General Insurance
Elements of a valid contract
1. Competent parties 2. Legal purpose 3. Offer and acceptance (agreement) 4. Consideration
What documentation grants express authority to an agent ?
Agent's contract with the principal
When insurance is obtained through __________ , the insured's are sharing the risk of loss with other structures of that reciprocal.
Reciprocal Insurer
Insurer's who meet state's financial requirement and approved to transact business in the state are considered authorized or ___________ as a legal insurer
Admitted
Hazard
Anything that increases the chance of loss.
Definitions
Clarifies the meanings of certain terms used in the policy.
Endorsement
Documents attached to the policy that change the policy in some way.
The right to determine the wording of a policy
In insurance policies, contract ambiguities are automatically ruled in the favor of the insured.
Alien Insurer
Incorporated in a country other than the United States
Morale Hazard
When an individual increases the possibility for a loss by behaving carelessly or irresponsibly. Ex: A person drunk driving can cause a loss in a situation.
In insurance , an offer is usually made when __________
the application is submitted
Characteristics of Pure Risk
1. Chance 2. Definite 3. Measurable 4. Predictable *CANNOT BE CATASTROPHIC*
Parts of the insurance contract ( D, I , C , E, D, E)
1. Declarations 2. Insuring agreements 3. Conditions 4. Exclusions 5. Definitions 6. Endorsement
Retention usually results from 3 basic desires of the insured ...
1. To reduce expenses and impose cash flow 2. To increase control of claim reserving and claim settlements 3. To fund losses that cannot be insured.
Avoid Risk
To completely prevent a loss in a situation. ex. To avoid auto collision a person will never get into a car.
Pure Risk
Which involve only the possibility of loss.
Domestic Insurer
Within its home state
Express Authority
Authority granted to an agent through the agents contract.
A ____________ is prepared by only the insurer, the insurer's only option is to ACCEPT or REJECT the policy as it is written. Classified as a "Take it or leave it "
Contract of Adhesion
Insuring agreements
Describes what is covered and the perils the policy insures against.
Lloyd's Association
Does not issue insurance policies or provide insurance protection. Provides meeting to conduct business.
Conditions
Explains the rights and duties of the insured and the insurer under the policy.
Retain Risk
If any loss occurs , they will pay for it themselves. Ex. A person chooses not to get medical insurance because they feel that they do not it.
Risk Retention Group
Is a liability insurance company owed by its member. The members are exposed to similar liability risks by virtue of being in the same business or industry.
Exposure
Is a unit of measurement used to determine rates charged for insurance coverage.
Peril
Is the cause of loss ex: fire , collision , earthquake , tornado , etc.
Exclusions
List property , perils , persons , or situations that are not covered by the policy.
Agreed Value
Represents a fair valuation for the property at the time of the insurance.
Speculative Risk
Risks in which there exists both the possibility of gain and the possibility of loss.
Insurance obtained from or placed with a unauthorized insurer is ____________
Surplus Insurance
Foreign Insurer
Within states other than the state
Physical Hazard
A physical object or hazard that arises from the condition , occupancy , or use of the property itself. Ex. A skateboard left on the porch steps.
Captive Agent
An insurance producer who by contract is bound to write insurance for only one company or group of companies.
Declarations
Explains the who , what , when , and how of the insured.
What does "Components" mean in insurance terms ?
Factors that determine rates
Risk
is the chance or uncertainty of loss.
Aggregate Limit
Is the max limit of a coverage available under a liability policy during a policy year.
Moral Hazard
Means that a person might create a loss situation on purpose just to collect from the insurance company. ex: fake an injury just to collect money from the insurance company.
Concealment
Occurs when a person withholds a material fact that is crucial to making a decision.
Principle of Indemnity
To put a person in the same position before , no more or no less.