Florida 2-40 Health License Chapters Review
Loss Sharing: ️ The distribution or pooling of risks among a large group of individuals.
Risk Pooling: ️ Identical to loss sharing.
Law of Large Numbers: ️ A principle of probability and mortality/morbidity experience; the larger and
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Loss Sharing: ✔️ The distribution or pooling of risks among a large group of individuals.
Risk Pooling: ✔️ Identical to loss sharing.
Law of Large Numbers: ✔️ A principle of probability and mortality/morbidity experience; the larger and
more uniform the group, the more reliable the predictions.
Risk: ✔️ Defined as the uncertainty surrounding the possibility of loss.
Speculative Risk: ✔️ Represents the potential for both loss and gain.
Pure Risk: ✔️ Involves only the possibility of loss; only pure risk is insurable.
Peril: ✔️ A specific, immediate event that causes loss and gives rise to risk.
Hazard: ✔️ Any condition that heightens the likelihood of a peril occurring.
Physical Hazards: ✔️ Personal traits that elevate the chance of peril; examples include blindness,
deafness, and riding a motorcycle on a racetrack.
Moral Hazards: ✔️ Poor behavioral choices, such as alcohol and drug addiction, that increase risk and
potential loss.
Morale Hazards: ✔️ An indifferent attitude toward loss; for instance, reckless driving driven by
selfishness.
, Risk Avoidance: ✔️ A strategy where you completely refrain from exposure to certain risks; examples
include avoiding flying, driving, or investing in stocks.
Risk Reduction: ✔️ Efforts to decrease the likelihood of loss through cautious actions, like installing a
fire alarm.
Risk Retention: ✔️ Choosing not to purchase insurance and planning to cover possible losses
independently, known as self-insuring.
Risk Transference: ✔️ Shifting your risk to an insurer (insurance company).
Elements of Insurance Risk: ✔️ Must be definite and measurable, predictable, not catastrophic to the
insurer, must have large exposure for the insured, and loss exposures must be randomly selected.
Human Life Value: ✔️ The present worth of an individual's future earnings dedicated to their
dependents.
Principles of Insurance: ✔️ Based on risk pooling and the law of large numbers.
Insurance: ✔️ Functions to transfer risk.
Adverse Selection: ✔️ The tendency for individuals in high-risk jobs or lifestyles to seek life insurance.
Stock Insurers: ✔️ All profits go to shareholders, and dividends are taxable; includes participating and
non-participating types. Their aim is to generate profit for owners or shareholders.
Mutual Insurers: ✔️ Policyholders own the company, and dividends are distributed to them; these
dividends are tax-free as they serve as refunds to owners. Their purpose is to offer products at a lower
cost.
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