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Idaho Property Insurance > 1- General Insurance > Flashcards

1- General Insurance Flashcards

1
Q

Agent/Producer

A

A legal representation of an insurance company; includes agents and brokers.

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2
Q

Applicant

A

A person applying for insurance

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3
Q

Broker

A

An insurance producer not appointed by an insurer and is deemed to represent the client

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4
Q

Insurance policy

A

A contract between a policy owner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events

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5
Q

Insured

A

The person covered by the insurance policy

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6
Q

Insurer

A

The company who issues the insurance policy

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7
Q

Policy owner

A

Person entitled to exercise the rights and privileges in the policy

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8
Q

Premium

A

The money paid to the insurance company for the insurance policy

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9
Q

Reciprocity/Reciprocal

A

a mutual interchange of rights and privileges

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10
Q

Insurance

A

a transfer of risk of loss from an individual or business to an insurance company, which spreads the costs to many individuals

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11
Q

Risk

A

the uncertainty or chance of loss occuring

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12
Q

What are the two types of risk?

A

Pure risk and Speculative risk

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13
Q

Which type of risk cannot be insured?

A

Speculative risk

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14
Q

Hazard

A

Conditions or situations that increase the probability of an insured loss occuring

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15
Q

Classifications of hazards

A

Physical, Moral, Morale

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16
Q

Physical hazards include

A

physical condition, past medical history, conditions at birth (such as blindness)

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17
Q

Moral hazards are

A

A tendency toward increased risk.. Evaluated on character and reputation

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18
Q

Morale hazards arise from

A

a state of mind that causes indifference to loss, carelessness, or actions without forethought.

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19
Q

Peril

A

Causes of loss insured against in an insurance policy

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20
Q

Loss

A

The reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril

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21
Q

What are the methods of handling risk?

A

Sharing, transfer, avoidance, retention, and reduction

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22
Q

Risk Sharing

A

deals with risk by spreading cost of the losses that occur within a group that is more likely to be exposed to that loss

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23
Q

Risk Transfer

A

the most common way to handle risk. The loss is borne by another party.

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24
Q

Risk Avoidance

A

dealing with risk by eliminating exposure to loss. The most effective, but least practical.

25
Q

Risk Retention

A

planned assumption of risk by an insured through the use of deductibles, co-payments, and self-insurance.

26
Q

The purposes of risk retention are

A
  1. Reduce expenses and improve cash flow
  2. Increase control of claim reserving and claim settlements
  3. Fund for losses that cannot be insured
27
Q

Risk Reduction

A

Lessening the possibility of risk. Including installing smoke detectors, having an annual physical, or making lifestyle changes.

28
Q

Insurable risks follow these characteristics:

A
  • Due to chance
  • Definite and measurable
  • statistically predictable
  • not catastrophic
  • Randomly selected and large loss exposure
29
Q

Law of Agency

A

the acts of the agent/producer within the scope of authority are deemed to be the acts of the insurer

30
Q

Types of Authority of Producers

A

Express, implied, and apparent

31
Q

Express Authority

A

the authority ta principal intends to grant to an agent. Authority written into the contract

32
Q

Implied Authority

A

authority that is not written or expressed into the contract, which the agent is assumed to have in order to transact business.

33
Q

Apparent Authority

A

AKA perceived authority. the appearance or assumption of authority based on the actions, words, or deeds of the principal.

34
Q

Fiduciary

A

a person in a position of trust

35
Q

Fiduciary responsibility

A

An agent handles the money of the insurer and the insured and cannot comingle their personal funds with that money.

36
Q

Market Conduct regulations include

A
  • Conflict of Interest;
  • Request of a gift or loan as a condition to complete business;
  • supplying confidential information
37
Q

Elements of a contract

A
  1. Agreement
  2. Consideration
  3. Competent Parties
  4. Legal Purpose
38
Q

Consideration

A

The binding force of a contract. Ex: insured pays a premium, insurer promises to pay in event of a loss.

39
Q

Competent parties

A

People who can legally enter a contract. Must be of legal age, mentally competent to understand the contract, and not under the influence of drugs or alcohol.

40
Q

Indemnity

A

provision in an insurance policy that states, in the event of a loss, an insured is permitted to collect only to the extent of the financial loss.

41
Q

Utmost Good Faith

A

implies there will be no fraud, misrepresentation, or concealment between two parties

42
Q

Representations

A

statements believed to be true to the best of one’s knowledge, but not guaranteed to be true

43
Q

Misrepresentations

A

Untrue statements on the application. If intention, they are considered fraud.

44
Q

Warranty

A

an absolutely true statement upon which the validity of insurance depends.

45
Q

Concealment

A

legal term for intentionally withholding information of a material fact that is crucial in making a decision

46
Q

Fraud

A

intentional misrepresentation or concealment of a material fact to induce another party to make or refrain from making a contract.

47
Q

Fraternal Benefit Society Insurer

A

Not for profit organization based on religious, national, or ethnic lines. Must be a member to receive the benefits.

48
Q

Stock Insurer

A

Owned by stockholders

49
Q

Mutual Insurer

A

Owned by policyholders and pay dividends to policyholders which are in excess of premiums.

50
Q

Domestic domicile

A

incorporated in this state

51
Q

Foreign domicile

A

incorporated in another state or territory

52
Q

Alien domicile

A

incorporated in another country

53
Q

Adhesion

A

one party prepares the contract; the other must accept is as is

54
Q

Aleatory

A

exchange on unequal amounts

55
Q

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

a. Legal purpose
b. Contract of adhesion
c. Acceptance
d. Consideration

A

Consideration

Something of value that each party gives to each other

56
Q

Which of the following is NOT a goal of risk retention?

a. Increase control of claim reserving & settlements
b. Fund losses that cannot be insured
c. Minimize the insured’s level of liability in the even of loss
d. Reduce expense and improve cash flow

A

Minimize the insured’s level of liability in the even of loss.

57
Q

When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having sever chest pain. What is this an example of?

A

Concealment

58
Q

If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?

A

Reasonable expectations.

If advertising or sales literature implies it, an insured could expect the coverage

59
Q

A tornado that destroys property would be an example of which of the following?

a. A peril
b. Pure risk
c. Loss
d. Physical hazard

A

A peril

Idaho Property Insurance (9 decks)

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