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Unit 1 Arkansas Insurance Questions and Answers 2025, Exams of Advanced Education

Unit 1 Arkansas Insurance Questions and Answers 2025

Typology: Exams

2024/2025

Available from 06/25/2025

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Unit 1 Arkansas Insurance
insurance - answer transfer of risk from a person or business to an insurer
Risk - answer uncertainty/possibility of a loss
Types of Risk - answer Speculative and Pure
Speculative Risk - answer A chance of loss, no loss, or gain. not insurable
Pure Risk - answer chance of loss only; insurance companies will insure
Exposure - answer possibility that a loss will occur
Examples of Exposure - answer Auto Accident; Luggage lost on a trip; Pet biting a
mailman; Employee hurt on the job; House fire
Peril - answer cause of loss
Example of Peril - answer House burns down; peril is fire
Direct - answer Physical Loss
Indirect - answer consequence of the direct loss
Hazard - answer increases the chance of loss
Types of Hazards - answer Physical, Moral, Morale
Physical Hazard - answer the hazard can be seen
Moral Hazard - answer Dishonesty
Morale Hazard - answer carelessness
STARR (methods of handling risk) - answer Sharing
Transfer
Avoidance
Retention
Reduction
Contract (Policy) - answeran agreement between the insured and the insurer
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Unit 1 Arkansas Insurance

insurance - answer transfer of risk from a person or business to an insurer Risk - answer uncertainty/possibility of a loss Types of Risk - answer Speculative and Pure Speculative Risk - answer A chance of loss, no loss, or gain. not insurable Pure Risk - answer chance of loss only; insurance companies will insure Exposure - answer possibility that a loss will occur Examples of Exposure - answer Auto Accident; Luggage lost on a trip; Pet biting a mailman; Employee hurt on the job; House fire Peril - answer cause of loss Example of Peril - answer House burns down; peril is fire Direct - answer Physical Loss Indirect - answer consequence of the direct loss Hazard - answer increases the chance of loss Types of Hazards - answer Physical, Moral, Morale Physical Hazard - answer the hazard can be seen Moral Hazard - answer Dishonesty Morale Hazard - answer carelessness STARR (methods of handling risk) - answer Sharing Transfer Avoidance Retention Reduction Contract (Policy) - answeran agreement between the insured and the insurer

1st Party - answer Insured (customer) 2nd Party - answer insurer, insurance company Law of Large Numbers - answer the larger the group, the more accurately future losses can be predicted CANHAM - elements of insurable risk - answer Calculable Affordable Non-catastrophic Homogeneous Accidental Measurable Adverse Selection - answerrisks that have a greater-than-average chance of loss Adverse Selection Causes - answerto be not wanted by insurers; tendency for high-risk individuals to get and keep insurance; Why insurers go through the underwriting process; High risk = Higher rate or refusal to insure Reinsurance - answeran insurance company (the ceding company) paying another insurance company (reinsurer) to take some of the companies risk of catastrophic loss What is the purpose of reinsurance - answerhelp spread the insurer's risk Two Types of Reinsurance - answerTreaty and Facultative Facultative Reinsurance - answerthe reinsurer evaluates each risk before allowing the transfer Treaty Reinsurance - answerthe reinsurer accepts the transfer according to an agreement called a treaty Stock Insureer - answerOwned by Stockholders; Dividend is not guaranteed; Dividend is paid to stockholder; Dividend is taxable to stockholder; Issues non-participating policies Mutual Insurer - answerOwned by the policy holders; Dividend is not guaranteed; Dividend is paid to policy holder; Dividend is not taxable; Issues participating policies Fraternal Insurer - answerProvides insurance and other benefits; Must be a member of the society to get the benefits. Reciprocal Insurers - answerUnincorporated; Member are required to pay assessed amount if a loss to any member of the group occurs; Managed by an attorney-in-fact

  • General agents or managing general agents
  • direct writing companies Direct Response - answerno agent/producer involved; via direct mail, magazines, tv, internet, and the radio Agency - answerthe insurance agent acts on behalf of the principal (insurance company) Agent Authority - answerexpress, implied, apparent Express Authority - answerwhat the agent's written contract with the company says Implied Authority - answernot written; activities an agent normally does to sell insurance Apparent Authority - answeractivities an agent does that a reasonable person would assume as authority, based on the agent's actions and statements Fiduciary Trust - answer- Promptly sends premiums to insurer
  • Has knowledge of products
  • Complies with laws and regulations
  • Does not commingle funds