Ch. 1 - General Insurance FLASH CARDS
What type of authority is based on the agent’s actions, or words?
Apparent
What do individuals use to transfer their risk of loss to a larger group?
Insurance
Conditions that increase the chance of a loss are known as what?
Hazards
What does indemnify mean in insurance?
To restore an insured to the same financial status as before a loss.
In insurance contracts, when does acceptance usually occur?
When the insurer approves a prepaid application
A tornado that destroys a property would be an example of what?
Peril
Insurers are classified according to their domicile. What are the three types of insurers?
Domestic, foreign, and alien
What does the term reasonable expectations mean in insurance?
Certain expectations for coverage that a reasonable person would have based on sources other than just the policy language.
What is the term for the causes of loss insured against in an insurance policy?
Peril
What are the methods of managing risk?
Avoidance, transfer, sharing, retention, and reduction
Wagering on a sporting event is known as what type of risk?
Speculative
What are the three types of hazards?
Physical, moral, and morale
If an insurer holds a Certificate of Authority, it is known as what type of insurer?
Authorized or admitted
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material.
According to the Law of Agency, who represents the principal?
Agent or producer
What is consideration on the part of the insurer?
A promise to pay in the event of a loss.
What type of insurer is formed under the laws of another state?
Foreign
What is a risk?
Uncertainty of loss
What document is required for an insurance company to transact insurance?
Certificate of Authority
In the agent/insurer relationship, who is considered the principal?
The insurer
What are the three types of agent authority?
Apparent, implied, and express
What are the four elements of an insurance contract?
Agreement (offer and acceptance), consideration, competent parties, and legal purpose
What is consideration in an insurance contract?
Consideration is something of value that each party gives to each other. Consideration on the part of the insurer is binding.
What is a warranty in an insurance contract?
An absolutely true statement upon which the validity of the policy depends.
A situation in which a person can experience only a loss and no gain presents what type of risk?
Pure risk
Insurance contracts are aleatory in nature? What does that mean?
Unequal values are exchanged between the parties to a contract.
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
5) coverage cannot be mandatory.
In insurance contracts, when is the offer usually made?
When the insurance application is submitted.
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?
Indemnity
What does the term unilateral contract mean?
A one-sided contract. This means only one party makes an enforceable promise.
