - Answer- is planned assumption of risk by insured through use of deductibles, co-payments, or self-insurance What is the purpose of retention? - Answer- 1. to reduce expenses, increase cash flow 2. to increase control of claim reserving and claims settlements 3. to fund losses that cannon be insured Sharing (method of handling risk) - Answer- method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss to share the loss that occurs within that group What is a formal risk sharing agreement? - Answer- A reciprocal insurance exchange Reciprocal - Answer- insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers Risk Retention Group (RRG) - Answer- is a liability insurance company owned by its members. What is the purpose of a risk retention group? - Answer- assume and spread all or part of the liability to a group of members. What can an RRG do? - Answer- may re-insure another RRG's liability as long as the members of the 2nd group are engaged in the same or similar business or industry Risk Purchasing Group - Answer- an entity which offers insurance to g