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72 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Because the insurance policy is a contract between the insurer and the insured, it must conform to the state laws governing contracts which require all of the following elements...
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competent parties
legal purpose offer and acceptance |
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What is the major difference between a Stock Company and a Mutual Company?
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Ownership
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Insurance companies may be classified according to the legal form of their ownership. They type of company organized to return any surplus money to their policyholders is
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mutual insurer
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According to the Law of Agency, a principal is represented by a/an
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agent
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Wagering on a sporting event is known as what type of risk?
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Speculative
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What type of risks are not insurable? Why?
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Speculative risks are not insurable because there is a chance for a loss or a gain.
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When an insured makes truthful statements on the application for insurance and pays the required premium it is known as...
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Consideration
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What is consideration on the part of the insured?
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The consideration on the part of the insured is the payment of premium and the representations made in the application.
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An insurance producer who by contract is bound to write insurance for only one company or group of companies, is classified as...
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A captive or exclusive agent
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Insurers are classified according to the legal form of their ownership. The type of insurer organized to return a profit to the stockholders is...
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Stock Companies
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Which insurers are owned by stockholders who have the usual rights of ownership, including the right of voting and incurring profits or losses?
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Stock Companies
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In life and health insurance, an offer is usually made when...
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the application is submitted
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When does acceptance occur?
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Acceptance occurs when the underwriter approves the application, provided it's accompanied by the initial premium. Otherwise, acceptance occurs when the insurer receives payment, after the application has been approved.
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An applicant who knowingly fails to communicate a fact that would help an underwriter make a sound decision regarding coverage is guilty of...
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Concealment
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Representations are written or oral statements made by the applicant which...
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Are considered true to the best of the applicant's knowledge
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Which factors are considered by an underwriter when determining the premium rates for an individual seeking insurance?
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Medical History, sex, age
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Define a Domestic insurance company
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an insurance company that has been formed under the laws of this state
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What is a risk retention group?
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an insurance organization that most often addresses a commercial casualty concern
is typically not regulated as a company state authorities |
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When a homeowner purchases insurance on his home, what risk management technique is he practicing?
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transfer
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An insurance policy specifies that it will pay $600 for a specific loss. The policyowner suffers a loss of $535. How much will the policy pay?
(H) |
$535
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$535
$600 $300 or $500 |
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According to the Law of Agency, a principal is represented by a/an
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agent
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If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?
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Unilateral
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Which of the following is consideration on the part of an insured? (H)
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B
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A) asking an agent to clarify a rider
B)submitting a statement of Good Health and premium payment C)Submitting a Statement of Good Health D)Premium Payment and asking an agent to clarigy a rider |
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To transact business in this state, an insurer must be...
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Authorized
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An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming.
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Foreign
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Which statement regarding Lloyd's associations in NOT true? (H)
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B)
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A)The United States version of Lloyd's is subject to looser regulation than the London version
B)Lloyd's associations operate primarily in the life insurance field. C)Most states have laws which prohibit Lloyd's associations from forming. D)They are not insurance companies |
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An insurance contract must contain what 4 elements to be considered legally binding?
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offer and acceptance
consideration competent parties legal purpose |
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When would a misrepresentation on the insurance application be considered fraud?
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if it is intentional an material
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The authority granted to an agent through the agent's contract is referred to as...
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express authority
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A Participating Insurance Policy may do which of the following? (H)
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A)
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A)It may pay dividends to the policyowner
B)It may provide group coverage C)It may pay dividends to the stock holder D)It may require 80% participation |
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An Insurance company receives an application with some information missing and issues the policy anyway. What is this called?
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Waiver
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Adverse selection is a concept best described as...
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risks with higher probability of loss seeking insurance more often than other risks
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The requirement that an agent not co-mingle insurance monies with their own funds is known as...
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Fiduciary responsibility
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Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
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The law of numbers
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An organization that, in addition to other activities, provides a formal insurance plan to its members is classified as a...
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Fraternal insurer
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Insurance companies may be classified according to the legal form of their ownership. The type of company organized to return any surplus money to their policyholders is...
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a mutual insurer
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What is a risk retention group?
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An insurance organization that most often addresses a commercial casualty concern
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Define insurance
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a contract whereby one party(insurer) agrees to indemnify or guarantee another party(insured) against a loss by a specified future contingency or peril in return for payment of a premium
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Define pure risk
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situations that can only result in a loss or no change
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Define Exposure
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unit of measurement used to determine rates charged for insurance coverage
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Define Homogenous
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a large number of units having the same or similar exposure to loss
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Define Hazard
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A circumstance that increases the likelihood of a loss
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Define Physical Hazard
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a type of hazard that arises from the physical characteristics of an individual, such as a physical disability due to either current circumstance or a condition present at birth
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Define Moral Hazard
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the effect of a person's reputation, character, living habits, etc. on his/her insurability
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Define Morale Hazard
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the effect a person's indifference concerning loss has on the risk to be insured
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Define Peril
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the cause of a possible loss
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Define Loss
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the reduction, decrease or disappearance of value of the person or property insured in a policy, by a peril insured against
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Define avoidance
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a method of dealing with risk by deliberately keeping away from it (e.g. if a person wanted to avoid the risk of being killed in an airplane crash, he/she might choose never to fly in a plane.)
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Define retention
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a method of dealing with risk by intentionally or unintentionally keeping a portion of it for the insured's account; the amount of responsibility assumed but not reinsured by the insurance company
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Define sharing
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a method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss who share the losses that occur within that group.
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Define transfer
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a basic principle of insurance under which the risk of financial loss is assigned to another party
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What certain characteristics or elements must be present before a pure risk can be insured? (h)
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Loss must be due to chance
Loss must be definite and measurable Loss must be statistically predictable Loss cannot be catastrophic Loss exposure to be insured must be large insurance must not be mandatory |
There are 6
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Define Reinsurance
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a form of insurance whereby one insurance company (the reinsurer) in consideration of a premium paid to it, agrees to indemnify another insurance company (the ceding company) for part or all of its liabilities from insurance policies it has issued
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Define Stock Companies
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companies owned by the stockholders whose investments provide the capital necessary to establish and operate the insurance company
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Define mutual companies
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insurance organizations that have no capital stock, but are owned by the policyholders
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Define Fraternal Benefit Societies
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life or health insurance companies formed to provide insurance for members of an affiliated lodge, religious organizations, or fraternal organization with representative form of government
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Define Lloyd's Association
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organizations that provide support facilities for underwriters or groups of individuals that accept insurance risk
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Define Agent's Authority
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special powers granted to an agent by his or her agency contract
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Define Express Authority
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the authority granted to an agent by means of the agent's written contract
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Define Implied Authority
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authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal
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Define Apparent Authority
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the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created
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Define Fiduciary
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an agent/broker who handles insurer's funds in a trust capacity
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Define contract
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agreement between two or more parties enfocreable by law
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Define indemnity
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a provision in an insurance policy that states that in the event of a loss, an insured is permitted to collect only to the extent of his/her financial loss and is not allowed to gain financially because of the existence of an insurance contract
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Define Utmost Good Faith
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the fair and equal bargaining by both parties in forming the contract, where the applicant must make full disclosure of risk to the company, and the insurance company must be fair in underwriting the risk
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Define representations
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statements made by the applicant on the insurance application that are believed to be true, but are not guaranteed to be true
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Define misrepresentations
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a false statement or lie that can render the contract void
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Define warranty
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a material stipulation in the policy that if breached may void the contract
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Define Concealment
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the withholding of known facts which, if material, can void a contract
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Define Fraud
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intentional misrepresentation or deceit with the intent to induce a person to part with something of value
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Define Waiver
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the voluntary abandonment of a known or legal right or advantage
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Define Estoppel
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a legal impediment to denying a fact or restoring a right that has been previously waived
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