Kentucky Life Exam and Health Insurance Test Exam 2024 Q&A Risk - CORRECT ANSWER -The uncertainty or chance of a loss occurring Pure Risk - CORRECT ANSWER -Refers to situations that can only result in a loss or no change. There is no opportunity for financial gain. It is the only type of risk that insurance companies are willing to accept. Speculative Risk - CORRECT ANSWER -Involves the opportunity for either loss or gain (Gambling). This type of risk is not insurable. Perils - CORRECT ANSWER -The causes of loss insured against in an insurance policy Life Insurance - CORRECT ANSWER -Insures against the financial loss cause by the premature death of the insured Health Insurance - CORRECT ANSWER -Insures against the medical expenses and/or loss of income caused by the insured's sickness or accidental injury Property Insurance - CORRECT ANSWER -Insures against the loss of physical property or the loss of its income -producing abilities Casualty Insurance - CORRECT ANSWER -Insures against the loss and/or damage of property resulting in liabilities Hazards - CORRECT ANSWER -Conditions or situations that increase the probability of an insured loss occurring. Physical Hazards - CORRECT ANSWER -Individual characteristics that increase the chances that cause of loss. Exist because of a physical condition, past medical history, or a condition at birth (blindness) Moral Hazards - CORRECT ANSWER -Tendencies towards increased risk. Involves evaluating the character and reputation of the proposed insured. Morale Hazards - CORRECT ANSWER -Similar to moral hazards, except that they arise from a state of mind that causes indifference to loss such as carelessness. Insurance - CORRECT ANSWER -Transfers the risk of loss from an individual or business entity to an insurance company, which in turn spreads the costs of unexpected losses to many individuals. Pure Risk Characteristics - CORRECT ANSWER -The loss must be due to chance (accidental) The loss must be definite and measurable The loss must be statistically predictable The loss cannot be catastrophic The loss exposure to be insured must involve large homogenous exposure units The insurance must not be mandatory Avoidance - CORRECT ANSWER -One method to deal with risk Eliminating exposure to a loss Retention - CORRECT ANSWER -One method to deal with risk The planned assumption of risk by an insured through the use of deductibles, co -
payments, or self insurance Sharing - CORRECT ANSWER -One method to deal with risk For a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within that group Reduction - CORRECT ANSWER -One method to deal with risk Attempting to lessen the possibility or severity of a loss Transfer - CORRECT ANSWER -One method to deal with risk (most effective) The loss is borne by another party (through insurance) Principle of Life Insurance - CORRECT ANSWER -Spread the risk Insurable Interest - CORRECT ANSWER -The possibility of the policy owner losing money or something in value in the event of loss Policyowner's life Life of a family member Life of a business partner
payments, or self insurance Sharing - CORRECT ANSWER -One method to deal with risk For a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within that group Reduction - CORRECT ANSWER -One method to deal with risk Attempting to lessen the possibility or severity of a loss Transfer - CORRECT ANSWER -One method to deal with risk (most effective) The loss is borne by another party (through insurance) Principle of Life Insurance - CORRECT ANSWER -Spread the risk Insurable Interest - CORRECT ANSWER -The possibility of the policy owner losing money or something in value in the event of loss Policyowner's life Life of a family member Life of a business partner
