General Insurance

Elements of a valid contract

1. Competent parties 2. Legal purpose 3. Offer and acceptance (agreement) 4. Consideration

What documentation grants express authority to an agent ?

Agent's contract with the principal

When insurance is obtained through __________ , the insured's are sharing the risk of loss with other structures of that reciprocal.

Reciprocal Insurer

Insurer's who meet state's financial requirement and approved to transact business in the state are considered authorized or ___________ as a legal insurer

Admitted

Hazard

Anything that increases the chance of loss.

Definitions

Clarifies the meanings of certain terms used in the policy.

Endorsement

Documents attached to the policy that change the policy in some way.

The right to determine the wording of a policy

In insurance policies, contract ambiguities are automatically ruled in the favor of the insured.

Alien Insurer

Incorporated in a country other than the United States

Morale Hazard

When an individual increases the possibility for a loss by behaving carelessly or irresponsibly. Ex: A person drunk driving can cause a loss in a situation.

In insurance , an offer is usually made when __________

the application is submitted

Characteristics of Pure Risk

1. Chance 2. Definite 3. Measurable 4. Predictable *CANNOT BE CATASTROPHIC*

Parts of the insurance contract ( D, I , C , E, D, E)

1. Declarations 2. Insuring agreements 3. Conditions 4. Exclusions 5. Definitions 6. Endorsement

Retention usually results from 3 basic desires of the insured ...

1. To reduce expenses and impose cash flow 2. To increase control of claim reserving and claim settlements 3. To fund losses that cannot be insured.

Avoid Risk

To completely prevent a loss in a situation. ex. To avoid auto collision a person will never get into a car.

Pure Risk

Which involve only the possibility of loss.

Domestic Insurer

Within its home state

Express Authority

Authority granted to an agent through the agents contract.

A ____________ is prepared by only the insurer, the insurer's only option is to ACCEPT or REJECT the policy as it is written. Classified as a "Take it or leave it "

Contract of Adhesion

Insuring agreements

Describes what is covered and the perils the policy insures against.

Lloyd's Association

Does not issue insurance policies or provide insurance protection. Provides meeting to conduct business.

Conditions

Explains the rights and duties of the insured and the insurer under the policy.

Retain Risk

If any loss occurs , they will pay for it themselves. Ex. A person chooses not to get medical insurance because they feel that they do not it.

Risk Retention Group

Is a liability insurance company owed by its member. The members are exposed to similar liability risks by virtue of being in the same business or industry.

Exposure

Is a unit of measurement used to determine rates charged for insurance coverage.

Peril

Is the cause of loss ex: fire , collision , earthquake , tornado , etc.

Exclusions

List property , perils , persons , or situations that are not covered by the policy.

Agreed Value

Represents a fair valuation for the property at the time of the insurance.

Speculative Risk

Risks in which there exists both the possibility of gain and the possibility of loss.

Insurance obtained from or placed with a unauthorized insurer is ____________

Surplus Insurance

Foreign Insurer

Within states other than the state

Physical Hazard

A physical object or hazard that arises from the condition , occupancy , or use of the property itself. Ex. A skateboard left on the porch steps.

Captive Agent

An insurance producer who by contract is bound to write insurance for only one company or group of companies.

Declarations

Explains the who , what , when , and how of the insured.

What does "Components" mean in insurance terms ?

Factors that determine rates

Risk

is the chance or uncertainty of loss.

Aggregate Limit

Is the max limit of a coverage available under a liability policy during a policy year.

Moral Hazard

Means that a person might create a loss situation on purpose just to collect from the insurance company. ex: fake an injury just to collect money from the insurance company.

Concealment

Occurs when a person withholds a material fact that is crucial to making a decision.

Principle of Indemnity

To put a person in the same position before , no more or no less.