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Chapter One: General Insurance
Terms in this set (62)
What are 3 types of hazards?
Physical, Moral, Morale
Who is the Producer?
What is the Principal?
a risk that presents the chance of loss but no opportunity for gain
a situation in which either profit or loss is possible
The cause of loss insured against
Methods of Handling Risk
What are the 5 characteristics of an ideally insurable risk?
Due to chance
Must be definite and measurable
Must be predictable
Cannot be catastrophic
Must not be mandatory
insuring of risks that are more prone to losses than the average risk
Law of Large Numbers
The larger the number of people with a similar exposure to loss, the more predictable actual losses will be
Fraternal Benefit Society
A life or health insurance company formed to provide insurance for members of an affiliated lodge, religious, or fraternal organization with a representative form of government.
What documentation grants express authority to an agent?
Agent's contract with the principal
Rates that are established based on the similarities with the other risks
Direct Response Marketing
Bypasses the insurance agent. Business is conducted over the phone through the mail, online, or television.
If the insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be what?
What authority is not written in the agent's contract but is required in order for the agent to conduct business?
An insurance organization that does not issue insurance but provides a meeting place for underwriters to conduct business is known as?
An insurer that hold a Certificate of Authority in the state in which it transacts business is considered?
An Authorized insurer
When would a misrepresentation on an insurance application be considered fraud?
If it is intentional and material
What is an example of risk retention?
What insurance concept is associated with Weiss and Fitch?
Guides describing company financial integrity
An insured stated on her application for life insurance that she had 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 will explain the reason for a death benefit claim to be denied?
A producer who fails to segregate premium from his own personal funds is guilty of what?
What is the major difference between a stock company and a mutual company?
What are the three classifications of a domicile?
Domestic, Foreign, and Alien
What are the 3 types of agent authority?
express, implied, apparent
What are the four elements of an insurance contract?
Agreement, Consideration, Legal Purpose, and Competent Parties
A tornado destroys a property would be an example of what?
What provision states that is a policy allows for greater benefits than the financial loss incurred, the insured may be compensated only for the amount loss?
In Insurance contracts, when is the offer usually made?
When the insurance application is submitted
Wagering on a sporting event is known as what type of risk?
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.
What is the term for the causes of loss insured against in the insurance policy?
If an insurer hold a Certificate of Authority, it is known as waht type of insurer?
Authorized or Admitted
According to the Law of Agency, a principal is represented by whom?
The agent or producer
What does indemnify mean in insurance?
To restore an insured to the same financial status as before 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.
Insurance contracts are aleatory in nature. What does that mean?
Unequal values are exchanged between the parties to a contract.
In the agent/insurer relationship, who is considered the principal?
Conditions that increase the chance of a loss are known as what?
What do individuals use to transfer their risk of loss to a larger group?
In insurance contracts, when does acceptance usually occur?
When the insurer approves a prepaid application
What is a warranty in an insurance contract?
An absolute true statement upon which the validity of the policy depends
What type of insurer is formed under the laws of another state?
What is consideration on the part of the insurer?
A promise to pay in the event of a loss
When would a misrepresentation on an insurance application be consideration fraud?
When it is intentional and material
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
What is risk?
Uncertainty of loss
What type of authority is based on the agent's actions or words?
What implies that there will be no fraud, misrepresentation, or concealment between the parties?
Utmost Good Faith
An absolutely true statement upon which the validity of the insurance policy depends.
The voluntary act of relinquishing a legal right, claim or privilege
A legal process that can be used to prevent a part to a contract from re-asserting a right or privilege after that right or privilege has been waived. A legal consequence of a waiver.
The process of reviewing applications and the information on the application; Risk selection process.
This person is responsible for evaluating applications to the insurer and determining whether a policy should be issued, and if so, the terms, conditions, and rates for that policy.
Class, or manual rating
means that exposures with similar characteristics are placed in the same underwriting class, and each is charged the same rate
Used when credible statistics are lacking or when the exposure units are so varied that it is impossible to construct a class. Also referred to as "A" Rated
Rates that are developed by applying a schedule of charges and credits to some base rate to determine the appropriate rate for an individual exposure.
The insured's past loss experience enters into the determination of the final premium
Self-Rating plan under which the actual losses during the policy period determine the final premium, subject to min. and max. premium.
Insured's premium is based NOT on the actual loss record but on other factors that indicate the probability that loss will occur. Most commonly used in personal auto insurance.
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