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Arizona Life Insurance Exam - General Insurance – Questions with Solutions
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Arizona Life Insurance Exam - General Insurance – Questions with Solutions
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Arizona Life Insurance Exam - GeneralInsurance – Questions with Solutions
Agent/Producer - -Legal representative of an insurance company
(classification of producer usually includes agents and brokers, agents are
the agents of the insurer)
-Applicant (proposed insured) - -Person applying for insurance
-Broker - -Insurance producer not appointed by an insurer and is deemed to
represent the client
-Insurance Policy - -Contract between a policyowner (and/or insured) and an
insurance company which agrees to pay the insured or the beneficiary for
loss caused by specific events
-Insured - -Person covered by the insurance policy (this person may or may
not the policy owner)
-Insurer (principal) - -Company who issues an insurance policy
-Policyowner - -Person entitled to exercise the rights and privileges in the
policy
-Premium - -Money paid to the insurance company for the insurance policy
-Reciprocity/Reciprocal - -Mutual interchange of rights and privileges
-Insurance - -Transfers the risk of loss from an individual or business entity
to an insurance company, which in turn spreads the costs of unexpected
losses to many individuals
-Risk - -Uncertainty or chance of loss occuring
-Pure Risk - -Situations that can only result in a loss or no change (no
opportunity for financial gain) (insurable)
-Speculative Risk - -Situations with opportunity for either loss or gain
(noninsurable)
-Exposure - -Unit of measure used to determine rates charged for insurance
coverage
-Factors of Exposure - -1. Age of Insured
2. Medical History
, 3. Occupation
4. Sex
-Homogenous - -A large number of units having the same or similar
exposure to loss
-Hazard - -Condition or situation that increases the probability of an insured
loss occuring
-Physical Hazard - -Individual characteristics that increase the chances of
the cause of loss
-Moral Hazard - -Tendencies toward increased risk (applicants who lie on an
application for insurance or have committed fraud)
-Morale Hazard - -Hazards that arise from a state of mind that causes
indifference to loss, such as carelessness
-Peril - -Cause of loss insured against in an insurance policy
-Loss - -The reduction, decrease, or disappearance of value of the person or
property insured in a policy, caused by a named peril
-Life Insurance - -Insures against the financial loss caused by the premature
death of the insured
-Avoidance - -Eliminating exposure to a loss
-Retention - -Planned assumption of risk by an insured through the use of
deductibles, co-payments, or self-insurance
-Purpose of Retention - -1. To reduce expenses and improve cash flow
2. To increases control of claim reserving and claims settlements
3. To fund for losses that cannot be insured
-Sharing - -Method of dealing with risk for a group of individual persons or
businesses with the same or similar exposure to loss to share the losses that
occur within that group
-Reduction - -Lessening the probability or severity of a loss
-Transfer - -The most effective way to handle risk so that the loss is borne
by another party
-Elements of Insurable Risk - -1. Due to Chance
2. Definite and measurable
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