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Life & Health Insurance Exam Practice Questions and Answers | 100% Verified
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Life & Health Insurance Exam Practice Questions and Answers | 100% Verified In insurance, a type of risk that involves the chance of loss or gain and which is therefore uninsurable is called - Answer️️ -speculative risk: Speculative risk is risk that may result in loss or gain. This type of...

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  • September 1, 2024
  • 74
  • 2024/2025
  • Exam (elaborations)
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©SOPHIABENNETT
2024/2025 ACADEMIC YEAR




©SOPHIABENNETT 9/1/24 2024/2025

,Life & Health Insurance Exam Practice
Questions and Answers | 100% Verified


In insurance, a type of risk that involves the chance of loss or gain and which is

therefore uninsurable is called - Answer✔️✔️-speculative risk: Speculative risk is risk that

may result in loss or gain. This type of risk is generally uninsurable.


A hurricane is an example of a(n) - Answer✔️✔️-Peril: A hurricane is an example of a

peril. A peril is a condition that involves danger or risk and is the cause of a loss.

Insurance policies are written to provide financial protection against losses from stated

perils.

Which of the following is an example of pure risk? - Answer✔️✔️-the loss of life: The loss

of a life is a good example of pure risk because there is no possible gain in this

situation.

Which of the following is defined as increasing the severity or frequency of loss? -

Answer✔️✔️-Hazard: A hazard does indeed increase the number of, or the severity of,

losses.

Mary refuses to fly on a commercial airplane for her business. This is an example of risk

________. - Answer✔️✔️-Avoidance: Mary refuses to fly on a commercial airplane for her

business. This is an example of risk avoidance.

The banding together of individuals who collectively agree to cover a loss suffered by

any group member is the definition of which method of handling risk? - Answer✔️✔️-


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,share the risk: Under risk-sharing each member of a group agrees to share the financial

burden of a loss that could be suffered by any member.

Pamela replaces the batteries in her smoke alarms throughout the house and tests

them once a year. This is an example of - Answer✔️✔️-risk reduction: Risk reduction is

an option to lessen the possibility of loss when a risk cannot be avoided. In this case,

the risk of fire that could result in severe loss is reduced through having active fire

alarms.

Which of the following is considered an element of insurable risk? - Answer✔️✔️-The risk

of loss must be measurable with a dollar value defined.

Adverse selection can be described as - Answer✔️✔️-the fact that people in poor health

are more likely to buy and keep insurance. Adverse selection is selection against an

insurer. It refers to the tendency of persons who are likely to make a claim based on

their circumstances to buy and keep insurance. For example, a person who is sick is

more likely to buy health insurance and to keep the policy in force than a healthy

person.

This term is the principle that the greater the number of incidents of a random process,

the more likely that the expected number of incidents and the actual numbers of

incidents will be the same. - Answer✔️✔️-law of large numbers: The law of large numbers

describes the principle that the greater the number of incidents of a random process,

the more likely that the expected number of incidents and the actual numbers of

incidents will be the same. This fact allows the insurer to predict the extent of risk.

Both mutual insurance companies and stock insurance companies have which of the

following features in common? - Answer✔️✔️-Both can issue dividends:The stock

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, company can issue dividends to its stockholders; the mutual company can issue

dividends to its policyowners.

The Grand Halvorson Lodge has 250 members, united by a common Danish heritage.

For 50 years they have also run an annual carnival for the purpose of sponsoring

families in need of medical care for their children. All the money brought in through dues

and fund-raising events is used to support their non-profit work with needy families. The

Grand Halvorson Lodge offers life insurance to its members. What type of insurer is it

considered? - Answer✔️✔️-fraternal benefit society: The members of a lodge or fraternal

organization can provide life insurance for their members.

A group of people who agree to pro-rate and share the losses suffered by other

members is called a(an) ______________ insurer. - Answer✔️✔️-Reciprocal: A group of

people who agree to pro-rate and share the losses suffered by other members is called

a reciprocal insurer.

Which of the following services does Lloyd's of London provide? - Answer✔️✔️-a

common meeting ground where member associations can conduct insurance business:

Lloyd's of London provides a common meeting ground where member associations can

conduct insurance business.

When a state bars the sale of a particular coverage within its boundaries, a typical

insurance company cannot cover it. In this case, an insurer not licensed in the state can

underwrite this insurance through a third party broker. What type of insurer can

underwrite the coverage in this case? - Answer✔️✔️-a surplus lines insurer: A surplus

lines insurer is not licensed to do business in the state. However, it must be eligible to

provide unique coverage when requested through the surplus lines market.

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