life Insurance-General

Moral Hazard

an applicant that is dishonest in completing an application for insurance or submitting fraudulent claims would be deemed a moral hazard and could be uninsurable from an underwriting standpoint.

Risk Avoidance

avoiding any behavior that could create the possibility of a loss.

Reciprocals

insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers, collectively known as a Reciprocal Insurance Company or Exchange. The company is put into effect and administered through an attorney-in-fact common to all persons. Subscribers agree to become liable for their share of losses and expenses incurred among all subscribers, and they authorize the attorney-in-fact to manage and operate the exchange.

Implied Authority

not written in the agent's contract but it is required in order for the agent to conduct business. This exists because not every single detail of an agent's authority can be written in a contract.

Contract of Adhesion

prepared by one of the parties (insurer) and accepted or rejected by the other party (insured). Insurance policies are not drawn up through negotiations, and an insured has little to say about it's provisions. In other words, insurance contracts are offered on a take it or leave it basis by an insurer. Any ambiguities in the contract will be settled in favor of the insured.

Fiduciary Responsibility

The requirement that agents not commingle insurance monies with their own funds.

Estoppel

a legal process that can be used to prevent a party to a contract from re-asserting a right or privilege after that right or privilege has been waived. Estoppel is a legal consequence of a waiver.

Warranty

a statement guaranteed to be true. When an applicant is applying for an insurance contract, the statements he or she makes are generally not warranties but representations.

Apparent Authority

also known as perceived authority, is the appearance or the assumption of authority based on the actions, words or deeds of the principal or because of circumstances the principal created.

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.

Conditional

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable.

Fiduciary

Fiduciary refers to a position of trust. When an agent is handling the premiums that belong to an insurance company, they are acting in a fiduciary capacity.

Consideration

something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application. The consideration on the part of the insurer is the promise to pay in the event of the loss.

Representations

statements that are true to the best of the applicants knowledge.

Peril

the causes of loss insured against in an insurance policy.

Reciprocal Insurer

the insureds are sharing the risk of loss with other subscribers of the reciprocal.

Law Of Large Numbers

the larger a group becomes, the easier it is to predict losses. Insurers use this law in order to predict certain types of losses and set appropriate premiums.

Retention

the planned assumption of risk by an insured through the use of deductibles, co-payment a or self-insurance. It is also known as self-insurance when the insured accepts the responsibility for the loss before the insurance company pays. The purpose of retention is -to reduce expenses and improve cash flow -to increase control of claim reserving and claims settlements -to fund for losses that cannot be insured

Waiver

the voluntary act of relinquishing a legal right, claim or privilege.