General Insurance Concepts
Reduction
The insured exercised and eliminated fatty foods, which method of dealing with risk does this scenario described
Utmost good faith
The insurer must be able to rely on the statements in the application and the insured rely on the insured to pay valid claims. In the insurance contract, this is referred to as?
Loss
The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as
Fiduciary Responsibility
The requirement that agents not commingle insurance monies with their own funds is known as
Avoidance
The risk management technique that is used to prevent a specific loss by not exposing oneself
consideration
a promise to pay in event of a loss
Pure risk
a risk that is insurable is a
utmost good faith
a term that implies that there will be no fraud, misrepresentation, or concealment between parties
indemnity
reimbursement is referred to as
indemnity
restore you to the condition you were at before you had a loss
Reasonable Expectations
if a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of
uncertain
in insurance, the loss must be
domestic
in state business is
Person completed secondary education
in terms of parties to contract, which does not describe a competent party
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company.
material misrepresentation is
factor to determine rates
mobility tables are a
factor to determine rates
mortality tables are a
implied authority
not express or written in the contract but the producer is assumed to have to transact business
alien
out of country business is
foreign
out of state business is
stock and mutual
ownership insurance companies have both
hazards
probability of a loss
competent parties
when both parties are legal of age, mentally able to understand the contract, and not under the influence is
When underwriter approves coverage
when does acceptance occur an an insurance contract?
Express and implied
which of the following are the authorities that an agent can hold
Investing in the stock market
Not described by a person as a risk avoidance
Implied
Not stated in an agent's contract but is required for the agent to conduct business
legal purpose
when a contract is legal and not against public policy
transfer
when a loss is borne to another party
Types of domicile
1.Domestic 2.Foreign 3.Alien
The 5 risk management
1.Sharing 2. Transfer 3.Retention 4.Avoidance 5. Reduction
5 contract characteristics
1.adhesion 2.aleatory 3.conditional 4.personal 5.unilateral
insurance may be defined as
A contract to indemnify you
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.
Peril
A tornado destroyed property, this is an example of
Concealment
Act of withholding material information that would be crucial to an underwriting decision is
factor to determine rates
Age is a
Apparent
Agent using logo of company so applicants assume the agent is authorized to transact on behalf of insurance
The policy will not be affected
An individual applies for life policy, he suffered a head injury from an accident he has been in the hospitalized for a drug abuse and does not remember this for applying for insurance. The insurer issue the policy and learns of his history one year later. What will happen
material misrepresentation
An insured stated on her application for life insurance that she never had a heart attack, when she has a series of heart attacks, which explains the reason a death benefit is denied
Conditions
Because insurance policy is a legal contract, it must conform to the state laws governing contracts which required all elements except
Elements of insurance risk
Due to chance , Definite and measurable , Predictable, Not catastrophic, Large exposure, randomly selected exposure
Hazard
Events or conditions that increase the chances of an insured loss occurring are referred to as
factor to determine rates
Gender is a
Moral Hazard
Individuals tendency to be dishonest would be indicative of
Loss
Insurance is a contract by which one seeks to protect another from a
Risk
Insurance is the transfer of
Not being honest about health on application for insurance
Insurer may suspect that a moral hazard exist if the policy holder
loss due to chance
Loss out of your control is a
factor to determine rates
Medical history is a
Hazard
Moral, Morale, or Physical are what
1. sufficient of homogeneous exposure units to make losses predictable 2. the loss produced by the risk must be definite 3.the loss cannot be catastrophic
Not all losses are insurable, the requirements must include
The loss may be intentional
Not all losses are insurable, the requirements must include all except
factor to determine rates
Occupancy is a
All of the following are examples of risk retention except
Premiums
Indemnity
Principle that states that if a policy allows for a greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost
Considered true to the best of the applicants knowledge
Representations are written or oral statements made by the applicant that are
Express
The authority granted to an agent through agents contract
Loss
The basis for a claim against an insurance policy
Hazard
Something that increases the risk of loss
Peril
The causes of loss insured against insurance policy are known as
The trust that a client places in the producer in regard to handling premiums
Which of the following is an example of a producers fiduciary duty
Mutual, stock, domicile
What are types of insurance
Agent's contract with the principal
What documentation grants express authority to an agents
Insurance
What individuals use to transfer their risk of loss to a larger group
Principal
What is the term for the entity that an agent represents regarding contractual agreements with third parties
Consideration
When an insured makes truthful statements on the application for insurance and pays premium, this is
Concealment
When applying for an individual life insurance policy, an applicant states that he went to the doctors for nausea but failed to say that he was also having severe chest pain
If it is intentional and material
When would a misrepresentation on the application be considered fraud
catastrophic losses
Which is not a characteristic of an insurable risk
Reciprocal
Which of the following insurance options would be considered a risk-sharing arrangement
The application given to prospective insured
Which of the following is NOT the consideration in a policy?
producer
agent may be known as
fiduciary responsibility
agents that handles funds of the insured and insurer, a.k.a a person of trust has
apparent authority
assumption of authority based on actions, words, or deeds
retention
assumption of risk by an insured, through use of deductibles, co-payments, or self insurance.
reduction
attempt to lessen the possibility of severity of a loss
certificate to conduct business
authorize and unauthorize must have
indemnity
collecting only to the extent of the financial/economic loss
domestic, foreign, alien
domicile includes
acceptance, competent parties, consideration, legal purpose
elements of legal contract
avoidance
eliminating exposure of a loss
agreement, consideration, compentent parties, legal purpose
four required elements of an insurance contract?
express authority
grant to a producer by means of the agents contract
homogenous units
group of humans that experience similar risks
Warranty
guaranteed to be true and untrue, may breach and insurance contract is
factor to determine rates
homogenous units are a
consideration
something of value that each party gives to each other
representation
statements believed to be true to the best of one's knowledge, but not guaranteed to be true
law of large numbers
the larger the number of people with similar exposure to loss, the more predictable the loss will be
the relationship between the principal and the producer
the law of agency defines
transfer
the most effective way to handle a risk
expressed, implied, apparent
the three types of producer authority are
adverse selection
undesirable risks are known as
avoidance, retention, sharing, reduction, transfer
what are the methods of handling risks