Insurance Terminology

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Questions and Answers

What is the definition of risk in the context of insurance?

The possibility of incurring misfortune or loss. (correct)

The possibility of incurring a profit or gain.

A circumstance that increases the likelihood of a loss.

The cause of injury, loss, or damage.

What is the role of an actuary in insurance?

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

To investigate claims and determine their validity.

To determine the insurer's liability for loss.

To sell and service insurance policies.

What is the purpose of an adjuster in the insurance industry?

To sell insurance policies to customers.

To determine the extent of the insurer's liability for loss. (correct)

To invest insurance funds.

To calculate insurance premiums.

What is the term for the process of converting retirement funds into a stream of regular income payments?

Annuitization Signup and view all the answers

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

Casualty Insurance Signup and view all the answers

What is the term for the ratio of the reinsurance premiums ceded by the ceding company?

Ceded Reinsurance Signup and view all the answers

What is the term for an insurance company that passes part or all of its risks to a reinsurance firm?

Ceding Company Signup and view all the answers

What is the term for the cause of injury, loss, or damage?

Peril Signup and view all the answers

What is a claim in the context of insurance?

A demand made by the insured for payment of benefits Signup and view all the answers

What is the purpose of coinsurance in property insurance?

To require the policyholder to carry insurance equal to a specified percentage of the value of property Signup and view all the answers

What is commission in the context of insurance?

A fee paid to an insurance agent as a percentage of the policy premium Signup and view all the answers

What is an encumbrance in the context of insurance?

A claim on property, such as a mortgage or lien Signup and view all the answers

What is indemnity in the context of insurance?

Restoration to the victim of a loss by payment, repair or replacement Signup and view all the answers

What is liability insurance?

Insurance that pays and renders service on behalf of an insured for loss arising out of their responsibility Signup and view all the answers

What is net premium?

The amount of premium minus the agent's commission Signup and view all the answers

What is reinsurance?

Insurance purchased by an insurance company to protect itself from large losses Signup and view all the answers

Study Notes

Insurance Terms

Risk: The possibility of incurring misfortune or loss, including exposures such as health, dismemberment, loss of life, property damage, and casualty losses.

Underwriting

Peril: The cause of injury, loss, or damage.
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 insurance mathematics 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

Annuitization: The process of converting part or all of a qualified retirement plan or nonqualified annuity contract into a stream of regular income payments.
Annuity: An agreement to make periodic payments that continue during the survival of the annuitant(s) or for a specified period.
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.

Reinsurance

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.
Reinsurance: Insurance that an insurance company buys for its own protection, spreading the risk of loss to avoid disproportionately large losses.

Insurance Policies

Claim: A demand made by the insured or the insured's beneficiary for payment of benefits as provided by the policy.
Coinsurance: A requirement in property insurance to carry insurance equal to a specified percentage of the property value to receive full payment on a loss.
Commission: A fee paid to an agent or insurance salesperson as a percentage of the policy premium.
Encumbrance: A claim on property, such as a mortgage, a lien for work and materials, or a right of dower.
Indemnity: Restoration to the victim of a loss by payment, repair, or replacement.
Liability: A legally enforceable obligation, commonly 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.
Net Premium: The amount of premium minus the agent's commission, or the premium necessary to cover only anticipated losses.
Participation: Sometimes called a 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.

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Description

Test your knowledge of essential insurance terms, including risk, peril, hazard, and actuary. Learn key concepts in insurance underwriting and profession.