Insurance Quiz & Flashcards

Insurance transfers financial risk from the insured to the insurer, not eliminating or increasing risks.

A premium is a regular payment to maintain insurance coverage, not a claim payout or deductible.

Health insurance is specifically designed to cover medical expenses, unlike life or auto insurance.

A deductible is the out-of-pocket amount paid by the insured before insurance coverage starts.

Underwriting involves risk assessment and premium determination, not claims payout or policy cancellation.

Term life insurance provides coverage for a specific period, unlike whole life insurance which is lifelong.

Reinsurance helps share risk with other insurers, not directly impacting premium rates or customer service.

Moral hazard is the risk of policyholders engaging in riskier behavior because they are insured.

A peril is a specific risk or cause of loss covered by the insurance policy, not an exclusion or add-on.

An insurance broker sells policies from multiple insurers and does not represent a specific company.

Adverse selection leads to more high-risk individuals purchasing insurance, which can increase premiums.

A beneficiary is the person or entity designated to receive benefits from an insurance policy.

Coinsurance involves sharing the cost of care between the insured and insurer after meeting the deductible.

HMOs require members to use network providers, while PPOs offer more flexibility, including out-of-network care.

The loss ratio is the ratio of losses paid by the insurer compared to the premiums earned.

Exclusions are specific risks or conditions not covered by an insurance policy.

An umbrella policy provides additional liability coverage beyond the limits of primary insurance policies.

Subrogation is the insurer's right to seek reimbursement from a third party after paying a claim.

A rider is an optional modification to an insurance policy, adding or changing coverage.

The principle of utmost good faith requires honesty and full disclosure from both parties in an insurance contract.

A no-claims bonus is a discount on premiums given to policyholders who haven't filed any claims over a period.

Insurable interest is the financial stake an insured has in the insured item or person, necessary for a policy.

A waiting period delays coverage or benefits, ensuring conditions are met before claims can be made.

An insurance claim is a formal request to an insurer for compensation for a covered loss or event.

Property insurance covers physical items, while casualty insurance is concerned with liability for accidents and injuries.

Insurance companies invest premiums to generate returns, ensuring they can pay future claims.

A captive insurance company is one created by a parent company to insure its own risks.

An insurance adjuster evaluates claims to determine the extent of the insurer's liability and compensation.

Diversification reduces the risk of large losses by spreading exposure across different types of insurance.

A policy limit is the maximum amount an insurer will pay for a covered loss under an insurance policy.

A grace period allows additional time to pay a premium after its due date without losing coverage.

Insurance fraud involves falsifying or exaggerating a claim to receive undeserved benefits.

An endorsement is used to modify or add specific conditions or coverage to an existing insurance policy.

An actuary analyzes statistical data to predict risks and determine insurance premiums.

Reinsurance allows insurers to share large risks with other insurers, reducing their exposure to significant losses.

A policyholder is the individual or entity that owns and pays for an insurance policy.

An insurance adjuster evaluates claims to determine the extent of coverage and compensation.

A waiting period delays when insurance coverage begins or when benefits can be accessed.

Diversification reduces the risk of large losses by spreading exposure across different types of insurance.

The insurance commissioner regulates and oversees the insurance industry to ensure compliance with laws.

Insurers determine premium rates through underwriting and actuarial analysis, assessing risk and cost.

A deductible is the out-of-pocket amount the insured pays before insurance coverage starts.

A claims reserve is the money set aside by an insurer to pay future claims.

The primary goal of insurance is to provide financial protection against potential losses, not to eliminate risks.

Insurable interest ensures there is a legitimate financial stake in the insured item, necessary for a valid contract.