Chapter one
What are the five characteristics of an ideally insurable risk
1.Due to chance 2. definite and measurable 3. statisticallyy predictable 4. not catastrophic 5. coverage cannot be mandatory
What type of insurer is formed under the laws of another country?
Alien
What is a warranty in an insurance contract?
An absolute true statement upon which the validity of the insurance contract is based
an insurance company that is formed under the laws of another state is known as what type of insurer
Foreign
Conditions that increase the chance of a loss are known as?
Hazards
insurance is a contract that protects the insured from what?
Loss
What are three types of hazards
Physical, Moral, Morale
what are the strategies used by underwriters to prevent adverse selection
Restriction of coverage, refusal, to accept a risk, and accepting, a risk at a higher rate
For the purpose of insurance, what is risk?
Uncertainty of loss
when would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
in insurance, when is the offer usually made on a contract?
When the insurance application is submitted
When does an insurance policy go into effect?
When the policy is delivered and the premium is paid
When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?
adverse selection
If an applicant does not receive his or her insurance policy, who would be held responsible?
agent
whose responsibility is it to determine that all the questions and insurance application are answered?
agent
According to the Law of Agency, a principal is represented by whom?
agent or producer
what are the four elements of an insurance contract
agreement, consideration, competent parties, and legal purpose.
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?
authorized or admitted
What document is required for an insurance company to transact insurance?
certificate of authority
When a change needs to be made on the application for insurance, which is the best method for correcting the information?
complete new application and or find initial original application.
Insurers are classified according to their domicile. What are the three types of insurers?
domestic, foreign, alien
what are three types of agent authority?
express, implied, apparent
the requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility
fiduciary
an insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer's classification in Nevada?
foreign
What's the best way to handle incomplete insurance applications
give back to applicant to complete
what are two elements are necessary for a life insurance contract to leave a legal purpose?
insurable interest and consent
what do individuals use to transfer their risk of loss to a larger group?
insurance
Whom does an insurance agent represent?
insurance company
When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?
insurer
in the agent/insurer relationship, who is considered the principal
insurer
when forming an insurance contract, when does an acceptance usually occur
insurer approves a prepaid application
What entitles make up the Medical Information Bureau?
insurers
The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?
loss
An applicant conceals relevant health information on the application. The applicant presents what type of hazard?
moral
a person who does not lock the doors to his or her house shows an indifferent attitude. what type
morale
An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?
mutual
the type of insurance company organized to return any surplus money to it's policyholders known as?
mutual company
what is the term for the causes of loss insured against in an insurance policy
peril
What type of risk is insurable?
pure
a situation in which a person can only experience a loss and no gain represents what type of risk
pure risk
If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?
return to applicant and get signature
wagering on a sporting event is known as what type of risk
speculative
the insurer organized to return a profit to the stockholders is what type of insurance
stock company
Who owns stock companies?
stockholders