Life Agent: Section 1 - Basic Insurance Concepts And Principles

34 Questions | Total Attempts: 459

SettingsSettingsSettings
Insurance Quizzes & Trivia

Questions and Answers
  • 1. 
    What is the purpose of insurance?
    • A. 

      Provide financial (economic) protection against losses that may be incurred due to a chance happening (occurrence) or event.

    • B. 

      To protect oneself against losses. The insured has to be 21 or older.

    • C. 

      To transfer risk to an insurer. The insured has to be 65 or older.

  • 2. 
    Insurance defined by the society is:
    • A. 

      There must be an existence of a sharing of losses by members of the group

    • B. 

      An agreement (policy or certificate) whereby, for a set amount of money (the premium), one party (the insurer) agrees to pay the other party (the insured or his or her beneficiary) a set sum (the benefit) upon occurrence of some event)

    • C. 

      A social device whereby individuals transfer the financial risk associated with death, illness, injury, or disability to a group of persons, and which involves accumulation of funds by the group from these individuals to meet the uncertainty of financial losses associated with death, illness, injury, or disability.

  • 3. 
    Insurance from the individual's point of view is:
    • A. 

      To promise to substitute future financial or economic certainty for uncertainty and to replace the unknown with a sense of security.

    • B. 

      An agreement (policy or certificate) whereby, for a set amount of money (the premium), one party (the insurer) agrees to pay the other party (the insured or his or her beneficiary) a set sum (the benefit) upon occurrence of some event)

    • C. 

      A device or instrument that provides the funds to meet uncertainties

  • 4. 
    Insurance is:
    • A. 

      A contract whereby one undertakes indemnify another against loss, damage, or liability arising from a contingent or unknown event.

    • B. 

      A device or instrument that provides the funds to meet uncertainties

    • C. 

      A substitution/exchange of a small certain loss (premium) for a large uncertain loss (claim). Layman's definition.

    • D. 

      May be referred to as a written instrument, contract, or a policy

    • E. 

      A social device that transfers risk from an individual to a group (insurer), thus pooling a large number of individuals (pure risks). Funds to cover the individual losses are raised by collecting premiums in exchange for assuming the losses up to a predetermined limit. Conceptual definition.

  • 5. 
    What is risk?
    • A. 

      Uncertainty about loss exists when there is a possibility of more than one outcome.

    • B. 

      Uncertainty about loss exists when there is a possibility of only one outcome.

    • C. 

      The possibility of someone losing without insurance.

  • 6. 
    What are the two main types of risk?
    • A. 

      Pure

    • B. 

      Speculative

    • C. 

      Peril

  • 7. 
    What is pure risk?
    • A. 

      There is no possibility of gain or profit from a pure risk.

    • B. 

      Involves the possible outcome of: loss or no loss.

    • C. 

      Involves the possibility for either loss or gain.

    • D. 

      Only risk that insurance companies accepts

  • 8. 
    What is speculative risk?
    • A. 

      Involves the possibility of either loss or gain.

    • B. 

      It is insurable

    • C. 

      Not insurable

  • 9. 
    What is a peril?
    • A. 

      A hazard

    • B. 

      The actual cause of the loss

    • C. 

      An immediate specific event causing loss and giving rise to risk

  • 10. 
    What is a hazard?
    • A. 

      Actual cause of the loss

    • B. 

      Anything that increase the chance/likelihood that loss will occur, or the severity of a loss that does occur.

    • C. 

      Does not actually case the damage

  • 11. 
    What are the types of hazards?
    • A. 

      Moral

    • B. 

      Personal

    • C. 

      Morale

    • D. 

      Physical

    • E. 

      Legal

  • 12. 
    What is moral hazard?
    • A. 

      Deals with alcoholism and drug addiction

    • B. 

      Associated with mental attitudes, behaviors, ethics and habits

    • C. 

      Deals with a person's state of mind

  • 13. 
    What is morale hazard?
    • A. 

      Examples are reckless driving, socializing, paying bills late, etc.

    • B. 

      Deals with mental attitudes, behaviors, ethics, and habits

    • C. 

      Deals with a person's state of mind.

  • 14. 
    What is physical hazard?
    • A. 

      Deals with a person's state of mind

    • B. 

      Associated with the law

    • C. 

      Anything that poses a risk that can be seen, heard, touched, tasted, or smelled

  • 15. 
    What is legal hazard?
    • A. 

      Anything that deals with physicality

    • B. 

      The chance of a certain risk ending up in court.

    • C. 

      Deals with the mind of a person

  • 16. 
    What is the law of large numbers?
    • A. 

      The larger the number of similar units the more predicable the loss

    • B. 

      The larger the group size the better for the insurance company to create prices

    • C. 

      Used to predict losses and to establish rates

    • D. 

      The insured benefits

    • E. 

      Mortality and morbidity tables are based on the law of large numbers

  • 17. 
    What is mortality?
    • A. 

      Probability of disease or disability

    • B. 

      Life expectancy and is the table used for life and annuity products.

    • C. 

      Deals with when will a person die

  • 18. 
    What is morbidity?
    • A. 

      Deals with mortality

    • B. 

      Life expectancy table

    • C. 

      Probability of disease or disability

  • 19. 
    What is loss exposure?
    • A. 

      The possibility of a loss

    • B. 

      People are exposed to various types on a daily basis

    • C. 

      Actual cause of the loss

  • 20. 
    What are the dimensions of loss exposure?
    • A. 

      The type of value (asset) exposed to loss (key employee, breadwinner)

    • B. 

      The peril that causes loss

    • C. 

      How long the loss lasts

    • D. 

      The extant of the potential financial consequences (depletion of savings).

  • 21. 
    What are the risk situations?
    • A. 

      Property

    • B. 

      Financial

    • C. 

      Liability

    • D. 

      Personal (human) and Personnel Loss Exposure

  • 22. 
    What is property loss exposure?
    • A. 

      The degree of a loss a person/organization faces in regard to lawsuits brought by a third party.

    • B. 

      The degree of loss of a person/organization faces in regard to property.

    • C. 

      Presents the possibility of a financial loss to an individual or a family

  • 23. 
    What is liability loss exposure?
    • A. 

      The degree of loss of a person/organization faces in regard to property.

    • B. 

      Presents the possibility of a financial loss to an individual or a family

    • C. 

      The degree of a loss a person/organization faces in regard to lawsuits brought by a third party.

  • 24. 
    What is personal (human) loss exposure?
    • A. 

      Presents the possibility of a financial loss to a business because of the death of a key employee

    • B. 

      Presents the possibility of a financial loss to an individual or a family

    • C. 

      Loss of an important human

  • 25. 
    What is personnel loss exposure?
    • A. 

      Presents the possibility of a financial loss to a business because of the death of a key employee

    • B. 

      Presents the possibility of a financial loss of a friend

    • C. 

      Presents the possibility of a financial loss to an individual or a family

Back to Top Back to top