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