TX General Lines Property And Casualty Agent Exam Prep Questions And Answers 100% Verified.
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TX General Lines Property and Casualty Agent
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TX General Lines Property And Casualty Agent
TX General Lines Property And Casualty Agent Exam Prep Questions And Answers 100% Verified.
risk - correct answer. "chance of loss" to insured person, property, or activity
this uncertainty of loss is the basic reason for insurance's existence
loss - correct answer. unw...
TX General Lines Property And Casualty
Agent Exam Prep Questions And Answers
100% Verified.
risk - correct answer. "chance of loss" to insured person, property, or activity
this uncertainty of loss is the basic reason for insurance's existence
loss - correct answer. unwelcomed/ unplanned reduction in economic value
role of insurance is to indemnify the insured for the financial value of an insured loss
direct loss- immediate result of event caused by covered peril
indirect loss- remote ramification than direct loss, but still results of loss from covered
peril
ex) If a home is severely damaged by fire, the damage to the building is considered a
direct loss. Because the home is temporarily uninhabitable the home owner will incur
additional living expenses, over and above the home owner's normal expenses, until the
house has been repaired. These additional living expenses are an indirect loss that
follows the direct loss of the home.
exposure - correct answer. state of being subject to possible loss
ex) motorist exposed to risk of being involved in auto accident that could result in
damage to the car, serious injury, lawsuits, or even death
,- measured by assigning exposure units (influenced by insured item's market value and
risk factors facing it)
- more exposure units, higher premium
- exposure: total extent of risk an insurer faces with an insured
ex) insurance company that sells workers compensation insurance faces increased
exposure as an insured business's workforce increases
peril - correct answer. destructive event that insurance guards against
ex) covered perils: fire, explosion, windstorm, flood, theft, collision (insurance policy
provides financial protection against these losses)
insurance policy provides financial protection against losses caused by specified perils -
-> covered perils
hazard - correct answer. increases likely occurrence of peril or severity of a loss
moral hazard: traits of individual that increase chance of loss
- ex) alcoholism, smoking, bad credit
morale hazard: individual tendencies that arise from state of mind, attitude, or
indifference to loss
-ex) driving recklessly
physical hazard: physical conditions that increase chance of loss
-ex) dangerous conditions/activities, diseases, unsanitary conditions, congested traffic,
unguarded premises, etc.
legal hazards: legal or regulatory environment characteristics that affect an insurer's
ability to provide insurance at a premium that fairly reflects loss exposures
risk management - correct answer. process of dealing with risk
- risk avoidance
- risk control
- risk sharing
- risk retention
- risk transfer
risk avoidance - correct answer. avoid risk
ex) not owning car avoids risk of car being stolen or damaged
,risk control - correct answer. if risk can't be avoided, it can be controlled
risk prevention: reduce likelihood loss will occur
ex) shoveling snow prevents slip and fall
risk reduction: reduce severity of loss that does occur
ex) fire extinguishers doesn't prevent fire from starting, but limits fire damage if it does
occur
risk sharing - correct answer. groups share financial burden of loss suffered by
members of group
ex) pooling: groups organize formal arrangement by which they share one another's
losses through pooled resources
risk retention - correct answer. accepting risk and dealing with a loss using personal
funds
- better for small risks
ex) deductibles: shift small losses to policyowner --. insurance covers more serious
losses
involved when a business sets up a formal self-insurance program, which puts aside
funds to pay for any losses that occur
risk transfer - correct answer. in exchange for paying a premium, individual/business
transfer risk of loss to insurance company through insurance policy --> loss occurs,
insurer will compensate insured
basis for modern insurance
insurable risk - correct answer. 1. must be definite (time, cause, location)
2. value of insured item must be measurable
3. must be accidental
4. not covered due to catastrophic events (war, earthquake, etc.)
5. risk must be part of large group of similar risks that insurance company can use to
predict future losses
6. only pure risks are insurable (not speculative risks)
Speculative risks—those that offer the chance of gain as well as loss—are not
insurable. It is not insurance's role to protect a person's loss in situations where the
result may just as easily had been a gain, such as gambling or investing in the stock
market.
, adverse selection - correct answer. once insurance company receives application for
coverage, it begins underwriting
underwriting determines whether a particular risk can be insured and at what rate, which
protects against adverse selection
adverse selection- tendency of those of greater-than-average risk of loss to seek
insurance --> people at greatest risk of loss are ones most likely to do whatever is
necessary to buy insurance to cover that loss
ex) person with bad driving record recognizes need for auto insurance
underwriting - correct answer. when insurance company receives application for
coverage --> underwriting (determines whether particular risk can be insured and at
what rate; protects against adverse selection)
law of numbers - correct answer. what isn't predictable in single instance becomes
predictable the greater that number of similar instances observed
helps insurance company actuaries/mathematicians predict losses among group of
similar risks, as long as there are sufficiently large number of risks to observe
stock insurance companies - correct answer. owned by stockholders who purchase
shares of stocks as an investment --> pay stock dividends to stockholders if profitable
mutual insurance companies - correct answer. owned by policyholders
issue participating policies --> distribute company's surplus "profit" to policyowners in
form of policy dividends
county mutuals
- operate in a limited geographical location
- sell wide array of insurance products in broader geographical regions
reciprocal insurers - correct answer. unincorporated group of members that insure
each other by exchanging contracts of indemnity that obligate them to collectively pay
any member's covered loss
reciprocal insurance: form of self-insurance that prefunds coverage of future losses
through the members/ premium deposits
fraternal benefit societies - correct answer. organizations of people who share a
common ethnic, religious, or vocational affiliation
provide insurance to their members through fraternal insurers whose insureds are
usually restricted to members of society
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