Types of Insurance Policies
Morale
A person who does not lock the doors to his or her house shows an indifferent attitude. This person presents what type of hazard?
What are the four elements of an insurance contract?
Agreement (offer and acceptance), consideration, competent parties, and legal purpose
What is a warranty in an insurance contract?
An absolutely true statement upon which the validity of insurance contract is based.
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?
Authorized or admitted
conditions that increase the chance of a loss are known as what?
hazards
What type of report provides information about the applicant's hobbies, habits and financial status?
inspection report
What do individuals use to transfer their risk of loss to a larger group?
insurance
Insurance is a contract that protects the insured from what?
loss
The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?
loss
An applicant conceals relevant health information on the application. The applicant presents what type of hazard?
moral
What is the term for the causes of loss insured against in an insurance policy?
peril
The insurer organized to return a profit to the stockholders is what type of insurer?
stock company
Who owns stock companies?
stockholders
According to the Law of Agency, a principal is represented by whom?
Agent or producer
What entities make up the Medical Information Bureau?
Insurers
For the purpose of insurance, what is risk?
Uncertainty of loss
What are the three types of agent authority?
express, implied, apparent
What two elements are necessary for a life insurance contract to have a legal purpose?
Insurable interest and consent
What are the five characteristics of an ideally insurance risk?
Loss must be 1) due to chance 2) definite and measurable 3) statistically predictable 4) not catastrophic, and 5) coverage cannot be mandatory
Three types of hazards
Physical, Moral, Morale
What are the strategies used by underwriters to prevent adverse selection
Restriction of coverage, refusal to accept a risk, and accepting a risk at a higher rate
What is the best way to handle incomplete insurance applications?
Return the application to the applicant for completion
If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?
Send the application back to the applicant for signature
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
In forming an insurance contract, when does an acceptance usually occur?
When the insurer approves a prepaid application
When does an insurance policy go into effect?
When the policy is delivered and the premium is paid
When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?
adverse selection