Chapter 1
The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as ...
Utmost Good Faith
Peril
causes of loss (non hazard)
Limit of Liability
face value/amount or death benefit of an individual life insurance policy
Examples of risk retention
self insurance, deductibles, copayments
Elements of insurable risk
the loss must be: due to chance, definite & measurable, statistically predictable, not catastrophic, with large loss exposure, insurance cannot be mandatory
Risk
The uncertainty or change of loss occurring
Which method of dealing with risk is applied when a person purchases insurance?
Transfer
insurance
The Transfer of risk of loss
Risk in insurance terminology refers to
The Uncertainty of financial loss
Which of the following methods of calculating the amount of life insurance needed takes into account the insured's salary and years until retirement ?
The human life value approach
When must insurable interest exist?
At the time of application
Who is eligible for coverage under key person insurance?
The manager of a small store, the pharmacist in a drug store, the executive officer of a company
Conditions that increase the chances of an insured loss occurring are referred to as
Hazards
Which provision states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?
Indemnity
Indemnity
Insureds Cannot recover more than their financial loss
What is the Needs approach to determine amounts of life insurance based upon?
It's based upon Predicted needs of a family after premature death of the insured.
Types of Hazards
Physical, Moral, Morale
The purpose of key person insurance
So business can lessen the risk of financial loss because of premature death
Common personal uses of life insurance
Survivor protection, estate creation and conservation, cash accumulation and liquidity
