Basics/Coverage Concepts Flashcards
What is insurance?
A contract where by one undertake to indemnify another against loss, damage or liability arising from a contingent or unknown event.
Substitution of a small certain loss for a large uncertain loss.
What is risk?
Possibility or uncertainty of loss occurring
What are the 2 types of risk? Define them.
Pure risk- involves two possible outcomes: loss or no loss.
Speculative risk- involves the possible opportunity for loss or gain.
What are the methods of handling risk?
S T A R R
Sharing, transfer, avoid, reduce, retain
What is indemnity?
The insurer restoring the insured back to the condition they were in before the loss occured
What is a contract?
An agreement between two or more parties enforceable by law.
What is estoppel?
Prevents reasserting a right previously waived
What are two types of tort?
Intentional (deliberate act) and unintentional (negligence)
What element of a contract is the binding force?
Consideration
What is the actual cause of the loss?
Peril
What is anything that increases the chance/likelihood that loss will occur…
Hazard
Name the 4 types of hazard.
Moral (dishonest) , morale (irresponsible), physical (location/material/value), and legal (court).
What are the 3 major types of loss exposure?
Property loss
Liability loss
Personal and personnel loss
What are the 4 elements of an enforceable contract?
Competent parties
Legal purpose
Offer and acceptance
Consideration
What are the benefits of insurance?
Allows individuals/society to recover from unexpected loss; promotes loss control; reduces uncertainty
What is loss and loss exposure?
Loss - any reduction in quality, quantity, or value of something
Loss exposure- possibility of loss
What are the 3 dimensions of loss exposure?
1 - type of value exposed to loss
2- the peril causing loss
3- extent of the potential financial consequences
What is an insurable event?
Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest or create a lability against him may be insured against
Type of agreement that restores someone to the same condition as prior to the loss -
Indemnity
An agreement in which an insurer contracts with a 3rd party to insure itself against losses from insurance policies it issues is known as -
Reinsurance
Self funding is…
= risk retention; the owner/employer pays for claims
Two characteristics must be present for a risk to successfully self-insure…
I- the loss must be predictable/known
2- sufficient liquid assets to pay claims and other costs of retaining the risk
(Blank) is a legal abandonment/relinquishment of a known right.
Waiver
A person seeking recovery.
Claimant
Define California Code of Regulations (CCR)
CCRs = Rules and procedures written by the commissioner to carry out the intent of the code (law).
Define California Insurance Code (CIC)
Statutes = State insurance laws = proposed, written, enacted and changed only by state legislature
