General Insurance

pure risk

A chance of loss or no loss, but no chance of gain. (only pure risk are insurable)

sharing

A method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss who share the losses that occur within that group.

Insured

A person covered by an insurance policy

fiduciary relationship

A relationship of trust and confidence, as between trustee and beneficiary, attorney and client, or principal and agent.

Material Misrepresentation

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

exposure

A unit of measure used to determine rates charged for insurance coverage. (age of the insured, medical history, occupation, sex)

warranty

An absolutely true statement upon which the validity of the insurance policy depends.

contract

An agreement between two or more parties enforceable by law

Authorized Insurer

An insurance company that has qualified and received a Certificate of Authority from the Department of Insurance to transact insurance in the state.

Foreign Insurer

An insurance company that is incorporated in another state.

Domestic Insurer

An insurance company that is incorporated in the state.

Alien Insurer

An insurance company that is incorporated outside the United States.

Contract of Adhesion

Any contract in which one party must either accept the agreement as written by the other party or reject it.

morale hazards

Arise from a state of mind that causes indifference to loss, such as carelessness

Implied Authority

Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal.

hazard

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

Statistically predictable

Insurers must be able to estimate the average frequency and severity of future losses and set appropriate premium rates.

mutual companies

Owned by the policy owners and issue participating policies. (dividends are not guaranteed)

Stock Companies

Owned by the stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses.

retention

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

Apparent Authority

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

Express Authority

The authority granted to an agent by means of the agent's written contract.

Law of Agency

The law that governs the relationship between a principal and his or her agent.

risk

The uncertainty or chance of a loss occurring.

Market conduct

The way companies and producers should conduct their business.

Randomly selected and large loss exposure

There must be a sufficiently large pool of the insured that represents a random selection of risks in terms of age, gender, occupation, health and economic status, and geographic location.

insurance policy

a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events

homogeneous

a large number of units having the same or similar exposure to loss

Agent/Producer

a legal representative of an insurance company; the classification of producer usually includes agents and brokers; agents are the agents of the insurer

Due to chance

a loss that is outside the insured's control

defenite and measurable

a loss that is specific as to the cause, time, place and amount. an insurer must be able to determine how much the benefit will be and when it becomes payable

Reciprocity

a mutual interchange of rights and privileges

Applicant

a person applying for insurance

Professionalism

a person is engaged in an occupation requiring an advanced level of training, knowledge, or skill

beneficiary

a person who receives the benefits of an insurance policy

indemnity

a provision in an insurance policy that states that in the event of loss, an insured or beneficiary is permitted to collect only to the extent of the financial loss, and is not allowed to gain financially because of the exsistence of an insurance contract (insured cannot recover more than their loss)

speculative risk

a situation in which either profit or loss is possible

insurance

a transfer of risk of loss. the cost of an insured's loss is transferred over to the insurer and spread among other insureds

Aleatory Contract

an exchange of unequal amounts or values

nonauthorized insurer

an insurance company that has not applied, or applied and been denied, a Certificate of Authority and may not transact insurance

Broker

an insurance producer not appointed by an insurer and is deemed to represent the client

reduction

attempt to lessen the possibility or severity of a loss

conditional contract

certain conditions must be met by the policyowner and the company in order for the contract to be executed, and before each party fulfills its obligations

avoidance

eliminating exposure to a loss

physical hazards

individual characteristics that increase the chances of the cause of loss

Unilateral Contract

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

representations

statements believed to be true to the best of one's knowledge, but they are not guaranteed to be true

moral hazards

tendencies towards increased risk

perils

the causes of loss insured against in an insurance policy

Insurer

the company who issues an insurance policy

Personal Contract

the contract is between the insured and the insurer

fraud

the intentional misrepresentation or intentional concealment of a material fact used to induce another party to make or refrain from making a contract, or to decieve or cheat a party

Law of Large Numbers

the larger the number of people with a similar exposure to loss, the more predictable actual losses will be

Comcealment

the legal term of the intentional withholding of information of a material fact that is crucial in making a decision

domicile

the location where an insurer is incorporated, not necessarily where the insurer conducts business

transfer

the loss is borne by another party

Premium

the money paid to the insurance company for the insurance policy

Insured consideration

the payment of premium and statements on the application

Policyowner

the person entitled to exercise the rights and privileges in the policy

Insurer's Consideration

the promise to pay for losses

loss

the reduction, decrease, or disappearance of value of the person or property insured in a policy

Not catastrophic

there must be limits that the loss can't exceed

nonparticipating policy

typically issued by stock companies, do not allow policyowners to participate in dividends