Michigan General Insurance

What are the five characteristics of an ideally insurance risk?

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

What are the 3 types of hazards?

Physical, Moral, Morale

Wagering on a sporting event is known as what type of risk?

Speculative risk

What does the term unilateral contract mean?

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

What is consideration on the part of the insurer?

A promise to pay in the event of a loss

According to the Law of Agency, who represents the principal?

Agent/Producer

What are the four elements of an insurance contract?

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

What is a warranty in an insurance contract?

An absolutely true statement upon which the validity of the policy depends

If an insurer holds a Certificate of Authority, it is known as what type of insurer?

Authorized or admitted

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 document is required for an insurance company to transact insurance?

Certificate of Authority

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

Indemnity

What does indemnify mean in insurance?

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

What is a risk?

Uncertainty of loss

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

Unequal values are exchanged between the parties to a contract

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

When it is intentional and material

In insurance contracts, when is the offer usually made?

When the insurance application is submitted

In insurance contracts, when does acceptance usually occur?

When the insurer approves a prepaid application

What type of authority is based on the agent's actions, or words?

apparent

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

domestic, foreign, alien

What are the 3 types of agent authority?

express, implied, apparent

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

foreign

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

hazards

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

insurance

In the agent/insurer relationship, who is considered the principal?

insurer

A tornado that destroys a property would be an example of what?

peril

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

peril

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

pure risk

What is a consideration in an insurance contract?

something of value that each party gives to the other. on the part of the insurer is binding.