Insurance Broker Exam
Insurance is a contract by which one seeks to protect another from (BLANK) - answer
Loss
Which factor is NOT considered by an underwriter when determining the premium rates
for an individual seeking insurance? - answer Race
Agent/Producer - Answers a legal representative of an insurance company; the
classification of producer usually includes agents and brokers; agents are the agents of
the insurer
Applicant (proposed insured) - answer a person applying for insurance
Broker - answer an insurance producer not appointed by an insurer and is deemed to
represent the client
Insurance policy - answer a contract between a policy owner (and/or insured) and an
insurance company which agrees to pay the insured to the beneficiaries for loss caused
by specific events
Insured - answer person covered by the insurance policy; may or may not be the policy
owner
Insurer (principal) - answer The company who issues an insurance policy
Premium - answer The money paid to the insurance company for the insurance policy
Policy owner - answerThe person entitled to exercise the rights and privileges in the
policy
Reciprocity/Reciprocal - answera mutual interchange of rights and privileges
Insurance - answera contract in which on party (the insurance company) agrees to
indemnify (make whole) the insured party against loss
Risk - answerthe uncertainty or change of a loss occurring
Pure Risk - answerrefers to situations that can only result in a loss or no change. There
is no opportunity for financial gain. This is the only type of risk insurance companies are
willing to accept.
, Speculative Risk - answerInvolves the opportunity for either loss of gain. EX: Gambling.
NOT INSURABLE.
What is considered to be a morale hazard? - answerReckless driving
Exposure - answerA unit of measure used to determine rates charged for insurance
coverage.
Homogeneous - answera large number of units having the same or similar exposure to
loss. The basis of insurance is sharing risk among members of a large homogeneous
group with similar exposure to loss.
Hazards - answerconditions or situations that increase the probability of an insured loss
occurring
Physical hazard - answerindividual characteristics that increase the changes of the
cause of loss
Moral hazard - answertendencies towards increased risk. Moral hazards involve
evaluating the character and reputation of the proposed insured. Moral hazards refer to
those applicants who may lie on an application for insurance or in the past may have
submitted fraudulent claims against an insurer
Morale hazard - answersimilar to moral hazards except that they arise from a state of
mind that causes indifference to loss, such as carelessness
Perils - answerthe causes of loss insured against an insurance policy
Life insurance - answerinsures against financial loss caused by the premature death of
the insured
Health insurance - answerinsured against the medical expenses and/or loss of income
caused by the insured's sickness or accidental injury
Property insurance - answerinsures against the loss of physical property or the loss of
its income producing abilities
Casualty insurance - answerinsures against the loss and/or damage of property and
resulting liability
Loss - answerdefined as the reduction, decrease, or disappearance of value of the
person or property insured in a policy, caused by a named peril
A tornado that destroys property would be an example of (BLANK) - answera peril
Which of the following is the basis for a claim against an insurance policy - answera loss
Insurance is a contract by which one seeks to protect another from (BLANK) - answer
Loss
Which factor is NOT considered by an underwriter when determining the premium rates
for an individual seeking insurance? - answer Race
Agent/Producer - Answers a legal representative of an insurance company; the
classification of producer usually includes agents and brokers; agents are the agents of
the insurer
Applicant (proposed insured) - answer a person applying for insurance
Broker - answer an insurance producer not appointed by an insurer and is deemed to
represent the client
Insurance policy - answer a contract between a policy owner (and/or insured) and an
insurance company which agrees to pay the insured to the beneficiaries for loss caused
by specific events
Insured - answer person covered by the insurance policy; may or may not be the policy
owner
Insurer (principal) - answer The company who issues an insurance policy
Premium - answer The money paid to the insurance company for the insurance policy
Policy owner - answerThe person entitled to exercise the rights and privileges in the
policy
Reciprocity/Reciprocal - answera mutual interchange of rights and privileges
Insurance - answera contract in which on party (the insurance company) agrees to
indemnify (make whole) the insured party against loss
Risk - answerthe uncertainty or change of a loss occurring
Pure Risk - answerrefers to situations that can only result in a loss or no change. There
is no opportunity for financial gain. This is the only type of risk insurance companies are
willing to accept.
, Speculative Risk - answerInvolves the opportunity for either loss of gain. EX: Gambling.
NOT INSURABLE.
What is considered to be a morale hazard? - answerReckless driving
Exposure - answerA unit of measure used to determine rates charged for insurance
coverage.
Homogeneous - answera large number of units having the same or similar exposure to
loss. The basis of insurance is sharing risk among members of a large homogeneous
group with similar exposure to loss.
Hazards - answerconditions or situations that increase the probability of an insured loss
occurring
Physical hazard - answerindividual characteristics that increase the changes of the
cause of loss
Moral hazard - answertendencies towards increased risk. Moral hazards involve
evaluating the character and reputation of the proposed insured. Moral hazards refer to
those applicants who may lie on an application for insurance or in the past may have
submitted fraudulent claims against an insurer
Morale hazard - answersimilar to moral hazards except that they arise from a state of
mind that causes indifference to loss, such as carelessness
Perils - answerthe causes of loss insured against an insurance policy
Life insurance - answerinsures against financial loss caused by the premature death of
the insured
Health insurance - answerinsured against the medical expenses and/or loss of income
caused by the insured's sickness or accidental injury
Property insurance - answerinsures against the loss of physical property or the loss of
its income producing abilities
Casualty insurance - answerinsures against the loss and/or damage of property and
resulting liability
Loss - answerdefined as the reduction, decrease, or disappearance of value of the
person or property insured in a policy, caused by a named peril
A tornado that destroys property would be an example of (BLANK) - answera peril
Which of the following is the basis for a claim against an insurance policy - answera loss
