Insurance Reviewer: Basic Glossary and Acronyms

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Questions and Answers

What is the definition of risk from the underwriter's point of view?

The possibility of incurring misfortune or loss

A circumstance that increases the likelihood or probable severity of a loss

Exposure to health, dismemberment, and loss of life (correct)

The cause of injury, loss, or damage

What is the role of an actuary in insurance?

To sell and service insurance policies

To investigate and settle insurance claims

To calculate rates, reserves, dividends, and other statistics (correct)

To determine the extent of the insurer's liability for loss

What is the purpose of annuitization?

To convert part or all of the money in a qualified retirement plan into a lump sum payment

To withdraw from a qualified retirement plan

To invest in a nonqualified annuity contract

To convert part or all of the money in a qualified retirement plan into a stream of regular income payments (correct)

What type of insurance is concerned with losses caused by injuries to persons and legal liability?

Casualty Insurance Signup and view all the answers

What is the definition of peril?

The cause of injury, loss, or damage Signup and view all the answers

What is the role of an adjuster in insurance?

To determine the extent of the insurer's liability for loss Signup and view all the answers

What is ceded reinsurance?

The ratio of the reinsurance premiums ceded by the ceding company Signup and view all the answers

What is the definition of hazard?

A circumstance that increases the likelihood or probable severity of a loss Signup and view all the answers

What is the term for a demand made by the insured or the insured's beneficiary for payment of benefits as provided by the policy?

Claim Signup and view all the answers

What is the term for a fee paid to an agent or insurance salesperson as a percentage of the policy premium?

Commission Signup and view all the answers

What is the term for restoration to the victim of a loss by payment, repair or replacement?

Indemnity Signup and view all the answers

What is the term for a claim on property, such as a mortgage, a lien for work and materials, or a right of dower?

Encumbrance Signup and view all the answers

What is the term for insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence?

Liability Insurance Signup and view all the answers

What is the term for the price of insurance protection for a specified risk for a specified period of time?

Premium Signup and view all the answers

What is the term for insurance that an insurance company buys for its own protection?

Reinsurance Signup and view all the answers

What is the term for management of the pure risks to which a company might be subject?

Risk Management Signup and view all the answers

Study Notes

Insurance Terminology

Risk: The possibility of incurring misfortune or loss, including exposure to various types of perils such as health, dismemberment, loss of life, property damage, and more.
Peril: The cause of injury, loss, or damage, such as fire, flood, or explosions.
Hazard: A circumstance that increases the likelihood or probable severity of a loss, such as storing explosives in a home basement.

Insurance Professionals

Actuary: A specialist in the mathematics of insurance who calculates rates, reserves, dividends, and other statistics.
Adjuster: A representative of the insurer who determines the extent of the insurer's liability for loss when a claim is submitted.
Agent: An individual who sells and services insurance policies.

Insurance Concepts

Annuity: An agreement by an insurer to make periodic payments that continue during the survival of the annuitant(s) or for a specified period.
Annuitization: The process of converting part or all of the money in a qualified retirement plan or nonqualified annuity contract into a stream of regular income payments.
Casualty Insurance: Insurance primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others.
Ceded Reinsurance: The ratio of the reinsurance premiums ceded by the ceding company.
Ceding Company: An insurance company that passes part or all of its risks from its insurance policy portfolio to a reinsurance firm.

Insurance Policy and Claims

Claim: A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.
Coinsurance: A requirement in property insurance for the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss.
Commission: Fee paid to an agent or insurance salesperson as a percentage of the policy premium.
Indemnity: Restoration to the victim of a loss by payment, repair, or replacement.
Net Premium: The amount of premium minus the agent's commission, or the premium necessary to cover only anticipated losses, before loading to cover other expenses.

Risk Management

Liability: A legally enforceable obligation, often used in a pecuniary sense.
Liability Insurance: Insurance that pays and renders service on behalf of an insured for loss arising out of their responsibility, due to negligence.
Named Perils: Perils specifically covered on insured property.
Participation: Also known as deductible or a percentage of share of the assured in each claim.
Policy: The written contract effecting insurance, including all clauses, riders, endorsements, and papers attached thereto.
Premium: The price of insurance protection for a specified risk for a specified period of time.
Reinsurance: Insurance that an insurance company buys for its own protection, spreading the risk of loss so a disproportionately large loss under a single policy doesn't fall on one company.
Risk Management: Management of pure risks to which a company might be subject, involving analyzing all exposures to the possibility of loss and determining how to handle these exposures.

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Description

Test your knowledge of basic insurance terms, including risk, underwriters, and exposures. Learn key definitions and acronyms in the insurance industry.