General Insurance
What are the five characteristic of an ideally insurable risk?
1. Due to chance 2. definite and measurable 3. Statistically predictable 4. Not catastrophic 5. Randomly selected
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 is consideration in an insurance contract?
Consideration is something of value that each party gives to the other. Consideration on the part of the insurer is binding
Insurers are classified according to their domicile. What are the three types of insurers?
Domestic, foreign, and alien
What are the three types of agent authority?
Express, Implied and Apparent
What type of insurer is formed under the laws of another state?
Foreign
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 do individuals use to transfer their risk of loss to a larger group?
Insurance
A tornado that destroys a property would be an example of what?
Peril
A situation in which a person can experience only a loss and no gain presents what type of risk?
Pure risk
Wagering on a sporting event is known as what type of risk?
Speculative
Insurance contracts are aleatory in nature. What does that mean?
Unequal values are exchanged between the parties to a contract
what is consideration on the part of the insurer?
a promise to pay in the event of a loss
what does the term unilateral contract mean?
a unilateral contract is a one-sided contract. this means only one party makes an enforceable promise
according to the law of agency, who represents the principal?
agent or producer
what are the four elements of an insurance contract?
agreement (offer and acceptance), consideration, competent parties, and legal purpose
What type of authority is based on the agent's actions, or words?
apparent
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
conditions that increase the chance of a loss are known as what?
hazards
in the agent/insurer relationship, who is considered the principal?
insurer
what is the term for the causes of loss insured against in an insurance policy
peril
what are the three types of hazards?
physical, moral and morale
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
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