Basic Principles Of Life And Health Insurance Flashcards
Is a legal contract that transfers an uncertain risk from one party to another. The insured transfers, the possibility of suffering, a large financial loss to an insurer in return for paying a relatively small, contractually defined premium.
Insurance
When an insurance policy restores an insured to the financial position, he or she experienced before an insured loss. Insurance companies _________ they’re insured when covered losses occur.
Indemnify
Nonparticipating insurance companies are also known as:
Stock companies
Stock insurers issue ___________ insurance policies because policy owners are not stockholders and therefore, are not owners.
Non-participating
Participating insurance companies are also known as:
Mutual companies
• the policy holders own mutual insurance companies
• the revenue paid out in the form of policy dividends is referred to as the divisible surplus
What type of company? Hint: think participating
Mutual companies
Participating policies: are when policy owners receive a share of surplus revenue in the form of policy dividends.
What type of insurance companies sell participating policies?
Mutual insurance companies
To pay for claims this type of insurance company assesses premiums at the time members experience loss.
Assessment mutual insurers
• not for profit organizations that are noted for their social, charitable, and benevolent activities.
• membership is based on a common bond, and these organizations may be formed around a common religion, nationality, ethnicity, charitable, cause, or other affiliation.
Fraternal benefits societies
Each policy owner individually assumes a share of another’s risk. This type of insurance contracts, a form of risk sharing rather than risk transfer.
Reciprocal insurers
A specialized insurance company that provides liability insurance for individuals and entities with a common bond
Risk retention groups (RRGs)
_____________ buys coverage for its members, which must have a common bond.
• this type of group becomes a master policyholder, and it’s members receives certificates of insurance.
Risk purchasing groups (RPGs)
___________ provide insurance for other insurance companies.
Reinsurers
In the concept of reinsurers, the primary insurer is also referred to as:
a ceding insurer
The maximum amount of exposure that the insurer can carry when ensuring a single risk
Risk retention limit
____________ exists when a reinsurer enters into a contract with a primary insurance company to automatically assume it’s excess exposure for risks that meet contractually defined criteria. This agreement is also referred to as automatic reinsurance.
Treaty reinsurance
When a primary insurer seeks reinsurance for a specific exposure without an ongoing agreement, it’s referred to as:
Facultative reinsurance
A ____________ is established to cover the loss exposure of the parent organization that owns it
Captive insurer
______________ are unauthorized insurers that provide coverage when authorized insurers reject buyers or authorized insures don’t offer the type of insurance being sought.
Surplus lines insurance carriers
___________ is a syndicate of individuals that individually underwrite special (unique) risks.
Lloyds of London
An _____________________ describes an insurer that has been issued a certificate of AUTHORITY from a state’s insurance department authorizing the insurer to transact insurance in that state. Insurers must receive a certificate of authority from each state they wish to transact insurance.
Authorized or admitted insurer
An _________________ company is prohibited from conducting insurance operations in that particular
Unauthorized (non-admitted) insurance
_____________ is organized and incorporated in the state in which it’s writing business
Domestic insurer
____________ is organized under the laws of a different state
Foreign insurer
