Day 1

Pure risks

-the probability or possibility of loss with no chance for gain -generally insurable -must be measurable, due to chance, definite, predictable NOT catastrophic

Methods of dealing with risk

-transfer -avoidance -retention -reduction

Peril

A tornado that destroys property would be an example of which of the following?

Risk reduction

Actions that people may take to reduce the chance of loss

Grants express authority

Agent's contract with the principal

Lloyd's Association

An insurance organization that does not issue insurance policies but provides a meeting place for individuals, known as underwriters, to conduct business is known as a

Captive agent

An insurance producer who by contract is bound to write insurance for only one company or group of companies is classified as a/an

Consideration

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following terms best describes what the insurer has violated?

reinsurance

And insurance company that goes to another company for insurance

With respect to the business of insurance, a hazard is

Any condition or exposure that increases the possibility of loss.

Physical hazard

Anything you can touch that could increase the chance of loss

Speculative risk

Events in which a person has both the chance of winning or losing are classified as

Hazards

Events or conditions that increase the chances of an insured loss occurring are referred to as

Mutual

Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid. -return surplus money to its policyholders -owned by the policy holders

In insurance transactions, fiduciary responsibility

Handling insurer funds in a trust capacity

Casualty

Has to do with suing

Aleatory

Insured pays small amount of premium for large amount of risk

Which statement regarding insurable risks is NOT correct

Insureds cannot be randomly selected.

Reinsurance

Method used by insurers to protect against catastrophic losses

What is the major difference between a Stock Company and a Mutual Company?

Mutual companies are owned by policyholders, while stock companies are owner by stockholders.

Treaty reinsurance

Pacific types of risks are insured with another company

Moral hazard

People applying that have fraudulent things to me lie on app

Hazards are generally classified as

Physical, moral, morale

Which of the following statements is an accurate comparison between private and government insurers?

Private insurers may be authorized to transact insurance by state insurance departments.

Which of the following is an example of an agent's fiduciary

Promptly forwarding premiums to the insurance company

Retention

Putting more weight on your shoulders paying a deductable

Reciprocal

Specific agreement for investors to pay specific amounts in case of loss

High-risk

Surplus Lines insurance usually involves insurance for which type of individuals?

Which of the following is an example of apparent authority of an agent appointed by an insurer?

The agent accepts a premium payment after the grace period

Risk

The chance of loss occuring

Adverse selection

The ensuring of risks that are more prone to losses than the average risk

If under the influence of alcohol or drugs

The insured has grounds for the policy being rescinded.

Utmost good faith

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as

Expressed and Implied authorities

The powers and authorities that an agent holds are?

Conditional

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?

Fiduciary responsibility

The requirement that agents not commingle insurance monies with their own funds is known as

Transfer

Transferring a loss to another party normally your responsibility to someone else with payment(insurance)

Principal

What is the term for the entity that an agent represents regarding contractual agreements with third parties?

Reinsurance

What method do insurers use to protect themselves against catastrophic losses?

In forming an insurance contract, when does acceptance usually occur?

When an insurer approves a prepaid application

Indemnity

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?

Aleatory

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

Stock

Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?

To minimize the insured's level of liability in the event of loss

Which of the following is NOT a goal of risk retention?

material misrepresentation

a statement that, if discovered, would alter the underwriting decision of the insurance company.

Reduction

actions that people may take to reduce their chances of loss

An agents contract with the principal

documentation grants express authority to an agent?

Insurance

most common way to transfer risk

Implied authority

not written in the agent's contract but is required in order for the agent to conduct business. Not every detail can be written in a contract

Unilateral contract

only one of the parties to the contract is legally bound to do anything.

Contracts of adhesion

party and submitted to the other party on a "take it or leave it" basis are classified as

Apparent authority

the appearance of, or the assumption of, authority based on the actions, words, or deeds of the principal or because of circumstances the principal created

unilateral contract

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

Consideration on the part of the insured

the payment of premiums and the health representations made in the application.

Loss

the reduction, decrease, or disappearance of value of the person or property insured

Retention usually results from three basic desires of the insured

to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured.

aleatory contract

unequal amounts are exchanged between payments and benefits.

Exposure

unit of measurement used to determine rates charged for insurance coverage

participating insurance policy

will pay dividends to the policy owner based upon actual mortality cost, interest earned and costs.

Surplus lines insurers

those insurers that do not have a certificate of authority to transact business in the state, but are on the Commissioner's approved list to transact business under the state's surplus lines laws

Speculative risks

uncertainty as to whether the final outcome will be gain or loss. Speculative risks are generally uninsurable.

Consideration

Binding force of any contract. Something of value that is transferred btw the two parties to form a legal contract

Reasonable expectations

If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?

Adhesion

contract of adhesion is prepared by only the insurer;the insured's only option is to accept or reject the policy as it is written.

Warranty

guaranteed to be true

Fraternal

insurance providers must be nonprofit and sell insurance only to its members?

In insurance, an offer is usually made when

The application is submitted

Express authority

The authority granted to an agent through the agent's contract is referred to as

Perils

The causes of loss insured against in an insurance policy are known as

Marketing arrangements

-General agency system -Direct response marketing system -independent agency system

Which of the following statements is an accurate comparison between private and government insurers

Private insurers offer many lines of insurance. Government insurance programs, also known as "social insurance", cover areas that private companies cannot or will not, providing programs like Medicare, Social Security, and National Flood Insurance. Government programs are funded with tax dollars and serve national causes, in contrast with private insurers.

Adverse selection is a concept best described ad

Risks with higher probability of loss seeking insurance more often than other risks.

Which of the following is the basis for a claim against an insurance policy?

Loss

Not a consideration

The application given to the insured

Morale hazard

Idc attitude "my insurance will fix it"

Consideration on the part of the insurer

the promise to pay in the event of loss.