Ch 1 General Insurance Flashcards
For the purpose of insurance what is risk?
Uncertainty of loss
The type of insurance company organized to return any surplus money to its policyholders is known as what?
Mutual company
What do individuals use to transfer the risk of loss to a larger group?
Insurance
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
What entities make up the medical information bureau?
Insurers
The insurer organized to return a profit to the stockholders is what type of insurer?
Stock company
What document is required for an insurance company to transact insurance?
Certificate of authority
What are the three types of hazards?
physical, moral and morale
In insurance, when is the offer usually made on a contract?
When the insurance application is submitted
Informing an insurance contract, when does an acceptance usually occur?
When the insurer approves a prepaid application
When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?
Insurer
Insurers are classified according to the domicile. What are the three types of insurers?
Domestic, foreign, and alien
What type of risk is insurable?
Pure
What is a warranty in an insurance contract?
An absolutely true statement upon which the validity of the insurance contract is based
Wagering on a sporting event is known as what type of risk?
Speculative
What are the strategies used by underwriters to prevent adverse selection?
Restriction of coverage, refusal to accept the risk, and accepting a risk at a higher rate
What are the three types of agent authority?
express, implied and apparent
What type of insurer is formed under the laws of another country?
Alien
An applicant conceals relevant health information on the application. The applicant presents what type of hazard?
Moral
Who’s responsibility is it to determine that all the questions on an insurance application are answered?
The agents
A situation in which a person can only experience a loss and no game present what type of risk?
Pure risk
Insurance is a contract that protects the insured from what?
Loss
When a change needs to be made on the application for insurance, which is the best method for correcting the information?
Complete a new application or ask the applicant to initial the correction on the original application
an insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer’s classification in Nevada?
Foreign
When does an insurance policy go into effect?
When the policy is delivered and the premium is paid
What is the best way to handle incomplete insurance applications?
Return the application to the applicant for completion
If an insurer meets the states financial requirements and is approved to transact business in the state, it is considered what type of insurer?
Authorized or admitted
An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?
Mutual
Whom does an insurance agent represent?
Insurance company
Insurance company that is formed under the laws of another state is known as what type of insurer?
Foreign
A person who does not lock the doors to his or her house shows an indifferent attitude. This person presents what type of hazard?
Morale
What are the five characteristics of an ideally insurable risk?
Loss must be 1) due to chance, 2) definite and measurable, 3) statistically predictable, 4) not catastrophic, and 5) coverage cannot be mandatory.
According to the law of agency, a principal is represented by whom?
Agent or producer
If an applicant does not receive his or her insurance policy, who would be held responsible?
The agent
What is the term for the causes of loss insured against an insurance policy?
Peril
Conditions that increase the chance of loss or known as what?
Hazards
If an agent fails to obtain the applicant signature on the insurance application what must the insurer do?
Send the application back to the applicant for signature
What two elements are necessary for life insurance contract to have a legal purpose?
Insurable interest and consent
What are the four elements of an insurance contract?
Agreement (offer and acceptance), consideration, competent parties, and legal purpose
In the agent/insurer relationship, who is considered the principal
Insurer
The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?
Loss
The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?
Fiduciary
When risk with higher probability of loss are seeking insurance more often than other risk, this is known as what?
Adverse selection
Who owns stock companies?
Stockholders
Physical hazards
individual characteristics that increase the chances of the cause of loss.
Physical hazards exist because of a physical condition, past medical history, or a condition at birth, such as blindness.
Moral hazards
tendencies toward increased risk.
Moral hazards involve evaluating the character and reputation of the proposed insured. Moral hazards refer to those applicants who may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer.
Morale Hazards
state of mind that causes indifference toward loss, such as carelessness.
Mindset of I have insurance and so it doesn’t matter what I do because the insurance company will take care of it. (If i’m insured, why should I worry)
Insurers must obtain a _______________ prior to transacting business in this state.
Certificate of Authority
______ = unequal values
Aleatory
Methods of handling risk:
Avoidance Retention Sharing Reduction Transfer
Approved by the Department of Insurance and has a Certificate of Authority
Authorized/Admitted
breach of warranties, concealment, fraud - (all can void the contract) are known as what:
Material misrepresentations
