Chapter 1 -Primerica

domestic

Insurer is an insurance company that is incorporated in THIS state

Alien

Insurer is an insurance company that is incorporated outside the United States

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

No loss no gain

Is all risk insurable?

No only pure risk

Unilateral Contract

Only one of the parties to the contract is legally bound to do anything. The insured makes no legally binding promises. However and insurer is legally bound to pay losses covered by a policy in force

Classifications is private companies

Ownership Authority to transact business Location (domicile) Marketing and distribution Rating

Factors considered to determine rates:

The age of the insured Medical history Occupation Sex

peril

causes of loss insured against in an insurance policy

How many types of risk are there?

2 (pure and speculative)

Insurance

A contract whereby one party (insurer) agrees to indemnify or guarantee another party (insured) against a loss by a specified future contingency or peril in return for payment of a premium.

Homogeneous

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

In Louisiana

A minor who is 15 years old may purchase life or health insurance for his or her own benefit or the benefit of a parent, grandparent, spouse, sibling or any person with an insurable interest.

Reciprocity/Reciprocal

A mutual interchange of rights and privileges

Applicant/Proposed insured

A person applying for insurance

Insured

A person covered by an insurance policy (this person may or may not be the policy owner)

Exposure

A unit of measure used to determine rates charged for insurance coverage.

Who acts on behalf of the principal?

Agent

Apparent

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

Agent/produxer

An individual licensed to sell, solicit or negotiate contracts on behalf of the principal (insurer)

Broker

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

An agent's actions show what kind of authority?

Apparent

Express

Authority is the authority a principal intended to grant an agent by means of the agents contract-written in the contract

Implied

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

Why do physical hazards exist?

B/c of physical condition, past medical history or condition at birth.

Fiduciary Responsibility

Because an agent handles the funds of the insured and the insurer, he/she has _______

Certificate of Authority

Before insurers may transact business in a specific state, they must apply and be granted license

Loss

Defined as the reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril.

Policy owners are entitled to?

Dividends

What characteristics does insurable risk involve?

Due to chance Definite and measurable Statistically predictably Not catastrophic Randomly selected and large loss exposure

Which program is funded with taxes? Private or government?

Government

Reasonably expect coverage

If an agent implies through advertising, sales literature or statement that these provisions exist

Utmost Good Faith

Implies that there will be no fraud, misrepresentation or concealment between the parties.

Offer and Acceptance

In insurance the applicant usually makes an offer when submitting the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy

What is the most common method of transferring risk?

Insurance

Aleatory contract

Insurance contracts are? Which means there is an exchange of unequal amounts or values

Foreign

Insurer is an insurance company that is incorporated in another state or territorial possession (Puerto RICO, Guam)

Material Misrepresentation

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

Warranty

Is an absolutely true statement upon which the validity of the insurance policy depends

Contract of adhesion

Is prepared by one of the parties (insurer) and accepted or rejected by the other party (insured)

Concealment

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

Mutual Companies

Issue participating policies

Reduction

Lessen the possibility of risk. Reduction includes actions such as installing a smoke detector in your home

Example of hazards

Lifestyle, scuba diving all can increase chance of loss

indemnify

Make whole

Transfer

Most effective way to handle risk is to transfer it so that the loss is borne by another party

Parties to a contract

Must be capable of entering into a contract in the eyes of the law (generally requires both parties to be of legal age, mentally competent to understand the contract, and not under the influence of drugs or alcohol)

Legal purpose of a life insurance policy

Must have both: insurable interest and consent, a contract without legal purpose is considered void and cannot be enforced by any party

Retention

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

Mutual companies are owned by?

Policyownwers

What are private policies funded with?

Premiums

Who is insurance available from?

Private and government companies

Code of Ethics

Producers must adhere to certain established procedures and failure to comply will result in penalties.

Conditional contact

Requires that certain conditions must be met by the policy owner and the company in order for the context to be executed and before the party fulfills the obligations

All of the following are examples of risk

Self insurance Deductibles Copayments

Sharing

Sharing is a method of dealing with fish for a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within a group.

Fiduciary

Someone in position of trust

Indemnify

Sometimes referred to as reimbursement, a provision in an insurance policy that started 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 existence of an insurance xontract

In an insurance contracts, a warranty is a?

Statement that must be true

Representations

Statements believes fo be true to the best of ones knowledge but they are not guaranteed to be true

What are the types of ownership?

Stock companies and Mutual funds

Stock companies are owned by?

Stockholders

Moral Hazard

Tendencies towards increased risk.

Consideration

The binding force in any contract is ______ (Something of value that each party gives to the other)

Fraud

The intentional misrepresentation or intentional concealment of a material fact used to induce another party to make or refrain from making a contact or to deceive or cheat a party

Premium

The money paid to an insurance company for the insurance policy

insurance policy

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

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

Hazards

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

Law of agency

defines the relationship between the principal and the agent/producer: the acts of the agent/producer within the scope of authority are deemed to be the acts of the insurer

Market conduct

describes the way companies and producers should conduct their business, it is a Code if Ethics

Types of agent authority

express, implied, apparent

Physical Hazard

individual characteristics that increase the chances of the cause of loss.

life insurance

insures against the financial loss caused by the premature death of the insured

Casualty insurance

insures against the loss and/or damage of property and resulting liabilities

Property insurance

insures against the loss of physical property or the loss of its income-producing abilities

health insurance

insures against the medical expenses and/or loss of income caused by the insured's sickness or accidental injury

Speculative Risk

involves the opportunity for either loss or gain. (gambling) can not be insured

Pure Risk

refers to situations that can only result in a loss or no change. NO opportunity for financial gain

Insurer (principal)

the company who issues an insurance policy

Policy owner

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

Location of incorporation

How insurance companies are classified

Dividends

A return of excess premiums and are nontaxable

Contract

An agreement between two or more parties that is enforceable by law

Avoidance

Eliminating exposure to loss

Risk

The uncertainty or chance of loss occurring

Agreement

There must be a definite offer by one party, and the other party must accept this offer in its exact terms

Morale Hazard

They arise from a state of mind that causes indifference to loss such as carelessness. Texting while driving

Elements of a legal contract

They must have 4 essential elements: Agreement (offer and acceptance) Consideration Competent parties Legal purpose

Which method of dealing with risk is applied when a person purchases insurance?

Transfer

What does insurance do?

Transfers the risk of loss from an individual or business entity to an insurance company

Misrepresentation

Untrue statements on the application

Example of apparent authority

When an insurer furnished an agent with a rate book, application forms, and sales literature, the insurer cannot later deny that such relationship existed