4/11/25, 9:23 WEBCE Prep Exam Life Insurance Flashcards |
PM
WEBCE PREP EXAM LIFE INSURANCE EXAM
QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS
4.0 (1 review)
Save
Terms in this set (199)
Risk Management using strategies to reduce the amount of risk
Risk The chance of loss from an event that cannot be entirely controlled
The possibility of loss with no chance of gain. That which can result only in a
Pure risk
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.
The process that determines if the risk proposed for insurance should be
Underwriting
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
One of the oldest ways to manage risks; similar to buying insurance in that a
risk sharing
part of the risk is transferred to others
An individual or business transfers the risk of loss to an insurance company in
Risk transfer
return for a premium
An applicant is an insurable risk to the insurer if he or she meets certain criteria
insurable risk
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.
Is the rate of death in the target population; it is a significant factor in
mortality
calculating life insurance premiums
Used by insurers in pricing health insurance policies. Indicates the average
morbidity number of persons at various ages who can be expected to become disabled
because of illness or accident.
The tendency of those who most need insurance to buy insurance. Those who
adverse selection don't have as much of a need for a particular type of insurance are less likely to
buy it
Owned by stockholders these companies pay dividends, when declared, to their
Stock insurance companies
stockholders
Mutual insurance companies Owned by policyowners; mutual companies have no stockholders
An amount returned to the owner of a participating insurance policy out of an
policy dividend
insurance company's surplus funds.
Refers to a large company that is willing and financially able to retain certain
self-insurers
risks and to self-fund for that purpose.
1/
5
, 4/11/25, 9:23 WEBCE Prep Exam Life Insurance Flashcards |
PM
An organization composed of individuals who typically share a common ethnic or
Fraternal Benefit Society
religious affiliation.
nonprofit organizations that are affiliated with a fraternal society and operate
Fraternal insurance companies under a special section of the insurance laws of the state in which they are
domiciled.
not a type of insurance company or product, but a market for insurance that is
Surplus Lines Insurance
not available through any admitted companies in a state.
An insurer that sells insurance to the public enters into agreement with another
Reinsurance
insurance company to accept some of its risks
A company that has received a certificate of authority from the state. This
certificate permits the company to transact insurance within the state. It
admitted insurer
certifies that the company has met the state's requirements for conducting the
business of insurance.
The insurance company's domicile (home office) is its state of incorporation.
Domestic Insurance Company
Insurers doing business in the state in which they are domiciled.
Any company that does business in a state other than the one in which it is
Foreign Insurance Company
domiciled.
A company that is incorporated in a country outside the United States and is
Alien Insurance Company
doing business in the United States
A person holding funds or valuable property for the benefit of another person.
Fiduciary
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
insurers allow their producers to engage in many sales-related activities not
implied authority
expressly listed in any agreement but that are recognized as essential to the job.
The appearance or the assumption of authority based on the actions, words, or
Apparent Authority
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
A type of disclosure to an insurance applicant that explains the applicant's
Buyer's Guide
rights and responsibilities with regard to the insurance coverage.
offer Bonus: what are five elements to a legal contract?
acceptance
consideration
competent parties
legal purpose
A contract that is drafted by one party and is offered on a take-it-or-leave-it basis.
contract of adhesion The other party has little chance to bargain terms, price or other elements; he or
she must "adhere" to its provisions.
One party may receive a benefit that is out of proportion to the consideration he
Aleatory Contract
or she is giving.
Unilateral Contract A contract in which only the insurer makes a promise that can be enforced
An insurance contract in which the payment of a loss is limited to the insured's
indemnity contract
actual loss.
A life or health insurance policy that pays a stipulated sum as set in the contract.
valued contract All life insurance policies are valued contracts, as are accidental death &
dismemberment health policies. is the opposite of a reimbursement contact.
Accidental death and dismemberment insurance. These policies provide financial
AD&D policy support if the insured dies or is dismembered from an accident. AD&D policies
are a form of limited risk policy.
warranty Statement guaranteed to be true
2/
5
PM
WEBCE PREP EXAM LIFE INSURANCE EXAM
QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS
4.0 (1 review)
Save
Terms in this set (199)
Risk Management using strategies to reduce the amount of risk
Risk The chance of loss from an event that cannot be entirely controlled
The possibility of loss with no chance of gain. That which can result only in a
Pure risk
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.
The process that determines if the risk proposed for insurance should be
Underwriting
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
One of the oldest ways to manage risks; similar to buying insurance in that a
risk sharing
part of the risk is transferred to others
An individual or business transfers the risk of loss to an insurance company in
Risk transfer
return for a premium
An applicant is an insurable risk to the insurer if he or she meets certain criteria
insurable risk
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.
Is the rate of death in the target population; it is a significant factor in
mortality
calculating life insurance premiums
Used by insurers in pricing health insurance policies. Indicates the average
morbidity number of persons at various ages who can be expected to become disabled
because of illness or accident.
The tendency of those who most need insurance to buy insurance. Those who
adverse selection don't have as much of a need for a particular type of insurance are less likely to
buy it
Owned by stockholders these companies pay dividends, when declared, to their
Stock insurance companies
stockholders
Mutual insurance companies Owned by policyowners; mutual companies have no stockholders
An amount returned to the owner of a participating insurance policy out of an
policy dividend
insurance company's surplus funds.
Refers to a large company that is willing and financially able to retain certain
self-insurers
risks and to self-fund for that purpose.
1/
5
, 4/11/25, 9:23 WEBCE Prep Exam Life Insurance Flashcards |
PM
An organization composed of individuals who typically share a common ethnic or
Fraternal Benefit Society
religious affiliation.
nonprofit organizations that are affiliated with a fraternal society and operate
Fraternal insurance companies under a special section of the insurance laws of the state in which they are
domiciled.
not a type of insurance company or product, but a market for insurance that is
Surplus Lines Insurance
not available through any admitted companies in a state.
An insurer that sells insurance to the public enters into agreement with another
Reinsurance
insurance company to accept some of its risks
A company that has received a certificate of authority from the state. This
certificate permits the company to transact insurance within the state. It
admitted insurer
certifies that the company has met the state's requirements for conducting the
business of insurance.
The insurance company's domicile (home office) is its state of incorporation.
Domestic Insurance Company
Insurers doing business in the state in which they are domiciled.
Any company that does business in a state other than the one in which it is
Foreign Insurance Company
domiciled.
A company that is incorporated in a country outside the United States and is
Alien Insurance Company
doing business in the United States
A person holding funds or valuable property for the benefit of another person.
Fiduciary
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
insurers allow their producers to engage in many sales-related activities not
implied authority
expressly listed in any agreement but that are recognized as essential to the job.
The appearance or the assumption of authority based on the actions, words, or
Apparent Authority
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
A type of disclosure to an insurance applicant that explains the applicant's
Buyer's Guide
rights and responsibilities with regard to the insurance coverage.
offer Bonus: what are five elements to a legal contract?
acceptance
consideration
competent parties
legal purpose
A contract that is drafted by one party and is offered on a take-it-or-leave-it basis.
contract of adhesion The other party has little chance to bargain terms, price or other elements; he or
she must "adhere" to its provisions.
One party may receive a benefit that is out of proportion to the consideration he
Aleatory Contract
or she is giving.
Unilateral Contract A contract in which only the insurer makes a promise that can be enforced
An insurance contract in which the payment of a loss is limited to the insured's
indemnity contract
actual loss.
A life or health insurance policy that pays a stipulated sum as set in the contract.
valued contract All life insurance policies are valued contracts, as are accidental death &
dismemberment health policies. is the opposite of a reimbursement contact.
Accidental death and dismemberment insurance. These policies provide financial
AD&D policy support if the insured dies or is dismembered from an accident. AD&D policies
are a form of limited risk policy.
warranty Statement guaranteed to be true
2/
5
