Chapter One: General Insurance
Exposure
A unit of measure to determine rates charged for insurance coverage. Such as the age of the insured, medical history, occupation, and sex.
Homogeneous
A large number of units having the same or similar exposure to loss.
Dividen
Return of unused premium.
AM Best
AM Best & Company assigns ratings to life, property, and casualty insurance companies based upon the financial stability of the insurer.
Elements of a legal contract
Agreement, Consideration, Competent Parties, and Legal Purpose.
Aleatory
An exchange of unequal amounts or values.
Captive Insurer
Corporations organize captive insurers in order to obtain lower insurance rates and avoid the uncertainties and risks associated with commercial insurance.
Insurable Risk Examples
Due to chance, definite and measurable, statistically predictable, not catastrophic, and randomly selected and large loss exposure.
Surplus Lines
Insurance that is not available in the usual market place from admitted insurers.
Speculative Risk
Involves the opportunity for either loss or gain. An example of speculative risk is gambling. These types of risks are not insurable.
Who might receive dividends from a mutual insurer?
Policyholders
Which services are associated with Standard & Poor's and AM Best?
Rating the financial strength of insurance companies.
Pure Risk
Refers to situations that can only result in a loss or no charge. There is no opportunity for financial gain. Pure risk is the only type of risk that insurances companies are willing to accept.
Indemnity
Reimbursement of only the financial loss of the insured.
Hazard is best defined as?
Something that increases the risk of loss. Hazards are conditions or situations that increase the probability of an insured loss occurring.
Perils
The causes of loss insured against in an insurance policy.
Risk Retention
The planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance.
Avoidance
Eliminating exposure to a loss.
Adverse Selection
The insuring of risks that are more prone to losses than the average risk.