General Insurance
pure risk
A chance of loss or no loss, but no chance of gain. (only pure risk are insurable)
sharing
A method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss who share the losses that occur within that group.
Insured
A person covered by an insurance policy
fiduciary relationship
A relationship of trust and confidence, as between trustee and beneficiary, attorney and client, or principal and agent.
Material Misrepresentation
A statement that, if discovered, would alter the underwriting decision of the insurance company.
exposure
A unit of measure used to determine rates charged for insurance coverage. (age of the insured, medical history, occupation, sex)
warranty
An absolutely true statement upon which the validity of the insurance policy depends.
contract
An agreement between two or more parties enforceable by law
Authorized Insurer
An insurance company that has qualified and received a Certificate of Authority from the Department of Insurance to transact insurance in the state.
Foreign Insurer
An insurance company that is incorporated in another state.
Domestic Insurer
An insurance company that is incorporated in the state.
Alien Insurer
An insurance company that is incorporated outside the United States.
Contract of Adhesion
Any contract in which one party must either accept the agreement as written by the other party or reject it.
morale hazards
Arise from a state of mind that causes indifference to loss, such as carelessness
Implied Authority
Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal.
hazard
Conditions or situations that increase the probability of an insured loss occurring.
Statistically predictable
Insurers must be able to estimate the average frequency and severity of future losses and set appropriate premium rates.
mutual companies
Owned by the policy owners and issue participating policies. (dividends are not guaranteed)
Stock Companies
Owned by the stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses.
retention
Planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance.
Apparent Authority
The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
Express Authority
The authority granted to an agent by means of the agent's written contract.
Law of Agency
The law that governs the relationship between a principal and his or her agent.
risk
The uncertainty or chance of a loss occurring.
Market conduct
The way companies and producers should conduct their business.
Randomly selected and large loss exposure
There must be a sufficiently large pool of the insured that represents a random selection of risks in terms of age, gender, occupation, health and economic status, and geographic location.
insurance policy
a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events
homogeneous
a large number of units having the same or similar exposure to loss
Agent/Producer
a legal representative of an insurance company; the classification of producer usually includes agents and brokers; agents are the agents of the insurer
Due to chance
a loss that is outside the insured's control
defenite and measurable
a loss that is specific as to the cause, time, place and amount. an insurer must be able to determine how much the benefit will be and when it becomes payable
Reciprocity
a mutual interchange of rights and privileges
Applicant
a person applying for insurance
Professionalism
a person is engaged in an occupation requiring an advanced level of training, knowledge, or skill
beneficiary
a person who receives the benefits of an insurance policy
indemnity
a provision in an insurance policy that states that in the event of loss, an insured or beneficiary is permitted to collect only to the extent of the financial loss, and is not allowed to gain financially because of the exsistence of an insurance contract (insured cannot recover more than their loss)
speculative risk
a situation in which either profit or loss is possible
insurance
a transfer of risk of loss. the cost of an insured's loss is transferred over to the insurer and spread among other insureds
Aleatory Contract
an exchange of unequal amounts or values
nonauthorized insurer
an insurance company that has not applied, or applied and been denied, a Certificate of Authority and may not transact insurance
Broker
an insurance producer not appointed by an insurer and is deemed to represent the client
reduction
attempt to lessen the possibility or severity of a loss
conditional contract
certain conditions must be met by the policyowner and the company in order for the contract to be executed, and before each party fulfills its obligations
avoidance
eliminating exposure to a loss
physical hazards
individual characteristics that increase the chances of the cause of loss
Unilateral Contract
only one of the parties to the contract is legally bound to do anything
representations
statements believed to be true to the best of one's knowledge, but they are not guaranteed to be true
moral hazards
tendencies towards increased risk
perils
the causes of loss insured against in an insurance policy
Insurer
the company who issues an insurance policy
Personal Contract
the contract is between the insured and the insurer
fraud
the intentional misrepresentation or intentional concealment of a material fact used to induce another party to make or refrain from making a contract, or to decieve or cheat a party
Law of Large Numbers
the larger the number of people with a similar exposure to loss, the more predictable actual losses will be
Comcealment
the legal term of the intentional withholding of information of a material fact that is crucial in making a decision
domicile
the location where an insurer is incorporated, not necessarily where the insurer conducts business
transfer
the loss is borne by another party
Premium
the money paid to the insurance company for the insurance policy
Insured consideration
the payment of premium and statements on the application
Policyowner
the person entitled to exercise the rights and privileges in the policy
Insurer's Consideration
the promise to pay for losses
loss
the reduction, decrease, or disappearance of value of the person or property insured in a policy
Not catastrophic
there must be limits that the loss can't exceed
nonparticipating policy
typically issued by stock companies, do not allow policyowners to participate in dividends