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Health & Life > Chapter 1 - General Insurance Concepts > Flashcards

Chapter 1 - General Insurance Concepts Flashcards

1
Q

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

A

Peril

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2
Q

In insurance, when is the offer usually made on a contract?

A

When the insurance application is submitted.

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3
Q

When does an insurance policy go into effect?

A

When the policy is delivered and the premium is paid

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4
Q

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

A

Insurance

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5
Q

What are the three types of agent authority?

A

Express, implied, and apparent

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6
Q

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

A

Insurer

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7
Q

Insurance is a contract that protects the insured from what?

A

Loss

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8
Q

A person who does not lock the doors to his or her house shows and indifferent attitude. This person presents what type of hazard?

A

Morale

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9
Q

An insurance company that is formed under the laws of another state is known as what type of insurer?

A

Foreign

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10
Q

When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?

A

Insurer

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11
Q

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

A

Domestic, Foreign, Alien

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12
Q

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?

A

Authorized and admitted

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13
Q

What type of risk is insurable?

A

Pure

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14
Q

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

A

When it is intentional and material

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15
Q

If an applicant does not receive his or her insurance policy, who would be held responsible?

A

The Agent

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16
Q

An insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer’s classification in Nevada?

A

Foreign

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17
Q

What are the four elements of an insurance contract?

A

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

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18
Q

For the purpose of insurance, What is risk?

A

uncertainty of loss.

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19
Q

What type of report provides information about the applicants hobbies, habits and financial status?

A

Inspection report

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20
Q

Whose responsibility is it to determine that all the questions on an insurance application are answered?

A

The agent’s

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21
Q

What are the strategies used by underwriters to prevent adverse selection?

A

Restriction of coverage, refusal to accept a risk, and accepting a risk at a higher rate

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22
Q

Who owns stock companies?

A

Stockholders

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23
Q

The insurer organized to return a profit to the stockholders is what type of insurer?

A

Stock company

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24
Q

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

A

Certificate of authority

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25
Q

What is the best way to handle incomplete insurance applications?

A

Return the application to the applicant for completion.

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26
Q

The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?

A

Loss

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27
Q

Insuring of risks that are more prone to losses than average risk. Insurers may protect themselves by refusing or restricting coverage or by charging a higher rate.

A

Adverse selection

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28
Q

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

A

Insurer

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29
Q

The type of insurance company organized to return any surplus money to its policyholders is known as what?

A

Mutual Company

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30
Q

In forming an insurance contract, when does an acceptance usually occur?

A

When the insurer approves a prepaid application

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31
Q

If an agent fails to obtain the applicant’s signature on the insurance application, what must the insurer do?

A

Send the application boack to the applicant for signature

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32
Q

When a change needs to be made on the application for insurance, which is the best method for correcting the information?

A

Complete a new application or ask the applicant to initial the correction on the original application

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33
Q

According to the Law of Agency, a principal is represented by whom?

A

Agent or producer

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34
Q

What two elements are necessary for a life insurance contract to have a legal purpose?

A

insurable interest and consent

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35
Q

An applicant conceals relevant health information on the application. The applicant presents what type of hazard?

A

Moral

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36
Q

What entities make up the medical information bureau?

A

Insurers

37
Q

When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?

A

Insurer

38
Q

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

A

Speculative

39
Q

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

A

Hazards

40
Q

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

A

Alien

41
Q

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

A

pure

42
Q

What is a warranty in an insurance contract?

A

An absolutely true statement upon which the validity of the insurance contract is based.

43
Q

An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?

A

Mutual

44
Q

The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?

A

Fiduciary

45
Q

What are the three types of hazards?

A

Physical, moral, and morale

46
Q

Insurer collects only to the extent of the financial loss

A

indemnity

47
Q

Hazards give rise to _____

A

peril

48
Q

Type of insurer that is non-par

A

Stock

49
Q

Type of insurer that is par (participates in dividends)

A

mutual

50
Q

non for profit orgnaizations with member based insurance

A

fraternal benefit society

51
Q

Not specifically stated in contract but assumed neccessary to conduct business

A

implied

52
Q

The appearance of a relationship between agent and prinicipal based on words or actions

A

apparent

53
Q

Company is approved by dept. of insurance ad has certificate of authority

A

authorized / admitted

54
Q

not agains public policy

A

legal purpose

55
Q

premiums and representations on behallf of the insured; payment of claims on part of the insurer

A

consideration

56
Q

always resolved in favor of the insured

A

ambiguities

57
Q

voluntary act of reliquishing a legal right; estoppel

A

waiver

58
Q

The planned assumption of risk by an insured through the use of deductibles, co-payments, or self insurance.

A

Risk retention

59
Q

The purpose of ______ is to
1. Reduce expenses and improve cash flow
2. Increase control of claim reserving and claims settlements
3. To fund for losses that cannot be insured

A

Retention

60
Q

One party prepares the contract; the other party must accept it.

A

Adhesion

61
Q

Exchange of unequal amounts

A

Aleatory

62
Q
  • adhesion
  • aleatory
  • conditional
  • personal
  • unilateral
A

Contract characteristics

63
Q

Material misrepresentations (if intentional), breach of warranties, concealment, fraud can al ——- the contract.

A

Void

64
Q

Consequence of a waiver

A

Estoppel

65
Q

What type of risk is insurance?

A

Pure risk that results in a loss or no change

66
Q

Avoidance, retention, sharing, reduction, transfer are all means of ___________ _________

A

Handling risk

67
Q

Due to chance
Definite and measurable
Statistically predictable
Not catastrophic
Randomly selected / large loss exposure

A

Elements of insurance risk

68
Q

Spreading risk among a large pool of people with a similar exposure to loss.

A

Law of large numbers

69
Q

A company that insures what other companies consider too high risk to take on. (Ie railcars, airlines, a persons body parts,) and are never authorized/admitted in any particular state

A

Excess / surplus lines

70
Q

An insurer that is incorporated in this state

A

Domestic insurer

71
Q

An insurer incorporated in another state or territory

A

Foreign insurer

72
Q

An insurer incorporated outside of the U.S.

A

Alien insurer

73
Q

According to the ___________ knowledge of the agent = knowledge of insurer and payment to agent = payment to insurer

A

Law of agency

74
Q

Authority written in the contract

A

Express authority

75
Q

Authority not written in contract, but is assumed

A

Implied authority

76
Q

Authority based on the principals actions or words

A

Apparent authority

77
Q

Element of a legal contract that is represented the offer and acceptance of that offer.

A

Agreement

78
Q

Element is a legal contract represented by the payment and info on application

A

Consideration

79
Q

Element of a legal contract that states all actions must not be against law or public policy.

A

Legal purpose

80
Q

An unequal exchange of values. Ie a premium is much less than the amount paid out in the case of an event.

A

Aleatory

81
Q

Contract language stating between insurer and insured

A

Personal

82
Q

Insurance language that suggests you take it or leave it

A

Adhesion

83
Q

Contact language that presents a policy as a one sided promise. The insurance company is contractually obligated to hold up their end of the deal whereas the insured can cancel at anytime.

A

Unilateral

84
Q

Contract language that states that certain conditions must be met.

A

Conditional

85
Q

Application statement may that are absolutely true. A breach of these can void a policy

A

Warranties

86
Q

Statements on an app that are true to the best of their knowledge and are not necessarily guaranteed to be true

A

Representations

87
Q

Intentional withholding of information of a material fact that is crucial in making an underwriting decision

A

Concealment

88
Q

A fact that would lead to a different underwriting decision had the insurer known about it

A

Material fact

89
Q

When insurance is obtained through a __________ insurer, the insureds are sharing the risk of loss with other subscribers.

A

Reciprocal

Health & Life (10 decks)

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