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NY Study Group > 1A-1C > Flashcards

1A-1C Flashcards

1
Q

What is a financial tool that protects individuals and organizations from unforeseen and extraordinary financial losses by transferring risk to another party?

A

Insurance

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2
Q

The Principle of Indemnity states -

A

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.

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3
Q

An insurance policy is a legal contract. True or False

A

True

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4
Q

What are the three ways an offer my be rejected by the offeree?

A
  1. Explicit Rejection
  2. Proposal of new offer
  3. Counteroffer
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5
Q

What are the four essential elements of a legal contract?

A
  1. Agreement
  2. Consideration
  3. Competent Parties
  4. Legal Purpose
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6
Q

Avoidance, reduction, Transference, and Retention are all considered to be what?

A

Risk Management Techniques

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7
Q

Describe the four types of risk management.

A
  1. Avoidance - eliminates risk
  2. Reduction - reduces or mitigates risk
  3. Transference - pay someone else to take on the risk
  4. Retention - assumes or accepts risk.
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8
Q

Name the six special characteristics of insurance contracts.

A
  1. Personal
  2. Adhesion
  3. Utmost Good Faith
    4 Aleatory
  4. Unilateral
  5. Conditional
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9
Q

An insurance policy is a contract that protects the person and not the insured item. True or False

A

True. The insurance policy is there to protect the person financially if the item becomes damaged.

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10
Q

Describe aleatory contract.

A

Aleatory contract means that it’s execution depends on and unknown future event.

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11
Q

The insured person is protected from losses, not the covered property

A

Personal

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12
Q

Both parities must act honestly and openly in order for the contract to be valid

A

Utmost Good Faith

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13
Q

One party sets the terms of the contract; the other may simply agree or not agree

A

Adhesion

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14
Q

Only the insurer makes a promise to act; the insured can void contract at any time.

A

Unilateral

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15
Q

The insurer must only honor the contract if the insured meets certain conditions.

A

Conditional

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16
Q

What does the acronym D.I.C.E. mean?

A

D. Declarations Page
I. Insuring Agreement
C. Conditions
E. Exclusions

17
Q

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

A

True

18
Q

What are endorsements?

A

A provision that modifies the coverage of the original contract.

19
Q

What is a certificate of insurance?

A

It is an official document that contains the details of an insurance policy.

20
Q

Insurance is provided by….

A

Insurers

21
Q

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?

A

Government insurers/Social insurance

22
Q

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?

A

Private Insurers

23
Q

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?

A

Stock Insurance Companies

24
Q

Owned by policyholders (no shareholders), policyholders elect board of directors, “participating” insurers: policyholders participate in dividends are characteristics of what?

A

Mutual Insurance Companies

25
Q

What is an insurer that provides insurance for other insurers?

A

Re-insurer

26
Q

What is a Reciprocal Insurer?

A

A group of people or organizations that insure each other

27
Q

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

A

True

28
Q

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

A

False: Permitted in SOME states

29
Q

Risk retention groups can provide all types of liability coverage to their members, except for what?

A

Workers Compensation Insurance

30
Q

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

A

True

31
Q

Insurance companies can be classified according to their location, what are these classifications

A
  1. Domestic Insurer
  2. Foreign Insurer
  3. Alien Insurer

NY Study Group (8 decks)

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