Insurance

When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?

Adverse selection

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

Agent or producer

What are the four elements of an insurance contract?

Agreement (offer and acceptance), consideration, competent parties, and legal purpose

What type of insurer is formed under the laws of another country?

Alien

A state-issued document empowering an insurance company to become an admitted insurer is called what?

Certificate of Authority

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

Certificate of Authority

What document is required for an insurance company to transact insurance?

Certificate of Authority

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

Complete a new application or ask the applicant to initial the correct on the original application

Insurers are classified according to their domicile. What are the three types of insurers?

Domestic, foreign, and alien

What are three types of agent authority?

Express, implied and apparent

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 the insurers classification in Nevada?

Foreign

An insurance company that is formed under the laws of another state is known as what type of insurer?

Foreign

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

Fraternal Insurer

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 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

Who does an insurance agent represent?

Insurance company

In the agent insurer relationship, who is considered the principal?

Insurer

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

Insurer

What entities make up the Medical Information Bureau (MIB)?

Insurers

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

Law of large numbers

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

What are the five characteristics of an ideally insurable risk?

Loss must be 1) due to chance, 2) definite and measurable, 3) statistically predictable, 4) not catastrophic, and 5) Coverage cannot be mandatory.

A person who does not lock the doors to his or her house shows an indifferent attitude. The person presents what type of hazard?

Molale

An applicant conceals relevant health information on the application. The application present what type of hazard?

Moral

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

The type of insurance company organized to return any surplus money to its policy holders is known as what?

Mutual company

What is the term for the causes of loss insured against in an insurance policy?

Peril

What are the three types of hazards?

Physical, moral and morale

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

Provide the applicant a Disclosure Authorization Notice

What type of risk is insurable?

Pure

A situation in which a person can only experience a loss and no gain presents what type of risk?

Pure risk

What are the strategies used by underwriters to prevent adverse selection?

Restriction of coverage,m 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 an applicant's signature on the insurance application, what must he insurer do?

Send the application back to the applicant for signature

Wagering on a sporting event is known as what types of risk?

Speculative

The insurer organized to return a profit to the stockholders is what type of insurer?

Stock company

Who owns stock companies?

Stockholders

What law protects consumers from the circulation of inaccurate or obsolete information?

The Fair Credit Reporting Act

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

For the purpose of insurance, what is risk?

Uncertainty of loss

What is the name of the process that insurance companies use to determine whether or not an application is insurable?

Underwriting

In forming an insurance contract, when does an acceptance usually occur?

When an insurer approves a prepaid application

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

When it is intentional or material

In insurance, when is an offer usually made on a contract?

When the insurance application is submitted

When does an insurance policy go into effect?

When the policy is delivered and the premium is paid