Chapter 1 Life Insurance

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become

Larger

What are the types of hazards

Physical, Moral, Morale

Define "Risk Retention"

Planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance.

When does the applicant apply for an offer

When submitting the application

Who is a competent party?

1) not under the influence 2) of legal age 3) mentally competent to understand the contract

Conditional Contract

A type of an agreement in which both parties must perform certain duties and follow rules of conduct to make the contract enforceable.

Mutual insurance company

A type of insurance company owned by its policyholders.

What contract grants express authority to an agent?

Agents contract with the principal

Lloyd's associations

Organizations that provide support facilities for underwriters or groups of individuals that accept insurance risk.

Unilateral Contract

The insured is not legally bound to do anything. The insurer, However, must pay losses covered by the policy.

Define indemnity

The insured may only receive benefits for the amount lost.

What is not a characteristic of an insurable risk?

The lost must be catastrophic

Pure Risk and Speculative Risk

The risk of loss may be classified as

What is Pure Risk?

a situation in which a person can only lose or have no change represents.

Reciprocal Insurance Exchange

is a formal risk sharing agreement

adverse selection problem

is that people who have more risk want insurance and people who have less don't want insurance as much.

Apparent Authority

is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created. Also known as "Perceived Authority"

Transfer (risk management)

is when a individual purchases insurance. this is a risk management technique.

Aleatory

means there is an exchange of unequal amounts or values. Example premium paid by the insured is small in relation to the amount that will be paid by the insure in the event of a loss.

Homogeneous

Are units with the same or similar exposure to loss

In an insurance policy contract ambiguates are automatically ruled in favor of?

Insured

Commingling

Is when a producer fails to segregate primum monies from his own personal funds.

When does acceptance of an insurance contract occur?

When the insurers underwriter approves coverage.

Alien Insurer

When transacting business in this state an insurer formed under the laws of another country is known as a/an

Personal contract

a policy can not be changed to someone else without written consent of the insurer, nor can the owner transfer the contract to another person without the insurers approval. Exception: Life insurance is an exception to this rule: a Policy owner can transfer or assign ownership to another person. however the insurer must still be notified in writing.

Fraternal benefit society

An organization formed to provide insurance benefits for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government.

Physical Hazards

Are individual characteristics that increase the chances of the cause of loss. Example Past medical history, condition at birth, blindness

Hazards

are conditions or situations that increase the probability of an insured loss occurring.

Foreign

is when your insurance company is formed under the laws of another state but you are selling in this state.

Risk Retention Goals

1) to reduce expenses and improve cash flow 2) to increase control of claim reserving and claims settlements 3) to fund for losses that cannot be insured

Stock Insurance Company

insurers are owned by stockholders who have the usual rights of ownership, including the right to vote.

Certificate Authority

is a document the insurer must have before selling insurance. this is by state.

Direct Response Marketing

is when the insurance agent is bypassed.

Moral hazards

tendencies towards increased risk. lying on application, submitted fraudulent claims against an insurer

Reasonable Expectations

the reasonable expectations of policyowners and beneficiaries will be honored even though the strict terms of the policy do not support these expectations; what a reasonable and prudent buyer can expect.

What privileges do insurers have that balances the order

the right to determine the wording of a policy

Producer's Fiduciary Duty

the trust that a client places in the producer in regard to handling premiums.

Express Authority

It is the authority that is written in the contract

Market conduct

describes the way companies and producers should conduct their business

Elements of Insurable Risk

due to chance, definite and measurable, statistically predictable, not catastrophic, randomly selected and large loss exposure

Morale hazards

Arise from a state of mind that causes indifference to loss, such as carelessness. example wreck less driving. Actions taken without forethought that may cause physical injury.

What type of authority is not stated in a agents contract but is required for the agent to conduct business?

Implied