Life and Health Insurance Overview

This set of flashcards encompasses key concepts related to life and health insurance, including definitions, types of risks, insurance contracts, underwriting, and policy details.

What is the definition of risk in insurance terms?

Risk is the uncertainty of loss.

What are the two types of risk?

Pure risk (insurable) and Speculative risk (not insurable).

What does the acronym STARR stand for in risk management methods?

Sharing, Transfer, Avoidance, Reduction, Retention.

What is a peril in insurance?

A peril is a direct cause of loss.

What are the three types of hazards?

Physical, Moral, Morale.

What are the characteristics of insurable risks?

Large numbers of homogenous units, measurable loss, uncertain loss, economic hardship, and the loss must not be catastrophic.

What is adverse selection in insurance?

The tendency of poor risks to purchase insurance.

What differentiates a Domestic company from a Foreign company in insurance?

A Domestic company is incorporated under the laws of a home state; a Foreign company is incorporated under the laws of another state or territory.

What is an Admitted insurer?

Licensed to transact insurance business in the state.

What are the four elements of a Legal Contract?

Consideration, Legal purpose, Offer, Acceptance, Competent parties (CLOAC).

What is a contract of adhesion?

A contract that is drafted by the insurer and is not negotiable, requiring the owner to adhere to the terms.

What does aleatory mean in the context of an insurance contract?

There is an unequal exchange of values (consideration).

Define a unilateral contract in insurance.

Only one party is legally bound to perform its part of the agreement.

What is the purpose of mortality/morbidity tables?

Used to predict future losses from death or illness.

What is the significance of a conditional receipt in life insurance?

It makes coverage effective as of the date of application or any required medical exam, as long as the policy is issued as applied for.

What is insurable interest?

The person will suffer financial consequences of death, illness, accident, or injury.

In what scenario does key person insurance apply?

It protects the employer in the event a valuable employee dies.

What is the most expensive mode of premium payment?

Monthly premium payments.

What does the Fair Credit Reporting Act protect?

It protects an individual’s right to privacy and access to a credit report.

What is the role of a fiduciary in insurance?

A person in a position of financial trust.