Chapter 1: General Insurance

Question 1

Acceptance

Answer 1

The acceptance of an insurance contact takes place when the insurance company agrees to issue insurance.

Question 2

Assignment

Answer 2

Specifies that the insured may not transfer rights of ownership or interest in an insurance policy to another party without the insurer’s written consent.

Question 3

Attained Age

Answer 3

Insured’s age at any point in time at renewal or conversation.

Question 4

Average Value Method

Answer 4

A loss reserve established based on average settlements of particular claim types.

Question 5

Broker

Answer 5

Person that negotiates insurance contracts on behalf of the insured, thereby representing the clients interest, not the insurer.

Question 6

Career Agency System

Answer 6

Agents are recruited, trained and supervised by either a managing employee or General Agent who is contracted with the insurance company.

Question 7

Case Reserve Method

Answer 7

A loss reserve established for each claim, when reported.

Question 8

Certificate of Authority

Answer 8

Authorization granted by the Department of Insurance to an agency or insurer to transact insurance in this state.

Question 9

Class Rating

Answer 9

A group of insureds who have similar exposures and experience are charged the same rate.

Question 10

Combined Ratio

Answer 10

Sum of the loss ratio and expense ratio.

Question 11

Competent Parties

Answer 11

All parties to a contract; minors, mentally incompetent, persons, under influence of drugs or alcohol do not have legal capacity.

Question 12

Concealment

Answer 12

The withholding of known(material) facts so important that the disclosure of them would change the decision of an insurer with respect to underwriting, settling a loss, or determining premium.

Question 13

Conditional Contract

Answer 13

Both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable.

Question 14

Consideration

Answer 14

Insured pays premium, insurer promises to pay claims.

Question 15

Contract Law

Answer 15

Law that pertains to the formation and enforcement of contracts.

Question 16

Contract of Adhesion

Answer 16

One party prepares a contract (Insurer) and submits it to the other party on a take-it-or leave-it basis (insured).

Question 17

Contract of Utmost Good Faith

Answer 17

Both parties bargain in good faith in forming the contract, and rely upon the statements and promises of each other.

Question 18

Deductable

Answer 18

A specified dollar amount of each covered property loss that an insured must pay.

Question 19

Direct Mail

Answer 19

• A marketing system utilizing direct mail, newspapers, magazines, radio, television, internet, web sites, call centers and vending machines.
• Sells insurance policies directly to the public with licensed employees or contractors.

Question 20

Direct Response Company

Answer 20

Sells insurance policies directly to the public with licensed employees or contractors utilizing direct mail, newspapers, magazines, radio, television, internet web sites, call centers and vending machines.

Question 21

Direct Writing System

Answer 21

An insurer deals directly with the insured through an employee agent.

Question 22

Domestic Insurer

Answer 22

An insurer organized under the laws of this state, whether or not it is admitted to do business in this state.

Question 23

Effective or Issue Date

Answer 23

The date when insurance coverage begins. (aka: inception date)

Question 24

Endorsement

Answer 24

A form changing the provisions of a policy.

Attached as a rider

Question 25

Estoppel

Answer 25

A legal doctrine that prevents the denial of a fact, if the fact was admitted to be true by a previous action.