CAA Life & Health Insurance Principles Flashcards
6 cards from real CAA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CAA Life & Health Insurance Principles flashcards as text
What is 'term life insurance' in the context of US life insurance products?
Answer: Pure death benefit coverage for a specified period with no cash value accumulation
Term life insurance provides a death benefit only during a specified coverage period and does not accumulate cash value, making it the simplest and typically least expensive form of life insurance.
What actuarial concept does the 'net premium' represent in life insurance pricing?
Answer: The premium calculated to cover expected mortality and interest costs only, without expense loadings
The net premium is the portion of the premium designed solely to fund expected policy benefits, calculated using mortality and interest assumptions without expense loadings.
What is the 'mortality table' used for in life insurance actuarial calculations?
Answer: Providing probabilities of death at each age, used to price and reserve life insurance products
A mortality table provides age-specific probabilities of death that actuaries use to calculate expected claim costs, premium rates, and policy reserves for life insurance products.
Which US regulatory framework requires life insurers to hold minimum reserves for individual life policies?
Answer: Statutory Accounting Principles (SAP) under NAIC model laws
US life insurers must hold statutory reserves under NAIC model laws, which apply Statutory Accounting Principles designed to ensure policyholder protection and solvency.
What does 'adverse selection' mean in health insurance underwriting?
Answer: The tendency for individuals with higher health risks to be more likely to purchase insurance, skewing the risk pool
Adverse selection occurs when people with higher-than-average health risks disproportionately seek insurance, causing the actual risk pool to be worse than expected if ignored in pricing.
In US employer-sponsored group health insurance, what is the purpose of 'experience rating'?
Answer: Rating a group based on its own historical claims experience to reflect its actual risk profile
Experience rating adjusts a group's premium based on its own historical claims data, so that groups with good (or poor) claims experience pay premiums reflecting their actual risk.