1A-1C Flashcards
What is a financial tool that protects individuals and organizations from unforeseen and extraordinary financial losses by transferring risk to another party?
Insurance
The Principle of Indemnity states -
when a loss occurs, the insured should be restored to his approximate financial condition before the loss, no better, no worse. He is “made whole” again.
An insurance policy is a legal contract. True or False
True
What are the three ways an offer my be rejected by the offeree?
- Explicit Rejection
- Proposal of new offer
- Counteroffer
What are the four essential elements of a legal contract?
- Agreement
- Consideration
- Competent Parties
- Legal Purpose
Avoidance, reduction, Transference, and Retention are all considered to be what?
Risk Management Techniques
Describe the four types of risk management.
- Avoidance - eliminates risk
- Reduction - reduces or mitigates risk
- Transference - pay someone else to take on the risk
- Retention - assumes or accepts risk.
Name the six special characteristics of insurance contracts.
- Personal
- Adhesion
- Utmost Good Faith
4 Aleatory - Unilateral
- Conditional
An insurance policy is a contract that protects the person and not the insured item. True or False
True. The insurance policy is there to protect the person financially if the item becomes damaged.
Describe aleatory contract.
Aleatory contract means that it’s execution depends on and unknown future event.
The insured person is protected from losses, not the covered property
Personal
Both parities must act honestly and openly in order for the contract to be valid
Utmost Good Faith
One party sets the terms of the contract; the other may simply agree or not agree
Adhesion
Only the insurer makes a promise to act; the insured can void contract at any time.
Unilateral
The insurer must only honor the contract if the insured meets certain conditions.
Conditional
What does the acronym D.I.C.E. mean?
D. Declarations Page
I. Insuring Agreement
C. Conditions
E. Exclusions
The declaration page is always the first section and it established: insured and insurer, policy number, location and description of insured item,, value of insured item, policy term dates, amount and limit of coverage, deductible, and premium. True or False
True
What are endorsements?
A provision that modifies the coverage of the original contract.
What is a certificate of insurance?
It is an official document that contains the details of an insurance policy.
Insurance is provided by….
Insurers
Non-profit, mandatory participation, benefits prescribed by law, designed to meet the needs of general public, and government has the monopoly are all characteristics of what?
Government insurers/Social insurance
Sell insurance based on consumer preferences, offer a wide variety of insurance products, typically exist to generate a profit or benefit a group, insured party voluntarily participates are characteristics of what?
Private Insurers
Always for profit, usually publicly-traded, stockholders provide capital and participate in profits or losses, “non-participating” insurers: no dividends go to policyholders are characteristics of what?
Stock Insurance Companies
Owned by policyholders (no shareholders), policyholders elect board of directors, “participating” insurers: policyholders participate in dividends are characteristics of what?
Mutual Insurance Companies
What is an insurer that provides insurance for other insurers?
Re-insurer
What is a Reciprocal Insurer?
A group of people or organizations that insure each other
A Fraternal Benefit Society Insurance is used to fund altruistic activities, must be assessable by law, members are both providers and recipients, and if claims payment ability is impaired members help pay the difference. True or False
True
Captive Insurers are created by businesses in order to retain risks, exist to provide insurance only for their “parent” company, permitted in all states. True or False
False: Permitted in SOME states
Risk retention groups can provide all types of liability coverage to their members, except for what?
Workers Compensation Insurance
All members of a Risk Retention Group must be in similar business endeavors, because the kinds
of liability they’re exposed to should be essentially the same. True or False
True
Insurance companies can be classified according to their location, what are these classifications
- Domestic Insurer
- Foreign Insurer
- Alien Insurer
