chapter 1 Flashcards
Elements of a legal contract (4)
Agreement
Consideration
competent parties
legal purpose
What does aleatory mean?
It is an unequal exchange of goods
insurable interest
Means that you have a stake in the thing you are buying insurance for
Buyers guide vs policy summary
Buyers guide - generic information about insurance policies. It helps compare the policies
policy summary - specific information about policy being issued. Shows every single thing that will be included
Parts of an application
part 1 - General information
part 2 - medical information
part 3 - agent’s report (additional information that is observed by the agent)
Underwriting
The process that the company goes through to decide what kind of risk a person is. And what the rates should be
Adverse Selection
Insuring risks that are more prone to losses than the average risk. (charging a higher risk to someone who sky dives or presents more risk)
Attending physical statement (APS)
forms from a doctor from the last however many years to obtain the medical history of someone. It helps determine likelihood of claims. (less expensive than a medical exam)
Medical Information Bureau (MIB)
another underwriting source. This stores and shares medical information among member insurers. helps uncover misrepresentations and prevent concealment.
This cannot be the only source used and can not make a decision soley based on MIB
Premium receipts
The type of receipt issued when premiums are collected with the application
Conditional receipt
states the covereage will be effective either on the date of application or the date of the medical exam.
3 different classifications of risk
Preffered - This is the best. Usually in great health. They will have the lowest rates
Standard - The average rate. Cost is a little bit higher.
Substandard - Below the standard of risk. Therefore, rates are the highest.
