General insurance

What is consideration in an insurance contract?

Something of value that each party gives to the other

What are the five characteristics of an ideally insurable risk?

Loss must be 1) due to chance, 2) definite and measurable, 3) statistically predictable, 4) not catastrophic, and 5) Randomly selected

What is consideration on the part of the insurer?

A promise to pay in the event of a loss

What does the term unilateral contract mean?

A unilateral contract is a one-sided contract. This means only one party makes an enforceable promise

What are the four elements of an insurance contract?

Agreement (offer and acceptance), consideration, competent parties, and legal purpose

What are the methods of managing risk?

Avoidance, transfer, sharing, retention, and reduction

What does the term reasonable expectations mean in insurance?

Certain expectations for coverage that a reasonable person would have based on sources other than just the policy language

What provision states that if a policy allows for greater benefits than the financial losses incurred, the insured may be compensated only for the amount lost?

Indemnity

What does indemnify mean in insurance?

To restore and insured to the same financial status as before a loss

Insurance contracts are aleatory in nature. What does that mean?

Unequal values are exchanged between the parties to a contract