512 M1: Principles of Insurance

Identify and establish risk management goals (element of risk management process)

- Don't risk more than you can afford to lose Some losses are small, while others are potentially devastating. For those losses that may be devastating, something generally must be done to mitigate the effect of the loss. Insurance may be a good option for limiting the financial upheaval of a large loss, but it is not the only option. - Consider the odds What is the likelihood that the loss will occur? If a specific loss is virtually certain to occur, the cost of insurance will be prohibitive. In such a case, the premium that the insurance company has to charge would likely equal the expected amount of the loss plus administrative expenses. - Don't risk a lot for a little The cost of ensuring a $300,000 home, including personal property and basic liability coverage, is probably less than 1% of the homes value per year. Why would anyone wanna risk losing their home and be left owning the balance of their mortgage? It makes much more sense to pay a relatively small amount to an insurance company to ensure that if the home is destroyed the funds would be available to rebuild or replace the home. The other side of this rule is designed to remind a person not to pay exorbitantly high premiums to insure something of little value.

Risk financing (handling risk)

- Risk retention (situations where the potential loss is small and it is believe that any losses in card can be covered out of pocket. Also possible that the cost of transferring risk is high, so there may be no reasonable alternative: in this case the risk is retained and if the loss occurs, the individual or business pays the cost) - Risk transfer(primarily insurance, but can be accomplished via waivers or subcontracting. The risk is transferred to an insurance company and exchange for a relatively small fee, the premium. Health, life, disability, and liability risk are examples that are generally transferred.)

Risk of liability based on contract law related to the asset or activity (analyze and evaluate the information to identify risk exposures facing the client)

Acquisition of an asset resulting in liability to a lender, a club membership contract putting certain responsibilities on the client, etc.

Particular (risk classification)

Affect individuals or small groups of people

Personal contract (insurance contract law)

All insurance contracts are "this" because the nature of the risk is related to the individual who owns the contract. Generally they are not transferable without permission of the other party, because the nature of risk may change as a result of the transfer.

Rescission (Equitable Remedies)

An equitable remedy by which the original contract is deemed no from its beginning. The party seeking relief must show fraud, impossibility, misrepresentation of material fact, concealment in the application, or mutual mistake as to a material fact. It's generally is sought by the insurer rather than by the insured because, when done with a contract, the insurer is required to only return premiums, as opposed to paying a larger benefit under the original contract.

Aleatory contract (insurance contract law)

An insurance contract in which the outcome is controlled by chance and the dollars that change hands are often of substantially unequal amounts. The contract owner pays substantially less than what the insurance company would pay in the event a loss occurs.

Conditional contracts (insurance contract law)

An insurance contract that the insurance company pays on the condition that a covered loss occurs.

Offer and acceptance (contract)

An offer must be made by one party and excepted by another party. Specific to insurance, this would be the offer to insure by the insurer, and the acknowledgment and willingness to be insured by the prospective client. When one party states that he will do something if the other agrees to do some thing or pay for it, he has made an offer. The second party agrees, there is acceptance.

Reformation (Equitable Remedies)

And equitable remedy by which the written instrument between parties is changed to express the original intentions of the parties. Before this can be done to a contract, it must be shown that there was a mutual mistake (or a unilateral mistake coupled with actual fraud by the other party), duress, or related misconduct.

Peril (Concept of risk)

Cause of financial loss.

Legal form (contract)

Certain contracts must be in the form prescribed by law. State law requires that real property have a title, and transfer of that title generally must be in writing. For other purposes, and oral contract may be excepted; if it can be proven that the agreement existed, and oral contract is fully enforceable. In most cases, a written document avoid the problem of one person understanding the terms of an agreement to be very different from what the other person understands them to be.

Static (risk classification)

Chances of risk doesn't really change and are due to factors other than economy changes (Death, earthquakes, floods, hurricanes, etc.) - tend to occur regularly and can be insured

Dynamic (risk classification)

Chances of the loss change and vary; Risk that are the results of changes in the economy, such as business cycle or inflation. Insurance does not typically cover these risk

The national Association of insurance commissioners (NAIC)

Composed of the state insurance commissioners from all 50 states. In 1989, this began a process of introducing a series of model laws that, if enacted by a state, would give this state accreditation by this group. This group has no power to force any state to adopt its recommendations, there are good reasons to do so. One of the primary motivations of this group's accreditation program is to maintain state regulation of the insurance industry. If all states become accredited by meeting this group's guidelines, the state Will have a good argument for Congress to leave regulation of the industry to the states. The purpose in establishing the accreditation program is to increase the reliability of the oversight of insurance companies by various states. When an accredited state certified that a given insurance company meets this groups requirements for solvency, the goal is that other states will except the certification rather than undertake its own investigations.

Mortality

Deals with death One of the cornerstones of the actuarial basis of life and health policies Life insurance premiums are based on three factors: this type of rate, investment income, and expenses

Morbidity

Deals with the incident of losing one's health through illness or injury This is a measure of the rate of disability.

The Risk Management Process (The risk management process)

Due to it's complexity and potential severity of the consequences, it is important for practitioners to develop a focused and well-organized process for consistently assessing and addressing risk management issues. Elements of this include: 1. Identify and establish risk management goals 2. gather pertinent data to determine risk exposures 3. analyze and evaluate the information to identify risk exposures facing the client 4. construct a risk management plan 5. implement the recommendation 6. monitor the recommendation for needed changes

Indirect federal regulation of insurance

Examples of this include the following: • Internal revenue code provision is dealing with insurance and investments • SEC • ERISA/PBGC/DOL/IRS • COBRA and the family medical leave act of 1993 • Civil rights act of 1964, as amended; the age discrimination in employment act as amended; and the Americans With Disabilities Act • health insurance portability and accountability act of 1996 (HIPAA) • patient protection and affordable care act of 2010 (ACA) • Dodd-Frank Wall Street reform and consumer protection

Implement the recommendation (element of risk management process)

Handing the client and nicely bound proposal does no good unless the action is taken based on the recommendations. Part of your job is helping clients through the decision making process so they can make informed decisions. Although the client was ultimately decide whether she will do anything at all to implement the financial plan, you can provide a better client service by helping to implement the plan

Handling Risk Matrix (Handling risk)

High Severity: risk avoidance/reduction | risk transfer Low Severity: risk retention/reduction | risk retention High frequency: risk avoidance/ reduction | risk retention/ reduction Low frequency: risk transfer | risk retention

Assumption of the risk (Legal Defense to Liability)

If a party recognizes and understands the danger in an activity and voluntarily chooses to encounter it, then another cannot be held responsible for the injury. In some states, if you choose to ride a horse, you cannot hold the horse owner liable for any injuries.

Gather pertinent data to determine risk exposures (element of risk management process)

If a total risk approach is being taken, pertinent data includes just about everything you can learn about the client. Potential sources of necessary information include the following areas: Property issues - actual policies for homeowners, automobile, watercraft, inland marine or floaters policies, and any other property coverage policies should be collected. - inventory of possessions and animals. And inventory will allow you to recognize which possessions make seed the internal policies limits and or exceed the amount of loss the client is willing to except. Many people don't think about animals as being possessions, but they are potential causes of loss both from property loss or injury to others. - upgrades and changes to the home or possessions that may not have been communicated to the insurance company Personal illness and injury issues - actual policies for medical, disability, accident, cancer, long-term care, or other specialty coverage need to be collected. You will need to evaluate medical payment sections of homeowners, auto, and umbrella policies. - The hobbies and activities the client and their family like to engage in may be excluded by insurance or add additional risk. Liability issues - automobile, homeowners, watercraft, or other special forms of insurance and the umbrella or extended coverage policy is all impact liability protection. - statement of financial position, business valuations, tax returns, and paystub's will allow you to assess how much you need to protect. - Volunteer activities, hobbies, professional duties, and information about the jobs held will let you assess the type of liability issues that could arise from non-possessions.

Contributory Negligence (Legal Defense to Liability)

If any negligence on the part of the injured party contributes to the injury, it solves the other party of liability. This is a strict his approach and has been replaced by comparative negligence.

Unilateral contract (insurance contract law)

In this type of contract only one party can enforce it. The policy owner can enforce the terms of the contract, but the insurance company may not force the policy owner to pay the premium.

Options of the insurer

Insurance contracts contain various provisions for settling claims. With certain types of insurance contracts, the insured has the settlement option; in other words, the insured has a settlement option. With a property loss, the insurer generally has three sets of options and setting claims. Those options are • replacement, • abandonment and salvage, and • pair or set

Speculative (risk classification)

Involves both a chance of loss and the chance of gain. (Investments, gambling, etc.) these risks are not insurable

Pure (risk classification)

Involves only the chance of loss or no loss; there's no chance of gain. These risks are insurable

Fundamental (risk classification)

Large Groups - social programs to protect against fundamental (large) risk — Employers (worker's compensation) — Retirees (social security) — Poor (Medicaid) — Elderly (Medicare) Examples include recessions and earthquakes

Tort law risk exposure (analyze and evaluate the information to identify risk exposures facing the client)

Liability for the loss resulting from the use of an asset or from an activity — a boating accident, practicing one's profession, etc.

Asset related risk exposure (analyze and evaluate the information to identify risk exposures facing the client)

Loss of the asset itself, loss of the use of the asset, and other associated losses.

Insured's duties (The loss adjustment process)

Most insurance policies contain the following seven provisions that deal with "this" pertaining to loss settlement • Notice of loss: The insured is required to give notice of a loss to allow the insurer to investigate the loss • protection of property: A provision (example: a policy condition) that requires the insurer to protect the damaged property after a loss • inventory: And itemized report that must contain the quantity, a description, the actual cash value or replacement cost, and the amount of loss of the damaged property • evidence: The insured may be required to show the damaged property to the insure as often as reasonably asked • proof of loss: generally a form the insured completes documenting the loss. Most insurers supply the insured with proof of loss for completion. • assistance and cooperation: The insured is required to cooperate with and provide assistance to the insurer when a loss occurs. Cooperation and assistance include attending hearings and trials, presenting evidence, and supplying medical reports. • appraisal: necessary to avoid litigation when the insured and insurer cannot agree on the actual cash value or the amount of the loss

Contract (insurance contract law)

Not simply an agreement; it is a legally enforceable agreement and there are certain elements that need to be in place for it to be legally enforceable. Some of the elements specific to insurance transactions are included in the following list: - Offer and acceptance - consideration - legal object - competent parties - legal form

Misrepresentation (insurance contract law)

Occurs when a false statement is made that at least partially induces the company to issue the contract. For this to void a contract, it must be material.

Competent parties (contract)

Parties to the agreement must be capable of contracting in the eyes of the law. Minors are not capable of entering into a legal contract. However, such contracts may be voidable by the minor.

Analyze and evaluate the information to identify risk exposures facing the client (element of risk management process)

Processing the information necessary to identify risk exposures involves evaluating each of the clients assets and activities to look for risk exposures. Another way you may see risks identified as according to the three basic types of risk exposures. Those exposure are: • asset-related • risk of liability based on contract law related to the asset or activity • tort law related

Monitor the recommendations for needed changes (element of risk management process)

Recommendations need to be monitored because things change over time and reviewing and updating recommendations gives you the opportunity to catch new or missed risk exposures, obtain missing information, and correct previous mistakes. The client situation will change, as well available options for meeting the clients needs. Insurance company changes, premium changes, provisions in the policies changes, and legal changes can all have an impact on an existing risk management plan. the client situation

Attractive Nuisance (important tort terms)

Refers to something about a property that is likely to attract and possibly injured children. A high degree of care is imposed on the landowner to use do you care to discover children on the property, take steps such as installing fences in lock super event harm, and warn them in order to protect them.

Equitable Remedies

Remedies used when a contract must be changed for the reason of either rescission or reformation

Agent (legal relationships)

Represents the insurer Acts of the insurance agent within the scope of express, implied, or apparent authority are considered acts of the insurer. Their authority to legally bind a principal (ensure, in this case) stems from three sources: • express authority, • implied authority, and • apparent authority (also known as ostensible authority)

Construct a risk management plan (element of risk management process)

Requires a planner to consider alternative risk treatment approaches for each risk exposure and select the most appropriate option. Also the point at which it's very important to involve the client.

Risk control (Handling risk)

Risk management technique that seeks to minimize the risk of loss. Includes the following: - Risk avoidance (avoid the risk entirely; this isn't always possible to do) - Risk reduction (using safety year to reduce the severity of the risk)

Selecting insurance agents and companies

Selecting an agent, competence and inclination to service, experience, training, education, and specialization, reputation

Self-insurance

Some businesses will use self insurance and retain significant risk. First of all is it important that as a planner that we recognize that self insurance is somewhat of an oxymoron. Insurance is based on the concept of sharing the risk of loss with a larger number of people who may suffer a similar loss. It is not possible to share with yourself.

Warranty (insurance contract law)

Statement by the applicant that all the information on the application is absolutely true. Under strict application of the [blank] doctrine, any mistake, however insignificant, would permit the company to void or resend the contract.

Risk Classifications (risk management and terminology)

Static, dynamic, fundamental, particular, pure and speculative

Hazard (Concept of risk)

The condition that increases the potential for loss. It can either be: - physical - moral (dishonesty) -> result of the client being unethical or misrepresenting himself - morale (indifference) -> indifference to loss that creates carelessness and increases the chance of loss

Risk (Concept of risk)

The dispersion of actual from expected results (uncertainty). The possibility of suffering harm, loss, or injury. This represents the possibility of a loss or a negative deviation from a desired outcome.

Insurance contracts actions and provisions (insurance contract law)

The four basic sections of this are declarations, ensuring agreement, exclusions, and conditions Declarations: is a section that includes information provided by the applicant Insuring agreement: identifies what is insured, for what amount, and under what conditions Exclusions: is a section that identify circumstances or situations that would preclude the company from paying a claim when a loss to the insured property or person occurs Conditions: is a section of the policy that states the rights and duties of the insurance company and the policy owner

(Risk and risk sharing)

The insurance company must be capable of ascertaining that the risk in the process of being insured comply with the elements of an insurable risk and that the adverse selection is controlled. To do this the company sets up gatekeeper mechanisms. The company creates risk categories in establish guidelines that, if followed when selecting risk to be insured, will minimize the possibility of problems. Note that these guidelines and that deviation from them may be appropriate in some situations. Another technique is determining how much risk sharing through deductibles, coinsurance or limits will be establish to discourage moral hazard or morale hazard and to share the risk with the client.

Concealment (insurance contract law)

The intentional withholding of material information, violates the requirement of utmost good faith even if no specific question arises about that information.

Legal object (contract)

The purpose of the contract. No one may enforce a contract that ask one person to do something illegal. An illegal contract will not be enforced.

Independent agents (Insurance producers)

These agents generally represent several insurance companies doing business under the American or independent agency insurance system. These agents decide where they will place their business, dividing the policies they sell among those various companies they represent while, ideally, basing that on the needs of the client and the suitability of the company.

Surplus-line, excess-line brokers or agents (Insurance producers)

These agents handle any type of insurance I cannot be purchased using normal distribution channels within a given state. An individual may not be able to obtain coverage from an admitted (in-state) insurer. They have the authority to go outside the state and place the business with a surplus-line (nonadmitted) insurer if the necessary coverage cannot be obtained from an insurer admitted in the state. They are found almost exclusively in the property and casualty field.

Captive agents (Insurance producers)

These agents sell property and liability insurance for companies that are known as direct writers. The agent represents only one company or one group of companies under common ownership. Most of these companies do not allow their agents to contract with other insurance companies. Some may allow their agents to place business with other companies only after they have declined the business .

Brokers (Insurance producers / legal relationship)

These are individuals who are licensed with and can work with many insurance. They are the agent of the insurance buyer. They represent a prospective insured and generally cannot find the prospective insured to an insurance contract.

Handling risk (Handling risk)

These four basic methods are divided into two groups: risk control and risk financing Risk control includes avoidance and reduction; while risk financing includes retention and transfer

Insurance producers (marketing of insurance)

These individuals no work with in the marketing systems of insurance companies. The major types are: - Independent agents, - captive agents, - career agents, - producing general agents, - brokers, - surplus-line or excess-line brokers or agents, and - solicitors

Insurance contracts (insurance contract law)

These use certain contractual concepts and have characteristics that are combined nowhere else in this manner. These concepts include: aleatory, adhesion, conditional, indemnity, personal, unilateral, and upmost good faith.

Implied authority

This authority is not expressively granted, but that which the agent is assumed to have an order to transact the insurance business. An agent has authority to perform all incidental acts that are necessary to fulfill her duties.

Express authority

This authority is specifically conferred on the agent. This authority is stated in the agents contract with the insured. The insured may specify the types of policies, the types of coverage, and the amount of insurance that the agent may write.

Apparent Authority

This authority of the appearance of, or assumption of, authority based on the actions, words, or deeds of the agent/insured. This authority is derived from the relationship between the client and the agent. If a third-party (insured) is led to believe that the agent is acting within the scope of reasonable and appropriate authority, the insurer can be liable for that acts of the agent.

Indemnity (insurance contract law)

This concept is based on the idea that when people suffer losses, they should be made whole. In other words they should be put back in the position they would have been had the loss not occurred. Insurer should not profit from a loss, but should merely be reimbursed for the loss. This concept is supported by various policy provisions including: - Requirement for insurable interest, - payment of actual cash value (ACV), - other insurance provisions, and - provision for subrogation

Upmost Good Faith (insurance contract law)

This concept is critical to insurance contracts. If applicants for insurance had to prove every fact on an application, or if the insurance company researched every fact, the additional cost of writing insurance would be excessive. Therefore this concept is used during underwriting. If the insurance company can make any of the following three claims it will believe that this concept was not maintained: - misrepresentation - warranties - concealment

Insurable interest (liability of the insurer)

This exists when the interested party will suffer a financial loss if the insured loss occurred

Concepts of risk (risk management and terminology)

This includes: - risk - peril - hazard

Abandonment and salvage (options of the insurer)

This involves surrendering ownership of the damaged property to the insurance company so that a total loss can be claimed. And this other option is property taken over and sold by the insured to reduce its loss. Generally these rights are found in the insurance contracts. And insured, however, does not have the right to choose.

Voidable contract (insurance contract law)

This is a contract where one party has an option avoiding the contract, but the other party is bound. Example: or a contract is made with a minor, the contract is voidable by the minor; until the minor reaches the age of the majority, he can void the contract, but if not voided it remains a legal contract.

Last Clear Chance (Legal Defense to Liability)

This is a modification of the contributory negligence rule in which contributory negligence on the part of the injured party will not bar recovery if the other party, immediately prior to the accident, had a last clear chance to prevent the accident but failed to seize the chance.

Deductibles (liability of the insurer)

This is a retained risk. It is a portion of the insured losses that the insured is expected to pay before the insurance company pays anything.

The loss adjustment process

This is a series of steps that are taking one and insured loss occurs. When individuals suffering financial loss end of property, medical expenses, disability, or death - they generally want their insurance company to make them whole. The process is known as indemnification, and it involves this process. - Insurance duties - adjuster steps - options of the insured

Comparative Negligence (Legal Defense to Liability)

This is an alternative to the contributory negligence defense; it reduces the defendants liability and some proportion based on the injured parties contribution to the total negligence causing the injury. If the jury determines that the injured party was 20% to blame for the injury, the plaintiffs award might be reduced by 20%.

Doctrine of Waiver

This is means that a party, by her own actions (or the actions of her agent), has voluntarily relinquish or surrendered a known right. It assumes that parties, with full knowledge of material facts do, or fail to do, something that is inconsistent with their rights under the contract or inconsistent with the intention to rely on such rights. No action is required on the other party. Example: consider a situation in which a claim adjuster agrees to pay a claim, even though the insured did not comply with all policy conditions (such as, failure to protect property after an accident)

Void contract (insurance contract law)

This is not enforceable and lacks one or more of the preceding requirements of an enforceable contract.

Consideration (contract)

This is the act or the payment for the act. Each party must give the other something of value. The insured pays the initial premium, and the ensure bind the coverage.

Policy limits or face value (liability of the insurer)

This is the maximum amount that will be paid when the insured loss occurs

Subrogation (liability of the insurer)

This is the right of an insurance company that has paid for a loss to recover its payments if it is determined that a different insurance company or a person is responsible for the loss and is required to pay for it. This prevents the insured from collecting twice on the same loss.

Absolute Liability (important tort terms)

This is the standard and pose when a person or organization is held responsible for any damages, even when there has been no negligence in the usual sense of the word. This generally is a case in which someone causes an extra-hazardous situation through her activities (example: keeping wild animals, blasting, etc.) Also known as strict liability and it is important to remember that liability and faults are not synonyms. Liability can exist in the absence of fault, and clients need to be aware of this potential risk exposure.

Actual cash value (liability of the insurer)

This is used with property losses, it is a replacement cost minus the depreciation

Vicarious Liability (important tort terms)

This is when someone is held liable for the acts of another (example: the persons child, employee, or agent).

Negligence per se (important tort terms)

This is where the duty or standard of care owned by the defendant is determined by reference to a stature. This can happen when a statute that was enacted to protect the class of people to which the plaintiff belongs against the type of harm that occurred in the case. The other elements of tort still must be proved.

Coinsurance (liability of the insurer)

This may be a splitting of costs, or it may refer to a minimum percentage of insurance that is required to avoid being penalized for an adequate insurance when there are partial losses.

Pair or set (options of the insurer)

This option gives the insure the right to repair or replace any part, to restore a pair (example: of earrings) or set (example: of silverware) to its value before the loss, or to pay the difference between the actual cash value of the property before and after the loss.

Doctrine of Estoppel

This prevents a party from asserting a right to which he would otherwise be entitled where, because of the parties own actions or behavior, he must lead someone (even though unintentionally) who relied on this understanding to his own detriment. It is based on the idea that we are one of two innocent persons must suffer, the one who caused a loss must bear it. Example: assume that Ralph wishes to set up an office in his home. He intends to buy significant amount of computer equipment to use during his spare time to do calculations he needs for work. He writes to the insurance agent, Mary. She (not having a lot of experience with people putting large amount of computer equipment in their homes) sends him a note saying that because the computer equipment will be in the home, it will be covered by his homeowners policy regardless of its value, and no additional coverage is needed. Ralph relies on Mary statement, and buys $20,000 worth of computer equipment, installs it in the house, and worries no more about insurance coverage. Later that year, a lightning strike destroyed the computer equipment. In this situation it is likely that the insurance company will be able to deny Ralph's claim. But because Ralph either would not have purchased the equipment or would've arranged another insurance had the company's agent knowingly/ unknowingly mislead him, Ralph may assert an estopple as a defense against any attempt by the company to deny his claim. This is because the company's agent, who's knowledge is imputed in the imputed to the company because of the agent-principal relationship, Mislead Ralph and caused him to change his position to his detriment. Thus, the insurance company will be estopped from denying Ralphs claim.

Other insurance (liability of the insurer)

This provision states that when a loss occurs, and there is more than one insurance policy covering the same loss, the insured will not profit from the loss. Either one policy is considered primary with the other paying for any uncovered loss, or the policies pay prorated shares of the loss.

State regulation (regulation of the insurance industry)

This regulation of insurance companies involves three areas of government: legislative, executive (administrative), and judicial. The legislature passes laws that govern conduct of the insurance business. These laws cover the requirements involved in organizing an insurance company, standards of solvency, regulation of rates and investments, and licensing of agents. The insurance department (administrative/executive), headed by the insurance commissioner, sets regulations implementing legislation and administers compliance. The courts (judiciary) interpret and apply the laws and regulations applicable to insurers and interpret policy provisions. The also provide insurers with recourse for a review of the actions of regulators and the constitutionality of laws passed by the legislature.

Contract of Adhesion (insurance contract law)

This term basically means that if you wrote the contract, you're stuck with any ambiguities that you created. A contract of this kind is one that is prepared by one party and either excepted or rejected by another. There's no negotiation in the process.

The underwriting process (Underwriting and loss adjustment)

Those functioning through this process have the job of determining whether a risk is reasonable, and the degree to which they are willing to except it (on behalf of the insurance company).

Adjuster's steps (The loss adjustment process)

Three steps followed buy this representative of the insured in the loss adjustment process. • investigation • proof of loss (sometimes this requires helping the insured complete the necessary forms) • payment or denial

Replacement (options of the insurer)

Under this option, the insurer may repair or replace damage property with that of like kind and quality rather than pay the actual cash value our replacement cost of the loss.

Career agents (Insurance producers)

Usually life insurance agents in a general agency or company owned office under the agency management for the branch office systems. In some cases they're also captive agents, but in many situations these agents maintain selling contracts with other companies to better serve their clients. These agents often choose this form of operation because of the support provided by the agency and the company. These agents have production requirements in order to maintain their contracts.

Torts (Legal terms and liability exposures)

When someone causes physical, emotional, or financial harm to another. The person who commits such wrong is called a tortfeasor. They can be intentional or unintentional and are civil (versus criminal). It's when someone causes physical harm, emotional harm, or a financial loss to another individual. If the person breaks a law, they have committed a crime, or a public wrong. Unintentional generally are those activities that involve negligence.

Selecting an Insurance Company

While it is important to choose a qualified agent, it is also important to choose a good company. Understanding what to look for in a good company gives you the ability to discuss alternative options with the agent and explain the choice to your client. A. M. Best, Demotech, Fitch ratings, Moody's , standard and poor's, thestreet.com ratings (former formally called Weiss research) and using the information

Four elements of negligence

• Aduties owed (individuals have a duty to drive their vehicles in a safe manner) •the duty was breached (individuals rear ended another car) • there were actual damages (damage to another car) • there was proximate cause (in on a uninterrupted sequence of events that brought damage).

Producing general agents (Insurance producers)

• Generally produce the majority of their income by selling insurance personally, • do not have specified territories, and • have authority to hire agents to work for them if they wish