General Insurance

What is not considered by an underwriter when determining premium rates for an individual seeking insurance?

Race

A tornado that destroys property would be an example of...

Peril - the cause of loss insrued against in an insurance policy

Which services are associated with standards & poors and AM Best

Rating the financial strength of insurance companies - Reports generated by STandard & Poor's and AM Best help prospective consuemrs to judge the financial security of various insurance companies

For the purpose of insurance, risk is defined as

The uncertainty or chance of loss

Following a career change, an insured is no longer required to perform physical activities, so he has implemented a program where he walks and jogs for 45 mintues each morning. THe insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe?

Reduction - the insured's lifestyle changes and habits will likely reduce the chances of health problems

Under what conditions would a contract between an insurer and prospective insured be legal?

when an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. It is legal for a person convicted of a felony to buy an insurance contract. An intoxicated person, however, may not be mentally competent, and a 12-year old student is considered to be underage in most states.

When doing business in this state an insurance company that is formed under the law of another state is known as which type of insurer?

Foreign - A foreign insurer is one that is formed under the laws of another state. A nonadmitted or unauthorized insurer is an insurance company that has not applied, or has applied and been denied a Certificate of Authority and may not transact insurance

What authority is not stated in an agent's contract, but is required for the agent to conduct business?

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

An individual's tendency to be dishonest would be indicative of a

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

What is the term for the entity that an agent represents regarding contractual agreements with third parties?

Principal - an agent represents princiapl, acting on behalf of contractual agreements with third parties

In insurance, an offer is usually made when

The application is submitted - the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

What is the most common way to transfer risk?

Purchase Insurance - The most effective way to handle risk is to transfer it so that the loss is borne by another party. Insurance is the most common method of transferring risk from an individual or group to an insurance company

An insured stated on her application for life insurance that she never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. What would explain the reason a detah benefit claim is denied?

Material Misrepresentation - It will affect whether or not the policy is issued. IF the insured had been truthful, it it svery likely that the policy would not have been issued

An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. THis is an example of what type of agent authority?

Apparant - an agent who accepts premium after the end of the grace period appears to the client to have authroity to prevent the policy from lapsing. In fact, the agent has no such power.

Which of the following is true regarding a risk retention group? It is a benefit society formed to provide insurance for members of an affiliated lodge It is a company owned by the stockholders that provides nonparticipating policies It is a liability insurance company owned by its members It provides support for underwriters and is not an insurance company

It is a liability insurance company owned by its members A risk retention group is a liability insurance company owned by its members. The members are exposed to similar liability risks by virtue of being in the same business or industry

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

Captive Agent - A captive/exclusive agent has agreed, by contract, to produce insurance busienss only for the insurer they are contracted with

An insured wants to transfer his personal insurance policy to a friend. Under what condiditons would this be possible?

The insurer will need a written consent of the insurer - A personal insruance contract is written between an insurance company and an individual, and the company has a right to decide with whom it will and will not do business. AN insured can transfer an insurance contract to another person, but her or she must first obtain the written consent of the insurer

What are characteristics of an insurable risk?

the loss must be due to chance, definite, measurable, and predictable, but not catastrophic

The proposed insured makes the premium payment on a new insurance policy. If the insured should sie, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?

Conditional COntract requires both the insurer and the policyowner to meet certain conditions before the contract can be executed, unlike other types of policies, which put the burden of condition on either the insurer or the policyowner

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?

Mutual: Funds not paid out after paying cliams and other operating costs are returned tothep olicowners in the form of a dividend