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Exam (elaborations)

LOMA 281 Study Guide with Complete Solutions

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LOMA 281 Study Guide with Complete Solutions Pure risk - Answer️️ -Risks that involve either a loss or no loss Speculative risk - Answer️️ -Risk that can result in a loss, gain or no change Insurance - Answer️️ -A method for transferring risk from an individual to an insurance comp...

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  • September 15, 2024
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  • 2024/2025
  • Exam (elaborations)
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  • LOMA 281
  • LOMA 281
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LOMA 281 Study Guide with Complete
Solutions


Pure risk - Answer✔️✔️-Risks that involve either a loss or no loss


Speculative risk - Answer✔️✔️-Risk that can result in a loss, gain or no change

Insurance - Answer✔️✔️-A method for transferring risk from an individual to an insurance

company

Premium - Answer✔️✔️-The amount that the insured pays in exchange for a promise of

money

Risk pooling - Answer✔️✔️-Insurers collect premiums from all insured people and spread

the cost of the relatively few anticipated losses among all insureds

Annuity - Answer✔️✔️-A financial product under which an insurer promises to make a

series of periodic payments to a named person or entity in exchange for a premium or

series of premiums

Policy benefit - Answer✔️✔️-The amount of money that an insurer promises to pay if a

covered loss occurs

Third Party Policy - Answer✔️✔️-An insurance policy that one person purchases on the

life of another person




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, ©SOPHIABENNETT EXAM SOLUTIONS Saturday, September 7, 2024 6:58 PM


Contract of indemnity - Answer✔️✔️-An insurance policy under which the amount of the

policy benefit payable for a covered loss is based on the actual amount of financial loss

that results from the covered event, as determined at the time of the event

Valued contracts - Answer✔️✔️-An insurance policy that specifies the amount of the

policy benefit that will be payable when a covered loss occurs, regardless of the actual

amount of the loss that was incurred

Face amount (face value) - Answer✔️✔️-The amount of the policy benefit that is payable

if the insured dies while the policy is in force

Law of large numbers - Answer✔️✔️-Mathematical theory which states that typically the

more times we observe a particular event, the more likely it is that our observed results

will approximate the true probability that the event will occur

Reinsurance - Answer✔️✔️-Insurance that one insurance company (the direct writer)

purchases from another insurance company (the reinsurer) to transfer all or part of the

risk on insurance policies that the direct writer has insured

Retention limit - Answer✔️✔️-The maximum amount of insurance that an insurer is willing

to carry at its own risk without transferring some of the risk to a reinsurer. The direct

writer cedes anything above that limit to a reinsurer in a reinsurance transaction of other

risk transfer mechanisms

Direct writer - Answer✔️✔️-The insurance company that purchases reinsurance to

transfer all or part of the risks on insurance policies the company issued

Retrocessionaire - Answer✔️✔️-A reinsurance company that accepts risks transferred

from another reinsurer in a reinsurance transaction


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, ©SOPHIABENNETT EXAM SOLUTIONS Saturday, September 7, 2024 6:58 PM


Medical risk factor - Answer✔️✔️-A physical or psychological characteristic that may

increase the likelihood of loss

Moral hazard - Answer✔️✔️-A characteristic that exists when the reputation, financial

position, or criminal record of an application or a proposed insured indicates that the

person may act dishonestly in the insurance transaction

Antiselection - Answer✔️✔️-The tendency of individuals who believe they have a greater

than average likelihood of loss to seek insurance protection to a greater extent than do

other individuals

Risk class - Answer✔️✔️-A grouping of insureds who represent a similar level of risk to

the insurer

Preferred Risks - Answer✔️✔️-A proposed insured who presents a significantly lower

than average likelihood of loss

Substandard risk - Answer✔️✔️-A proposed insured who has a significantly greater than

average likelihood of loss but is still found to be insurable

Substandard premium rates - Answer✔️✔️-A higher than standard premium rate charged

insureds who are classified as substandard rates

Preferred premium rates - Answer✔️✔️-A lower than standard premium rate charged

insureds who are classified as preferred risks

Declined risks - Answer✔️✔️-A proposed insured who is considered to present a risk that

is too great for the insurer to cover




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