New Mexico Life And Health Exam 53 Questions And Answers Set 01
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Terms in this set
53
Insurance
A method of spreading the result of financial loss among a large number people.
Life Insurance
A contract under which one party (the insurer) in consideration of the premium payment, agrees to pay an amount stipulated in the contract to a designated person (the beneficiary) upon the occurrence of a contingency defined in the contract (usually that of death).
Indemnity
The concept that insurance should restore the insured, in whole or in part, to the condition he enjoyed before the loss.
Risk
The uncertainty of financial loss.
The 3 Types of Risk
1) Pure Risk - there is only a chance of loss and there is no possibility of gain.
2) Speculative Risk - involves both an uncertainty of loss and of gain.
3) Insurable Risk
2) Speculative Risk - involves both an uncertainty of loss and of gain.
3) Insurable Risk
Insurable Risk
The more closely a risk align with the following characteristics, the more insurable it is: Due to chance, measurable/predictable, it is based upon a large enough pool, so that the law of large numbers allows for the accurate prediction of loss, and there must be a significant potential for economic loss.
Methods of Handling Risk
-Avoidance
-Retention
-Sharing
-Reduction
-Retention
-Sharing
-Reduction
Exposure
A measure of vulnerability of loss, usually expressed in dollars or units, to which an insurance rate is applied.
Hazard
A specific situation that introduces or increases the probability of occurrence of a loss.
The conditions that increase risk or the chance of a loss occurring:
Physical - arise from material, structural, or operation features of a risk situation.
Moral - The Insured's habits.
Morale - Careless attitude on the part of the insured that increased the chance of loss.
Legal - Court of legislative actions increases the risk of loss.
Moral - The Insured's habits.
Morale - Careless attitude on the part of the insured that increased the chance of loss.
Legal - Court of legislative actions increases the risk of loss.