Exam (elaborations)
Michigan Credit Insurance Study Guide 2024
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Michigan Credit Insurance Study Guide
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Michigan Credit Insurance Study GuideDefinintion of Insurance - Answer -"A social device for transferring risk through an
accumulation of funds"
Policy - Answer -A contract with the insurance company (insurer) that states what the
policyowner (insured) must pay for and what they agree to cover if damage or loss
occurs.
Premium - Answer -A set amount that must be paid for a Policy.
Concept of Risk - Answer -Risk evolves from uncertainty - the unpredictable chance
occurrences of everyday life, which result in financial or economic loss.
Life insurance addresses the financial impact of ____________. - Answer -Premature
Death
Speculative Risk - Answer -Involves the chance of winning or losing. It is a win-lose
situation.
Pure Risk - Answer -Creates only financial loss. It's a lose-lose situation.
Insurance only deals with _______ risk. - Answer -Pure
Ways to Manage Risk - Answer -- Avoidance
- Reduction
- Retention
- Sharing
- Transfer
Elements in Insurable Risks:
The loss.. - Answer -- Must Be Preictable
- Must Be Definite
- Must Be Due to Chance
- Cannot Be Catastrophic
- Exposure Must Be Large
, Law of Large Numbers - Answer -The larger number of similar risks, the more accurate
the prediction of loss will be over a period of time.
Mortality Table - Answer -Contains statistical information related to the probability of
death occurring at specific ages.
Mortality Expense - Answer -The cost of death protection.
Stock Insurance Company - Answer -Owned by its stockholders, policyholders DO NOT
participate in dividends.
Mutual Insurance Company - Answer -Owned by policyholders, policyholders DO
participate in dividends.
Fraternal Benefit Society - Answer -Promotes social and charitable activities, markets
insurance products to its members.
Lloyd's of London - Answer -Underwrites insurance, and is NOT an insurer.
Service Providers - Answer -Provides medical services to its subscriber.
Self-Insurers - Answer -A corporation establishes a fund to pay claims. Buys "stop-loss"
coverage for excess amounts.
Government Insurers - Answer -Rely on tax dollars to fund social insurance programs.
Authorized Company - Answer -An insurer licensed or chartered to transact insurance in
Michigan; is admitted to do business in the state.
Unauthorized Company - Answer -An insurer not licensed to transact insurance in
Michigan; not admitted to do business in the sate.
Insurance Company Rating - Answer -Protects condsumers from the insurance
company becoming insolvent. Rating is based on the level of reserves, claims,
amanaement, and investments. (A+ - F)
Structure: Sales and Marketing - Answer -Responsible for the developnment of
products, collecting premiums, licensing, recruiting, training, and advertisement.
Structure: Actuarial - Answer -Gathers statistical information to help with rate setting.
Structure: Underwriting - Answer -Reviews potential insured, gathers information,
classifying to accept or reject a proposed insured.
Structure: Claims - Answer -Investigates and pays claims, also guards against
fraudulent claims.
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