Walt and joanna are co-owners of a bagel shop. Both are listed in the declarations of the policy that insures the, with joanna's name appearing first. The declarations also list first state bank, which has an outstanding loan on the business.
Who is (are) considered a named insured(s) on the policy? Create
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Risk Increases the chance of loss
Insurance A means of transferring the risk of loss
Peril The chance of loss
Hazard The cause of loss
Which of the following represent pure risks? Terry places a bet on the outcome of a basketball game
The law of large numbers States that the more examples used to develop a statistic, the more reliable the statistic will be.
LaTonya purchases a house from john. She borrows $75,000 from first city bank which, along with her $25,000 down payment, equals the $100,000 purchase price of the home. Who has an insurable interest in this home? LaTony or First City Bank
Describe 4 of the criteria a risk must meet to be insurable Insurable risk; pure risk, not speculative; loss must not happen to a large number of insureds at the same time; risk of loss must be definite; loss would cause financial hardship; cost of loss is calculable; cost of insurance covering the risk is affordable; large number of persons with similar potential for loss.
Highpoint industries has an automatic sprinkler system installed in its office building. This is an example of which risk management method? Reduction
Benson Pharmaceutical Company decides not to manufacture a new drug after determining that it has serious potential side effects.This is a example of which risk management method? Avoidance
Since she has always been in good health, Donna decides to cancel her health insurance policy. This is an example of which risk management method? Retention
Mr. Reed's home was destroyed in a fire. fire
Suzanne's house was damaged in a flood. flood
Jim's automobile collided with Sue's collision
What was the peril of a thief entering veronica's unlocked apt and stealing her television. peril is theft
What was the hazard of a thief entering veronica's unlocked apt and stealing her television hazard is leaving the door unlocked
Jack agrees to burn down Albert's house for $10,000 Legal purpose.
One of the requirements for a valid contract is that it be formed for a legal purpose. A contract that is in violation of the law - such as this example, which involves arson - is not enforceable
Susan's insurance policy is canceled for nonpayment of premium. Consideration.
A valid contract must involve consideration - a thing of value exchanged for the performance promised in the contract. With insurance, the consideration that the insured gives is the premium payment. Since susan did not pay the premium, there is no consideration involved.
JAG Insurance Company denies George's application for auto insurance. Offer and acceptance.
A contract involves two parties: one who makes an offer and one who accepts it. Since JAG Insurance did not accept George's offer (an application for insurance), no contract exists.
Andrea, age 15, signs a lease for an apartment in Highview estates Competent parties.
A contract is not valid unless it is made between two parties who are considered competent under the law. In most cases, a person who is a minor is considered incompetent.
Conditional Includes conditions that both the insured and the insurer must comply with
Indemnity After a loss occurs, an individual is restored to the approximate financial condition she was in before the loss
Personal Insures a person
Aleatory dependent on an uncertain event
Adhesion Prepared by one party, with little or no opportunity for bargaining by the other party
Unilateral One-sided contract; only the insurance company is legally bound to perform under the contract
Utmost good faith Insurer relies on insured's statements and insured relies on insurer's ability to fulfill its promises
Declarations list who is insured, what property or risk is covered, when and where coverage is effective, and how much coverage applies
Insuring agreements what is covered and the perils the policy insures against
conditions explains the rights and duties of the insured and the insurer under the policy
exclusions list property, perils, persons, or situations that are not covered by the policy
definitions clarify the meaning of certain terms used in the policy
endorsements documents attached to the policy that change the policy in some way
A mutual insurance company is owned by its insureds
Beneficient Insurers writes homeowners, auto, and liability insurance for individuals and families. Beneficient is a (mono/multi) ____ line company that specializes in (personal/commercial) _____ lines. Multi-, personal.
One of the most important risks covered by insurance policies in the casualty line is the risk that you will become liable for damage to others
A nonexclusive agent is an independent businessperson
Solicitors may not issue or countersign policies
At DEF Insurance Company, agents are employees of the company who are paid a salary plus commissions. This is an example of what type of insurance marketing system? Direct writer
An agent has all of the following responsibilities to applicants and insureds EXCEPT representing the insured in the insurance transaction
The actuarial department collects and analyzes data to determine the rates to be charged for insurance
Which insurance company department is responsible for accepting and rejecting applications on the basis of company standards? Underwriting
which insurance company department is responsible for paying insureds' covered losses? Claims
In Idaho, Perfect Policies is a/an (Domestic/foreign/alien)____ company Domestic
Perfect policies is also authorized to do business in Montana. In Montana, Perfect Policies is (admitted/nonadmitted)____ and is a(n) (domestic/foreign/alient) _____ company. admitted, foreign.
who is responsible for licensing insurance agents? State insurance department
Blondell is offering a free television to every applicant who agrees to buy insurance through his agency. In most states, this is an illegal practice known as rebating
State insurance departments are responsible for approving or rejecting rates and policy forms
Prior approval Insurers must obtain official approval from the state before using forms or rates
file and use Insurers begin using rates and forms as soon as they are filed with the state
use and file Insurers must file rates and forms for approval within a certain period after they are first used.
open competition Insurers compete with one another with the forms and rates they select, subject only to requirements of adequacy and nondiscrimination
mandatory Insurers must use state's unique forms or rates.
J&M Industries does not have a group health insurance plan for its employees. Instead, it pays employees medical expenses out of a fund specifically created for this purpose. This is an example of self-insurance
What is the primary reason the state or federal government becomes involved in providing insurance? to provide insurance that is not available from private insurers. The govt. sometimes steps in to provide insurance that is not available from private insurers. Flood insurance and federal crop insurance are examples of insurance provided by the federal govt. At the state level, the govt. is involved in providing unemployment insurance and may provide workers' compensation benefits through state funds.
If an insurance company's agent makes an error, can the company be held liable? Yes.
under the principles of agency, actions or knowledge of the agent are considered actions or knowledge of the principal.
Which of the following statements concerning regulation of the insurance industry is correct? The state insurance department is responsible for controlling insurance matters within the state.
give three reasons that state insurance departments regulate insurance companies' financial situations. to preserve solvency; to detect financial problems; to protect insured if insolvency occurs.