General Insurance

A contract is an agreement between two or more parties enforceable by law. Elements of a Legal Contract 1. Agreement- Offer and acceptance 2. Consideration 3. Competent parties 4. Legal purpose

A contract is an agreement between two or more parties enforceable by law. Elements of a Legal Contract 1. Agreement- Offer and acceptance 2. Consideration 3. Competent parties 4. Legal purpose

An admitted or authorized insurer is an insurance company that has qualified and has received a Certificate of Authority from the Department of Insurance to transact insurance in the state.

An admitted or authorized insurer is an insurance company that has qualified and has received a Certificate of Authority from the Department of Insurance to transact insurance in the state.

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

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

In general, an insurance contract is a personal contract.

In general, an insurance contract is a personal contract.

Insurance companies are classified according to the location of incorporation.

Insurance companies are classified according to the location of incorporation.

Mutual companies are owned by the policyowners and issue participating policies and policyowners are entitled to dividends, which are returns of excess premiums and are NOT taxable. Dividends are created when the premiums and the earnings combined exceed the actual costs of providing coverage, creating a surplus.

Mutual companies are owned by the policyowners and issue participating policies and policyowners are entitled to dividends, which are returns of excess premiums and are NOT taxable. Dividends are created when the premiums and the earnings combined exceed the actual costs of providing coverage, creating a surplus.

Perils are the causes of loss insured against in an insurance policy.

Perils are the causes of loss insured against in an insurance policy.

Pure (Insurable) risks involve the following characteristics Due to chance Definite and measurable (cause, time, place, amount) Statistically predictable (average frequency and severity of future losses) Not catastrophic Randomly selected and large loss exposure

Pure (Insurable) risks involve the following characteristics Due to chance Definite and measurable (cause, time, place, amount) Statistically predictable (average frequency and severity of future losses) Not catastrophic Randomly selected and large loss exposure

Sharing is a method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within that group. A reciprocal insurance exchange is a formal risk-sharing arrangement.

Sharing is a method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within that group. A reciprocal insurance exchange is a formal risk-sharing arrangement.

The law of large numbers states that the larger the number of people with a similar exposure to loss (homogeneous group), the more predictable the actual losses will be. This law forms the basis for statistical prediction of loss upon which insurance rates are calculated.

The law of large numbers states that the larger the number of people with a similar exposure to loss, (homogeneous group) the more predictable the actual losses will be. This law forms the basis for statistical prediction of loss upon which insurance rates are calculated.

The most effective way to handle risk is to transfer it so that the loss is borne by another party.(Insurance)

The most effective way to handle risk is to transfer it so that the loss is borne by another party.(Insurance)

A conditional contract requires that certain conditions must be met by the policyowner and the company in order for the contract to be executed, and before each party fulfills its obligations. For example, the insured must pay the premium and provide proof of loss in order for the insurer to cover a claim.

A conditional contract requires that certain conditions must be met by the policyowner and the company in order for the contract to be executed, and before each party fulfills its obligations. For example, the insured must pay the premium and provide proof of loss in order for the insurer to cover a claim.

A large number of units having the same or similar exposure to loss is known as homogeneous.

A large number of units having the same or similar exposure to loss is known as homogeneous.

Adverse selection: Insurance companies strive to protect themselves from adverse selection, the insuring of risks that are more prone to losses than the average risk. Poorer risks tend to seek insurance or file claims to a greater extent than better risks. To protect themselves from adverse selection, insurance companies have an option to refuse or restrict coverage for bad risks, or charge them a higher rate for insurance coverage.

Adverse selection: Insurance companies strive to protect themselves from adverse selection, the insuring of risks that are more prone to losses than the average risk. Poorer risks tend to seek insurance or file claims to a greater extent than better risks. To protect themselves from adverse selection, insurance companies have an option to refuse or restrict coverage for bad risks, or charge them a higher rate for insurance coverage.

Fraud is the intentional misrepresentation or intentional concealment of a material fact. Voids the contract.

Fraud is the intentional misrepresentation or intentional concealment of a material fact. Voids the contract.

In a unilateral contract, only one of the parties to the contract is legally bound to do anything. The insured makes no legally binding promises. However, an insurer is legally bound to pay losses covered by a policy in force.

In a unilateral contract, only one of the parties to the contract is legally bound to do anything. The insured makes no legally binding promises. However, an insurer is legally bound to pay losses covered by a policy in force.

Insurance is available from both private companies and the government. The major difference between government and private insurance is that the government programs are funded with taxes and serve national and state social purposes, while private policies are funded by premiums.

Insurance is available from both private companies and the government. The major difference between government and private insurance is that the government programs are funded with taxes and serve national and state social purposes, while private policies are funded by premiums.

Insurance transfers the risk of loss from an individual or business entity to an insurance company, which in turn spreads the costs of unexpected losses to many individuals.

Insurance transfers the risk of loss from an individual or business entity to an insurance company, which in turn spreads the costs of unexpected losses to many individuals.

Representations are statements believed to be true to the best of one's knowledge, but they are not guaranteed to be true.

Representations are statements believed to be true to the best of one's knowledge, but they are not guaranteed to be true.

Stock companies are owned by stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses. Stock companies issue nonparticipating policies, in which policyowners do not share in profits or losses. A nonparticipating policy does NOT pay dividends to policyowners. However, taxable dividends are paid to stockholders.

Stock companies are owned by stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses. Stock companies issue nonparticipating policies, in which policyowners do not share in profits or losses. A nonparticipating policy does NOT pay dividends to policyowners. However, taxable dividends are paid to stockholders.

The principle of utmost good faith implies there will be no fraud, misrepresentation or concealment between the parties.

The principle of utmost good faith implies there will be no fraud, misrepresentation or concealment between the parties.

There are two types of reinsurance agreements, facultative and automatic. Facultative- They underwrite each application separately. Automatic Reinsurance is a predetermined, blanked arrangement.

There are two types of reinsurance agreements, facultative and automatic. Facultative- They underwrite each application separately. Automatic Reinsurance is a predetermined, blanked arrangement.

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

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

Exposure is a unit of measurement used to determine rates for insurance coverage. All the following factors are used in determining rates: The age of the insured Medical history Occupation Sex

Exposure is a unit of measurement used to determine rates for insurance coverage. All the following factors are used in determining rates: The age of the insured Medical history Occupation Sex

Reinsurance is a contract under which one insurance company (the reinsurer) indemnifies another insurance company for part or all of its liabilities. The purpose of reinsurance is to protect insurers against catastrophic losses. The originating company that procures insurance on itself from another insurer is called the ceding insurer. The other insurer is called the assuming insurer.

Reinsurance is a contract under which one insurance company (the reinsurer) indemnifies another insurance company for part or all of its liabilities. The purpose of reinsurance is to protect insurers against catastrophic losses. The originating company that procures insurance on itself from another insurer is called the ceding insurer. The other insurer is called the assuming insurer.

Risk retention is the planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance.

Risk retention is the planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance.

Untrue statements on the application are considered misrepresentations and could void the contract. A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company. Furthermore, if material misrepresentations are intentional, they are considered fraud.

Untrue statements on the application are considered misrepresentations and could void the contract. A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company. Furthermore, if material misrepresentations are intentional, they are considered fraud.

A contract of adhesion is 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 its provisions. In other words, insurance contracts are offered on a "take it or leave it" basis by an insurer.

A contract of adhesion is 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 its provisions. In other words, insurance contracts are offered on a "take it or leave it" basis by an insurer.

A reciprocal is 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.

A reciprocal is 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.

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. The purpose of a risk retention group is to assume and spread all or part of the liability of its group members. Must be engaged in the same or similar business or industry.

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. The purpose of a risk retention group is to assume and spread all or part of the liability of its group members. Must be engaged in the same or similar business or industry.

A warranty is an absolutely true statement upon which the validity of the insurance policy depends. Breach of warranties can be considered grounds for voiding the policy or a return of premium. Because of the strict definition, statements made for life and health insurance policies are not considered warranties except in cases of fraud.

A warranty is an absolutely true statement upon which the validity of the insurance policy depends. Breach of warranties can be considered grounds for voiding the policy or a return of premium. Because of the strict definition, statements made for life and health insurance policies are not considered warranties except in cases of fraud.

An agent/producer is an individual licensed to sell, solicit, or negotiate insurance contracts on behalf of the principal(insurer). The law of agency defines the relationship between the principal and the agent/producer.

An agent/producer is an individual licensed to sell, solicit, or negotiate insurance contracts on behalf of the principal(insurer). The law of agency defines the relationship between the principal and the agent/producer.

Captive insurers are organized and owned by a corporation or firm to serve the parent organization's insurance needs at lower rates than other insurers and without the uncertainties of commercial insurance.

Captive insurers are organized and owned by a corporation or firm to serve the parent organization's insurance needs at lower rates than other insurers and without the uncertainties of commercial insurance.

Concealment is the legal term for intentional withholding of information of a material fact that is crucial in making a decision.

Concealment is the legal term for intentional withholding of information of a material fact that is crucial in making a decision.

Indemnity (sometimes referred to as reimbursement) is a provision in an insurance policy that states in the event of a loss an insured or beneficiary is only permitted to collect only the extent of the financial loss, and is not allowed to gain financially.

Indemnity (sometimes referred to as reimbursement) is a provision in an insurance policy that states in the event of a loss an insured or beneficiary is only permitted to collect only the extent of the financial loss, and is not allowed to gain financially.

The two types of risk are pure and speculative, only one of which is insurable. Pure risk refers to situations that can only result in a loss or no change. There is no financial opportunity for financial gain. Insurance companies only insure pure risk. Speculative risk involves the opportunity for either loss or gain. An example of speculative risk is gambling.

The two types of risk are pure and speculative, only one of which is insurable. Pure risk refers to situations that can only result in a loss or no change. There is no financial opportunity for financial gain. Insurance companies only insure pure risk. Speculative risk involves the opportunity for either loss or gain. An example of speculative risk is gambling.