Ch. 1 - General Insurance FLASH CARDS

Question 1

What type of authority is based on the agent’s actions, or words?

Answer 1

Apparent

Question 2

What do individuals use to transfer their risk of loss to a larger group?

Answer 2

Insurance

Question 3

Conditions that increase the chance of a loss are known as what?

Answer 3

Hazards

Question 4

What does indemnify mean in insurance?

Answer 4

To restore an insured to the same financial status as before a loss.

Question 5

In insurance contracts, when does acceptance usually occur?

Answer 5

When the insurer approves a prepaid application

Question 6

A tornado that destroys a property would be an example of what?

Answer 6

Peril

Question 7

Insurers are classified according to their domicile. What are the three types of insurers?

Answer 7

Domestic, foreign, and alien

Question 8

What does the term reasonable expectations mean in insurance?

Answer 8

Certain expectations for coverage that a reasonable person would have based on sources other than just the policy language.

Question 9

What is the term for the causes of loss insured against in an insurance policy?

Answer 9

Peril

Question 10

What are the methods of managing risk?

Answer 10

Avoidance, transfer, sharing, retention, and reduction

Question 11

Wagering on a sporting event is known as what type of risk?

Answer 11

Speculative

Question 12

What are the three types of hazards?

Answer 12

Physical, moral, and morale

Question 13

If an insurer holds a Certificate of Authority, it is known as what type of insurer?

Answer 13

Authorized or admitted

Question 14

When would a misrepresentation on an insurance application be considered fraud?

Answer 14

When it is intentional and material.

Question 15

According to the Law of Agency, who represents the principal?

Answer 15

Agent or producer

Question 16

What is consideration on the part of the insurer?

Answer 16

A promise to pay in the event of a loss.

Question 17

What type of insurer is formed under the laws of another state?

Answer 17

Foreign

Question 18

What is a risk?

Answer 18

Uncertainty of loss

Question 19

What document is required for an insurance company to transact insurance?

Answer 19

Certificate of Authority

Question 20

In the agent/insurer relationship, who is considered the principal?

Answer 20

The insurer

Question 21

What are the three types of agent authority?

Answer 21

Apparent, implied, and express

Question 22

What are the four elements of an insurance contract?

Answer 22

Agreement (offer and acceptance), consideration, competent parties, and legal purpose

Question 23

What is consideration in an insurance contract?

Answer 23

Consideration is something of value that each party gives to each other. Consideration on the part of the insurer is binding.

Question 24

What is a warranty in an insurance contract?

Answer 24

An absolutely true statement upon which the validity of the policy depends.

Question 25

A situation in which a person can experience only a loss and no gain presents what type of risk?

Answer 25

Pure risk

Question 26

Insurance contracts are aleatory in nature? What does that mean?

Answer 26

Unequal values are exchanged between the parties to a contract.

Question 27

What are the five characteristics of an ideally insurable risk?

Answer 27

Loss must be

1) due to chance
2) definite and measurable
3) statistically predictable
4) not catastrophic
5) coverage cannot be mandatory.

Question 28

In insurance contracts, when is the offer usually made?

Answer 28

When the insurance application is submitted.

Question 29

What provision states that if a policy allows for greater benefits than the financial loss incurred, the insured may be compensated only for the amount lost?

Answer 29

Indemnity

Question 30

What does the term unilateral contract mean?

Answer 30

A one-sided contract. This means only one party makes an enforceable promise.