Chapter 2 - General Insurance
The only perils for car insurance are
Accident and theft
Another word for authorized insurer
Admitted
When risks with higher probability of loss are seeking insurance more often than other risks this is known as what?
Adverse selection
What factors are considered in determining rates?
Age Medical history Occupation Sex
According to the law of agency a principal is represented by whom?
Agent or producer
The only perils for life and health insurance are
Illness and accident
Who does insurance agent represent
insurance company
KNOW THIS
A risk is a chance that a loss will occur; a hazard increases the probability of loss; a peril is the cause of loss
Strategies used by underwriters to prevent adverse selection?
-Restriction of coverage -Refusal to accept a risk -Accepting a risk at a higher rate
What are methods of handling risk?
Avoidance Retention Sharing Reduction Transfer
Perils
Causes of loss insured against in an insurance policy
What document is required for an insurance company to transact insurance?
Certificate of authority
A producer who fails to separate premium monies from his own personal funds is guilty of
Commingling
Insurer (principal)
Company who issues an insurance policy
When a change needs to be made on the app for insurance, which is the best method fir correcting the info?
Complete a new app or ask the app to initial the correction on the original app.
Hazards
Conditions or situations that increase the probability of an insured loss occuring.
Insurers are classified according to their domicile. What are the three types of insurers?
Domestic foreign and alien
An insurance company is domiciled in Cali and transacts insurance in NV. Is the insurer's classification in NV?
Foreign
Broker
Insurance producer NOT appointed by an insurer.
Reduction
Lessen the severity of a loss
Agent/Producer
Licensed professionals that assist insurers to sell their products/policies
Insurance is a contract that protects the insured from what?
Loss
5 characteristics of an ideally insurable risk
Loss must be : -Due to chance -Definite and measurable -Statistically predictable -Not catastrophic -Coverage cannot be mandatory
Premium
Money paid to insurance company for the policy
Reciprocity/Reciprocal
Mutual interchange of rights and privileges
What type of risk is insurable?
PURE risk ONLY
Policyowner
Person entitled to exercise the rights and privileges in the policy (Insured or policy owner can be the applicant)
Beneficiary
Person who receives the benefits of an insurance policy
3 types of hazards
Physical(health), Moral(criminal activity), Morale(Negative State Of Mind)
Retention
Planned assumption of risk through use of deductibles, co-payments, or self-insurance. Purpose for it is to : -Reduce expense (LOWER PREMIUM) -Fund for losses that cannot be insured -Increase control of claim process and settlement -Allow for situations to be covered that insurers won't
Three types of agent authority
express, implied, apparent
A situation in which a person can only experience a loss and no gain presents what type of risk?
Pure risk
What method do insurers use to protect themselves against catastrophic losses
Reinsurance
Who owns stock companies?
Stockholders
Express authority
The authority granted to an agent through the agent's contract is referred to as
Insured
The one who is protected against a STATED LOSS in the insurance contract. -Stated loss for Life Insurance equals "Loss of Life"
What is insurance
The transfer of the risk of loss from the individual or business entity to an insurance company spreading the costs of unexpected losses to many individuals/
Speculative Risk
There is a chance for gain or loss Ex: Gambling
Pure Risk
There is only the chance for loss OR for things remaining the same
Transfer
Transfer of risk
What is risk
Uncertainty of loss
Sharing
a reciprocal insurance exchange -no insurer is involved
Exposure
a unit of measure used to determine rates charged for insurance coverage.
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
Avoidance
eliminating exposure to a loss
Loss
the reduction decrease or disappearance of value. Insurance provides a means to transfer loss.
in insurance when is the offer usually made on a contract
when app is submitted
