Question: Risk pooling is best described by which of the following?

Answer: Combining similar losses from many people so the average loss over the entire group remains relatively constant

Question: Another term which means the same as insurance policy is:

Answer: Insurance Contract

Question: All of the following correctly describe risk pooling:

Answer: Each member of the group shares in the losses of the group and is promised a future benefit.

Risk pooling allows a large number of people to be insured for a small amount of money.

Risk pooling transfers risk from an individual to a group.

Question: Which of the following correctly describes the law of large numbers?

Answer: It states that as a group’s size increases, it is easier to predict the number of future losses over a specific time period.

Question: Which of the following correctly identifies the most important principle(s) of insurance?

Answer: Risk pooling, the law of large numbers and insurable interest

Question: The law of large numbers and spreading the uncertainty of loss over a large number of people is:

Answer: Insurance

Question: What term means the insured’s demand for payment of benefits?

Answer: Claim

Question: Insurance is:

Answer: a transfer of of uncertainty of loss from the insured to the insurance company.

Question: Mathematicians who analyze statistical risk information for insurance companies are called:

Answer: Actuaries

Question: In life and health insurance, a person’s greatest asset is:

Answer: Their earning power