Florida Insurance 2-14 Exam Terms 100% Correct

Florida Insurance 2-14 Exam Terms 100% Correct Insurance Financial protection against loss or harm - An arrangement by which company gives customers financial protection against loss or harm such as theft or illness in return for premium payments. Life Insurance Is based on actuarial or mathematical principles and guarantees a specified sum of money upon the death of the person who is insured. Annuities Provide a stream of income by making a series of payments to the annuitant for the annuitant's lifetime or for a specifically designated period of time. Risk Uncertainty regarding loss; the probability of loss occurring for an insured or prospect Speculative Risks Involve the possibility of loss and gain. (Not Insurable) Pure Risks Involve the possibility of loss only. (Insurable) Peril Cause of risk (when a building burns, fire is the peril) Hazards The source of danger Physical Hazard A hazard being of physical nature. A person being treated of cancer, the disease is the physical endangerment. (Blindness & deafness) Risk Avoidance Occurs when individuals evade risk entirely. "If you don't drive, then you avoid getting in an auto accident." Risk Reduction Takes place when the chances of loss are lessened. Changing a lifestyle to minimize a known risk. Risk Retention Being aware of the risks involved and taking precautions for financial protection. Auto policy's deductible is an illustration of risk retention Risk Transference The act of shifting the responsibility of risk to another in the form of an insurance contract. Adverse Selection Refers to the tendency for those individuals who present less favorable insurance risk to seek or continue insurance to a great extent than other risks. Insuring Pure Risk Loss must be due to chance Loss must be definite and measurable Risk must be predictable Loss must NOT be catastrophic Exposure to loss must be large Loss exposures must be randomly selected Mutual Insurers Participating policies Owned by policyholders Vote for directors and trustees Directors and management have control Typically higher rates Assessment Mutual Insurers Prohibited in Florida Pure Assessment Mutual Company Don't pay premium and total loss is divided among members Lloyds of London NOT considered an insurance company - An association of individuals and companies that individually underwriter insurance. Fraternal Benefit Societies Must be nonprofit, have a lodge system, and offer insurance to its members only Home