General Insurance, completing the application, underwriting and delivering the policy.

three types of agent authority

- express - implied - apparent

Strategies used by underwriters to prevent adverse selection

- restriction of coverage - refusal to accept a risk - accepting a risk at a higher rate

Four elements of an insurance contract

-agreement (offer and acceptance) - consideration - competent parties - legal purpose

According to the Law of Agency, a principal is represented by whom?

Agent or producer

in order to transact insurance within a given state, an alien insurer must first obtain what?

Certificate of Authority

Insurance is used to transfer what to the insurance company?

Financial responsibility for loss

an insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer's classification in Nevada?

Foreign

What two elements are necessary for a life insurance contract to have a legal purpose?

Insurable Interest and consent

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

Five characteristics of an ideally insurable risk

Loss must be: 1) due to chance 2) definite 3) statistically predictable 4)not catastrophic 5) coverage cannot be mandatory

a person who does not lock the doors to his or her house shows an indifferent attitude. What type of hazard is this?

Morale hazard

An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?

Mutual insurer

What are the three types of hazards

Physical, moral, and morale

If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?

Provide the applicant a Disclosure Authorization Notice

Mutual Company

The type of insurance company organized to return any surplus money to its policyholders

Risk

Uncertainty of loss

pure risk

a situation in which a person can only experience a loss and no gain

Certificate of Authority

a state-issued document empowering an insurance company to become an admitted insurer

Foreign insurer

an insurance company that is formed under the laws of another state

when a change needs to be made on the application for insurance, which is the best method for correcting the information?

complete a new application or ask the applicant to initial the correction on the original application

Hazards

conditions that increase the chance of loss

Certificate of Authority

document required for an insurance company to transact business

three types of insurers

domestic, foreign, and alien. Insurers are classified according to their domicile

Alien Insurer

insurer formed under the laws of another country

stock company

insurer organized to return a profit to the stockholders

What entities make up the Medical Information Bureau?

insurers

Law of Large Numbers

law that is the foundation of the statistical prediction of loss upon which rates for insurance are calculated

Fair Credit Reporting Act

law that protects consumers from the circulation of inaccurate or obsolete information

underwriting

process that insurance companies use to determine whether or not an applicant is insurable?

what type of risk is insurable?

pure risk

Inspection report

report that provides information about the applicant's hobbies, habits and financial status

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 for signature

who owns stock companies?

stockholders

if an applicant does not receive his or her insurance policy, who would be held responsible?

the agent

whose responsibility is it to determine that all the questions on an insurance application are answered?

the agent's

peril

the causes of loss insured against in an insurance company

whom does the insurance agent represent?

the insurance company

in the agent/insurer relationship, who is considered the principal?

the insurer

when agents act within the scope of their contract, their actions will be assumed to be the acts of whom?

the insurer

Loss

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

Fraternal Insurer

type of insurer that is a voluntarily formed organization that provides insurance benefits for members of an affiliated lodge or religious organization with a representative form of government.

Speculative risk

wagering on a sporting event

moral hazard

when an applicant conceals relevant health information on the application

when would a misrepresentation on an insurance application be considered a fraud?

when it is intentional and material

adverse selection

when risks with higher probability of loss are seeking insurance more often than other risks

when is the offer usually made on a contract

when the insurance application is submitted

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