Life Insurance- Test 1

50 Questions | Total Attempts: 590

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Life Insurance Quizzes & Trivia

Practice Test: Life Insurance Test #1


Questions and Answers
  • 1. 
    Based on mathematical calculations of life expectancy and provides a sum of money when the insured person dies.
    • A. 

      ANNUITY

    • B. 

      INSURANCE POLICY

    • C. 

      LIFE INSURANCE

    • D. 

      LAW OF LARGE NUMBERS

  • 2. 
    Provides an income over a period while the annuity owner lives.
    • A. 

      INSURANCE POLICY

    • B. 

      ANNUITY

    • C. 

      LIFE INSURANCE

    • D. 

      POLICY SUM AMOUNT

  • 3. 
    Pool must include a mixture of "good risks" and "poor risks" to avoid a skewing of exposure that might lead to an unacceptable proportion of losses.
    • A. 

      COMMON TO A SUFFICIENTLY LARGE POOL

    • B. 

      RANDOMLY DIVERSE

    • C. 

      PREDICTABLE

    • D. 

      DUE TO CHANCE

  • 4. 
    In Life Insurance, the risk is if the insured will die.
    • A. 

      True: If

    • B. 

      False: When

  • 5. 
    Human life has a monetary value is the Economic Basis of a/an___________.
    • A. 

      ANNUITY

    • B. 

      INSURANCE POLICY

    • C. 

      LIFE INSURANCE

  • 6. 
    Causing another party to accept the risk, typically by contract or by hedging.
    • A. 

      INSURABLE RISK

    • B. 

      AVOIDANCE/ELIMINATION

    • C. 

      TRANSFERENCE/OUTSOURCING/INSURING

    • D. 

      REDUCTION/MITIGATION/SHARING

  • 7. 
    Cause, time, place, and amount of loss must be definalble, the how, when and how much of the benefit must be calculable.
    • A. 

      LIMITED

    • B. 

      DUE TO CHANCE

    • C. 

      PREDICTABLE

    • D. 

      DEFINITE AND MEASURABLE

  • 8. 
    The concept that having a large pool of similar risks enables predictability of losses on a statistical basis. The larger and more similar the group, the more predictability there is.  The idea that the greater the number of similar individual risks are combined into one group, the more accurately one may predict the number of future losses.  Making the uncertainty of risk more predictable.
    • A. 

      LAW OF LARGE NUMBERS

    • B. 

      PURPOSE OF INSURANCE

    • C. 

      RISK POOLING

    • D. 

      ECONOMIC BASIS OF LIFE INSURANCE

  • 9. 
    Economic Security is the idea for __________ and _____________.
    • A. 

      ANNUITY AND HEDGING

    • B. 

      LIFE INSURANCE AND MEDICAID

    • C. 

      ANNUITY AND LAW OF LARGE NUMBERS

    • D. 

      LIFE INSURANCE AND ANNUITY

  • 10. 
    Risk that is the nature of things and arises without the individual's volition.  There's no chance of gain, only loss.
    • A. 

      RISK

    • B. 

      SPECULATIVE RISK

    • C. 

      HAZARD RISK

    • D. 

      PURE RISK

  • 11. 
    Legal document issued by an insurance company to the policyholder defining the terms and conditions of the insurance.  
    • A. 

      LIFE INSURANCE

    • B. 

      ANNUITY

    • C. 

      INSURANCE POLICY

  • 12. 
    The chance of financial loss, stated in quantifiable terms (i.e. monetary or non-monetary).
    • A. 

      HAZARD

    • B. 

      RISK

    • C. 

      DUE TO CHANCE

  • 13. 
    The direct and immediate (specific) cause of a risk (loss).
    • A. 

      PERIL

    • B. 

      HAZARD

    • C. 

      EXPOSURE

  • 14. 
    To conserve and protect this monetary value of a human life ("greater human life value") by providing for and seeing to the needs of those who depend on the insured for their economic existence.
    • A. 

      THE CONCEPT OF RISK

    • B. 

      PURPOSE OF LIFE INSURANCE

    • C. 

      INSURANCE POLICY

  • 15. 
    What are the two types of exposure to loss?
    • A. 

      RISK AND HAZARD

    • B. 

      PURE RISK AND PROBABILITY

    • C. 

      PURE RISK AND SPECULATIVE RISK

  • 16. 
    Probability is the size of what?
    • A. 

      CHANCE

    • B. 

      LOSS

    • C. 

      PERIL

  • 17. 
    Voluntarily entering a situation that inherently contains the possibility of either loss or gain, such as investing in the stock market; assumed voluntarily and offers the possibility of gain as well as loss.
    • A. 

      MORALE HAZARD

    • B. 

      SPECULATIVE RISK

    • C. 

      GAMBLING

  • 18. 
    Concerning the annuity, the risk is that the individual will die.
    • A. 

      True: Will die.

    • B. 

      False: Live too long.

  • 19. 
    Accepting a known risk and entering into the activity that poses the chance of loss with full responsibility for consequences.  When the desire for the benefits of success at an activity outweigh the fear and potential loss of failure, when we cannot have the gain without taking the risk, and when we cannot reduce or transfer the risk, this is our strategy:   we know the risk, we live iwht the consequences.                    
    • A. 

      MORALE HAZARD

    • B. 

      RETENTION/ACCEPTANCE/BUDGETING

    • C. 

      REDUCTION/MITIGATION/SHARING

  • 20. 
    Hazards due to a person’s values or habits that increases the chance of peril.
    • A. 

      MORAL HAZARD

    • B. 

      PHYSICAL HAZARD

    • C. 

      MORALE HAZARD

  • 21. 
    WHAT IS THE TYPE OF RISKS THAT IS INSURABLE?
    • A. 

      MORAL RISK

    • B. 

      PURE RISK

    • C. 

      ALL RISKS ARE INSURABLE

  • 22. 
    The two dimensions of risk are:
    • A. 

      EXPOSURE AND PROBABILITY

    • B. 

      RISK AND HAZARD

    • C. 

      RISK AND PERIL

  • 23. 
    Must allow application of the "Law of Large Numbers" to predict losses.
    • A. 

      PREDICTABLE

    • B. 

      LIMITED

    • C. 

      COMMON TO A SUFFICIENTLY LARGE POOL

  • 24. 
    CONCERNING THE CONCEPT OF RISK, THE SIZE OF THE LOSS IS THE ____________.
    • A. 

      HAZARD

    • B. 

      EXPOSURE

    • C. 

      RISK

  • 25. 
    Not performing an activity that carries risk.
    • A. 

      REDUCTION/MITIGATION/SHARING

    • B. 

      AVOIDANCE/ELIMINATION

    • C. 

      TRANSFERENCE/OUTSOURCING/INSURING