Chapter one

What are the five characteristics of an ideally insurable risk

1.Due to chance 2. definite and measurable 3. statisticallyy predictable 4. not catastrophic 5. coverage cannot be mandatory

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

Alien

What is a warranty in an insurance contract?

An absolute true statement upon which the validity of the insurance contract is based

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

Foreign

Conditions that increase the chance of a loss are known as?

Hazards

insurance is a contract that protects the insured from what?

Loss

What are three types of hazards

Physical, Moral, Morale

what are the strategies used by underwriters to prevent adverse selection

Restriction of coverage, refusal, to accept a risk, and accepting, a risk at a higher rate

For the purpose of insurance, what is risk?

Uncertainty of loss

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

When it is intentional and material

in insurance, when is the 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

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

adverse selection

If an applicant does not receive his or her insurance policy, who would be held responsible?

agent

whose responsibility is it to determine that all the questions and insurance application are answered?

agent

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, consideration, competent parties, and legal purpose.

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

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

certificate of authority

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

complete new application and or find initial original application.

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

domestic, foreign, alien

what are three types of agent authority?

express, implied, apparent

the requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility

fiduciary

an insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer's classification in Nevada?

foreign

What's the best way to handle incomplete insurance applications

give back to applicant to complete

what are two elements are necessary for a life insurance contract to leave a legal purpose?

insurable interest and consent

what do individuals use to transfer their risk of loss to a larger group?

insurance

Whom does an insurance agent represent?

insurance company

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

insurer

in the agent/insurer relationship, who is considered the principal

insurer

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

insurer approves a prepaid application

What entitles make up the Medical Information Bureau?

insurers

The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?

loss

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

moral

a person who does not lock the doors to his or her house shows an indifferent attitude. what type

morale

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 it's policyholders known as?

mutual company

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

peril

What type of risk is insurable?

pure

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

pure risk

If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?

return to applicant and get signature

wagering on a sporting event is known as what type of risk

speculative

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

stock company

Who owns stock companies?

stockholders