Ch. 1 (General Insurance) Flashcards
What two elements are necessary for a life insurance contract to have a legal purpose?
Insurable interest and consent.
What is a warranty in an insurance contract?
An absolutely true statement upon which the validity of the insurance contact is based.
Wagering on a sports event is known as what type of risk?
Speculative.
When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?
Insurer.
What are the three types of agent authority?
Express, implied, and apparent.
An applicant conceals relevant health information on an application. The applicant presents what type of hazard?
Moral.
If an agent fails to obtain the applicant’s signature on the insurance application, what must the insurer do?
Send the application back to the applicant for signature.
What type of report provides information about the applicant’s hobbies, habits, and financial status?
Inspection report.
What type of insurer is formed under the laws of a different country?
Alien insurer.
When risks of higher probability of loss are seeking insurance more often than other risks, this is known as what?
Adverse selection.
For the purpose of insurance, what is risk?
Uncertainty of loss.
What are the three types of hazards?
Physical, moral, and morale.
In the agent/insurer relationship, who is considered the principal?
The insurer.
If an insurer meets the state’s financial requirements and is approved to transact business in the state, it is considered what type of insurer?
Authorized or admitted.
The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?
Fiduciary.
What is the term for the causes of loss insured against in an insurance policy?
Peril.
Whom does an insurance agent represent?
The insurer / insurance company.
Conditions that increase the risk of a loss are known as what?
Hazards.
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 type of risk is insurable?
Pure.
The type of insurance company organized to return any surplus money to its policyholders is known as what?
Mutual company.
When a change need 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.
In forming an insurance contract, when does an acceptance usually occur?
When the insurer approves a prepaid application.
What are the strategies used by underwriters to prevent adverse selection?
Restriction of coverage, refusal to accept a risk, and accepting a risk at a higher rate.
In insurance, when is the offer usually made on a contract?
When the insurance application is submitted.
Insurers are usually classified according to their domicile. What are the three types of insurers?
Domestic, foreign, and alien.
Insurance is a contract that protects the insured from what?
Loss.
An Insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer’s classification in Nevada?
Foreign.
An insurance company 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.
A situation in which a person can only experience a loss and no gain presents what type of risk?
Pure risk.
When would a misrepresentation on an insurance application be considered a fraud?
When it is intentional and material.
What do individuals use to transfer their risk of loss to a larger group?
Insurance.
The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?
Loss.
According to the Law of Agency, a principal is represented by whom?
The agent/producer.
Whose responsibility is it to determine that all the questions on an insurance application are answered?
The agent’s.
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.
What entities make up the medical information bureau?
Insurers.
If an applicant does not receive his or her insurance policy, who would be held responsible?
The agent.
What are the four elements of an insurance contract?
1) Agreement (offer and acceptance), 2) consideration, 3) competent parties, and 4) legal purpose.
Who owns stock companies?
Stockholders.
What is the best way to handle incomplete insurance applications?
Return the application to the applicant for completion.
When does an insurance policy go into effect?
When the policy is delivered, and the premium is paid.
A person who does not lock the doors shows an indifferent attitude. This person presents what type of hazard?
Morale.
An insurance company that is formed under the laws of another state known as what type of insurer?
Foreign.
