Texas Life, Accident, and Health Insurance ( Latest 2023/2024 ) Latest Questions With Complete Answers
- Risk
Answer: chance of loss
- speculative risk
Answer:
-involves the chance of gain or loss and is NOT insurable
-ex: gambling
- pure risk
Answer: involves only the chance of loss and is insurable
- exposure
Answer: being subject to the possibility of loss because of an activity, location, or characteristics -second hand smoke -no control on exposure
- peril
Answer: cause of loss
- natural peril
Answer: lightning, hail, hurricane, and so forth
- human peril
Answer: theft, murder, auto accidents, industrial accidents, and illness
- loss
Answer: accidental/unexpected death or injury to a person or any reduction in quality, quantity, or value of property
- hazard
Answer: situation that introduces or increases the probability of loss
-triggers the event -overloaded light switch
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- elements of an insurable risk
Answer: (CANHAM)
-Calculable
-Affordable (premiums have to be affordable)
-Noncatastrophic (not war, nuclear)
-Homogenous (similar in nature; how many 31-yr-old males die each yr)
-Accidental and definite (not on purpose)
-Measurable (have to be able to put a $ amount on it)
- insurance vs. gambling
Answer: insurance is a pooling of funds and sharing the cost of losses.
the insured transfers risk away from themselves to another entity
- what is buying insurance?
Answer: a transfer of risk
-risk management
- personal uses of life insurance
Answer:
- final illness and funeral expenses
- liquidity for immediate expenses
- income for ongoing expense
- survivor protection (loan spouse $ if you die, or recoup loss if spouse dies & you
are sole provider)
- estate creation (life ins. creates an estate to the death but life ins. could create
estate tax)
- cash accumulation (cash value life ins. is appropriate for all except emergency
fund) 2 / 4
- estate conservation
- what could ownership of life insurance cause in an estate?
Answer: estate tax, only if over 3.5 million
- Contract
Answer: the legal agreement between the insurer and the policyowner.
- What are the essential elements of all enforceable contracts?
Answer:
- competent parties
- legal purpose
- agreement
- consideration
- competent parties
Answer: a). insurance agency--certificate of authority b). applicant
- requirements of competent party applicant
Answer:
- of lawful age (usually 18; for the purchase of life insurance, 14 in Texas)
- mental competence
- not acting under duress
- what does the contract agreement consist of?
Answer: offer and acceptance (counteroffer)
-counteroffers are NOT required
- What is cash value life insurance good for?
Answer: all except emergency fund
- Consideration
Answer: equitable terms are not required
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- what is not considered an element of an enforceable contract?
Answer: counteroffer
- counteroffer
Answer:
-not considered an element of an enforceable contract -occurs when the offeree rejects the offer, amends the offer and submits a different offer back to offerer (e.g. the insurer rejects the applicant's offer as a standard risk and counteroffers a policy as a substandard risk; an agreement is not reached until the two parties agree to the exact offer or counteroffer)
- no consideration =
Answer: no coverage
- insurable interest
Answer: the applicant/policyowner has an insurable interest (emotional and
financial) in his own life and can name any beneficiary he chooses
- when is insurable interest required?
Answer:
a). when the proposed owner/applicant is to be someone other than the proposed insured (third-party insured)
b). at the time of ISSUE, not at time of LOSS in life insurance (e.g. not at time of claim)
- insurable interest is NOT on...
Answer: next door neighbor
- types of insurable interest
Answer:
-emotional interest (i.e., blood or marriage) -financial interest--for someone to whom you owe a debt or with whom you have a business relationship
- insurable interest & co-signing a loan
Answer: if you co-sign a loan, you now have insurable interest on person getting a loan, by that person does not have insurable interest on you
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