Primerica Pre-licensing Course Flashcards

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Questions and Answers

What is an agent in the context of insurance?

Company who issues an insurance policy

Legal representative of an insurance company (correct)

Contract between a policyowner and an insurance company

Person covered by an insurance policy

Who is the person covered by the insurance policy?

insured

What does a broker represent in the insurance context?

the client

What is an insurance policy?

a contract between a policyowner and an insurance company Signup and view all the answers

What is the definition of an insurer?

the company who issues an insurance policy Signup and view all the answers

Who is referred to as the policyowner?

the person entitled to exercise the rights in the policy Signup and view all the answers

What constitutes a premium in insurance?

the money paid to the insurance company for the insurance policy Signup and view all the answers

Define reciprocity in insurance terms.

a mutual interchange of rights and privileges Signup and view all the answers

What is the definition of risk in insurance?

the uncertainty or chance of a loss occurring Signup and view all the answers

What is pure risk?

situations that can only result in a loss or no change Signup and view all the answers

What does speculative risk involve?

the opportunity for either loss or gain Signup and view all the answers

What does a hazard refer to in the context of insurance?

a condition that increases the probability of an insured loss occurring Signup and view all the answers

Describe a moral hazard.

tendency towards increased risk related to the character of the insured Signup and view all the answers

What is a peril in insurance terms?

the cause of the loss insured against Signup and view all the answers

What does life insurance insure against?

the financial loss caused by the premature death of the insured Signup and view all the answers

What does health insurance cover?

medical expenses and/or loss of income due to sickness or injury Signup and view all the answers

What is property insurance designed to protect?

the loss of physical property or its income-producing abilities Signup and view all the answers

What is the definition of a beneficiary in an insurance policy?

a person who receives the benefits of an insurance policy Signup and view all the answers

What is a contract in the context of insurance?

an agreement between two or more parties enforceable by law Signup and view all the answers

What must be considered valid in a life insurance contract?

insurable interest and consent Signup and view all the answers

What does the term indemnity mean?

reimbursement according to the extent of financial loss Signup and view all the answers

What does utmost good faith imply?

no fraud, misrepresentation, or concealment between parties Signup and view all the answers

What is a viator in the context of viatical settlements?

the owner of a life insurance policy seeking a viatical settlement Signup and view all the answers

What is a buy-sell agreement?

a legal contract regarding business ownership transfer upon death or disability Signup and view all the answers

Define liquidity in insurance terms.

cash values that can be borrowed against for immediate needs Signup and view all the answers

Study Notes

Insurance Terms and Definitions

Agent: Legal representative of an insurance company; includes insurance brokers.
Insured: Individual covered by an insurance policy, may not be the policyowner.
Broker: Insurance agent not appointed by an insurer, representing the client.
Insurance Policy: Contract between the policyowner and insurer for loss coverage.
Insurer: The company issuing the insurance policy.
Policyowner: Individual entitled to the rights within the insurance policy.
Premium: Payment made to the insurance company for the policy.

Types of Risks and Covers

Risk: Uncertainty or chance of loss.
Pure Risk: Situations that can only result in loss or no change (no financial gain).
Speculative Risk: Involves opportunities for loss or gain (not insurable).
Hazard: Condition that increases the likelihood of an insured loss.
Physical Hazard: Individual characteristics that increase risk due to physical conditions.
Moral Hazard: Increased risk from the character/reputation of an insured.
Morale Hazard: Risks caused by a state of indifference towards loss.

Types of Insurance

Life Insurance: Protects against financial loss from premature death.
Health Insurance: Covers medical expenses and income loss due to sickness or injury.
Property Insurance: Covers loss of physical property or income-producing capabilities.
Casualty Insurance: Covers loss/damage of property and related liabilities.

Risk Management Techniques

Sharing Risk: Group exposure to loss is shared among participants.
Transfer Risk: Financial loss is transferred to another party (insurance company).
Avoidance of Risk: Eliminating exposure to potential loss.
Retention: Self-insurance where the policyholder accepts loss responsibility.
Reduction: Measures to mitigate risk (e.g., smoke detectors).

Contractual Elements in Insurance

Indemnity: Limited reimbursement for loss to the extent of financial loss.
Utmost Good Faith: Expectation of honesty between parties, prohibits fraud or concealment.
Material Misrepresentation: Misleading statements that affect underwriting decisions.
Warranties: Absolute truths critical for policy validity.
Concealment: Withholding important information affecting insurance decisions.
Beneficiary: Individual receiving benefits from an insurance policy.

Financial Aspects of Insurance

Cash Value: Accumulated equity in permanent life insurance.
Estate: Total net worth of an individual.
Liquidation: Selling assets for capital.
Lump-Sum: Full payment of insurance benefits at once.
Insurable Interest: Requirement that policyowner could suffer a financial loss.

Specialized Insurance Concepts

Viatical Settlements: Allows the terminally ill to sell life insurance for immediate cash needs.
Key Person Insurance: Protects businesses from the loss of essential employees.
Buy-Sell Agreement: Legal contract outlining business ownership succession upon death/disablement.
Cross Purchase Agreement: Partners buy insurance policies on each other.
Entity Purchase Agreement: The partnership buys policies on behalf of partners.

Additional Considerations in Insurance

Death Benefit: Amount disbursed upon the insured's death.
Education Funds: Allocate for children's schooling post-insured's death.
Emergency Reserve Funds: Cover unexpected expenses after loss of the insured.
Fraudulent Activities: Intentional actions to mislead and gain from insurance agreements.

Company Types in Insurance

Stock Companies: Owned by stockholders sharing in profits/losses.
Mutual Companies: Owned by policyholders; profits returned as dividends.
Domestic Insurer: Company incorporated within the state.
Foreign Insurer: Company incorporated in a different state.
Alien Insurer: Company incorporated outside the U.S.

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Description

Test your knowledge on essential terms related to insurance and agent definitions with these flashcards. This quiz is designed for those preparing for the Primerica pre-licensing course. Enhance your understanding of key concepts like agent, insured, and broker.