Insurance Probability

Which statement(s) describe the relationship between risk and insurance?

• Insurance can help protect a policyholder from losses that can come from risk
• Risk levels can impact a person’s insurability
• Both A and B
• Both B and C

Which of the following factors do insurance companies use to determine the potential risk of an applicant?

• Age, gender, and health
• Gender, health, and income
• Age, health, and income
• Age, health, and geographic location

Which insurance professional calculates risk based on loss percentage and determines insurance rates and premiums?

• Accountant
• Actuary
• Insurance agent
• Underwriter

The most effective way for insurers to employ risk pooling is to:

• Keep the risk pool as small as possible
• Separate the riskiest people into their own risk pool
• Group as many people as possible into the same risk pool
• Keep every risk pool the same size

In general, an insurance company will charge more for “high-risk” cases than “low-risk” cases

• True
• False

Who would you expect to pay more for a new term life insurance policy?

• A 25-year-old who smokes
• A healthy 25-year-old who earns a lot of money
• A 25-year-old who owns a house
• They would all pay the same amount

Twins, age 18, apply for car insurance. The insurance company could charge them different rates based on gender.

• True
• False

A 45-year-old warehouse worker injures his back cleaning his gutters and can’t work for eight weeks. Which of his insurance policies will help him make ends meet by paying him a percentage of his income while he is out of work recovering?

• Life insurance
• Health insurance
• Disability insurance
• Homeowners insurance

A couple with a young baby purchases a life insurance policy. What is the payment that they will make monthly or annually to the insurance company for coverage called?

• Premium
• Co-payment
• Principle
• Dividend

Why might the couple be investing in life insurance?

• To have income to travel and enjoy life when they retire
• To earn interest in the short term
• To save on taxes
• To help cover their family’s financial needs and obligations if one of them dies