Glossary of Insurance Exam Flashcards
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- A means for spreading the result of a financial loss among many persons, so the cost to any one person is small.
- The possibility that a loss might occur. It is one of the reasons that people buy insurance
- The cause of a potential loss (i.e. accident, fire, explosion, flood, etc.).
- A condition that increases the seriousness of a potential loss or increases the likelihood that a loss will occur (i.e. slippery floors, unsanitary conditions, improperly stored gasoline).
- Law of large numbers
- A statistical model that enables insurers to predict how many losses will occur in a group.
- Exposure unit
- The item of property or the person insured, such as the individual person's life in a life insurance contract.
- Mathematicians who study and compile statistical data regarding exposure units and risks.
- Insurable interest
- The interest, either personal or financial, related to emotional loss or financial loss, a person has in establishing insurance. Must be established before the policy is valid.
- Insurable risks
- Risks that can validly be insured and that have characteristics that make the rate of loss fairly predictable, allowing insurers to prepare for the losses that do occur.
- The obligation of insurance to restore the insured, in whole or in part, to the condition he or she enjoyed prior to the loss. Can be financial or related to repair or replacement of property.
- Limit of liability
- Not common for life and health industry. It meanss the maximum amount the insurer will pay for a specified insured contingency. This is usually the face amount of the policy.
- Limits within health and disability policies for specific items, such as maximum allowance for room and board, max. surgical allowances, etc.
- The initial amount of a covered loss (or losses) that the insured must absorb before the insurer begins to pay for additional loss amounts.
- Elimination period or waiting period
- In disability, this is usually the "deductible."
- Common to medical policies, it is a policy in which the insurer and the insured agree to share the allowable expenses, usually defined in percentages like 20%-80%.
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