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ChFC HS311: Insurance Planning > Chapter 2: Key Terms > Flashcards

Chapter 2: Key Terms Flashcards

1
Q

Actual Cash Value

A

Represent the depreciated value of the property

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2
Q

Adhesion

A

A take it of leave it contract

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3
Q

Adverse Selection

A

The tendency of those that most need insurance to seek it out

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4
Q

Agents

A

Legal representatives of an insurer and acts on behalf of that insurer

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5
Q

Aleatory

A

A type of insurance contract in which the dollar amounts exchanged are uneven

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6
Q

Apparent Authority

A

When the third party believes implied or express authority exists, but no authority actually exists

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7
Q

Appraised/Agreed Upon Value

A

Used for hard to value items and where the insured may own property that exceeds standard limits of a property insurance policy

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8
Q

Brokers

A

Legal representatives of an insured and can act in the interest of the insured

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9
Q

Coinsurance

A

The percentage of financial responsibility that the insured and the insurer must uphold in order to achieve equity in rating

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10
Q

Concealment

A

When the insured is intentionally silent regarding a material fact during the application process

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11
Q

Conditional

A

The insured must abide by all the terms and conditions of the contract, if the insured intends to collect under the policy

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12
Q

Copayment

A

A loss-sharing arrangement whereby the insured pays a percentage of the loss in excess of the deductible

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13
Q

Declarations Section

A

The section of an insurance policy that describes exactly what property is being covered

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14
Q

Deductible

A

A specified amount of money the insured is required to pay on a loss before the insurer will make any payment under the policy

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15
Q

Definition Section

A

The section of an insurance policy that defines key words, phrases, or terms used through the insurance contract

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16
Q

Description Section

A

The section of an insurance policy that describes exactly what is being insured

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17
Q

Endorsement

A

A modification of change to the existing property insurance policy

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18
Q

Estoppel

A

The legal process of denying a right you might otherwise be entitled to under the law

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19
Q

Exclusion Section

A

The section of an insurance policy that will exclude certain perils, losses, and property

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20
Q

Express Authority

A

Authority given to an agent through a formal written document

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21
Q

Financial Risk

A

A loss of financial value, such as the premature death of a family’s primary wage earner

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22
Q

Fundamental Risk

A

A risk that can impact a large number of individuals at one time (earthquake, flood, hurricane, etc.)

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23
Q

Hazards

A

A specific condition that increases the potential or likelihood of a loss occurring

24
Q

Implied Authority

A

The authority that a third party relies upon when dealing with an agent based upon the position held by the agent

25
Q

Lacking Sound Mind

A

The state of not having the capacity to understand the purpose and terms of the contract, therefore the contract lacks a meeting of the minds or mutual consent

26
Q

Law of Large Numbers

A

A principle that states the more similar events/exposures, the more likely the actual results will equal the probability expected

27
Q

Minors

A

In most states, a minor is under the age of 18. If a minor enters into a contract, the minor can void the contract at any time

28
Q

Moral Hazard

A

The potential loss occurring because of the moral character of the insured, and the filing of a claim with their insurance company

29
Q

Mutual Consent

A

Common understanding and agreement between parties to a contract regarding what the contract covers and the terms of the contract

30
Q

Non-Financial Risk

A

A risk that would result in a loss, other than a monetary loss

31
Q

Objective Risk

A

The variation of actual amount of losses that occur over a period of time compared to the expected amount of losses

32
Q

Offer and Acceptance

A

Consists of one party making an offer to purchase a good/service, and the acceptance is when consideration is received

33
Q

Out-of-Pocket Maximum

A

The sum of the deductible, the insured’s portion of coinsurance, and generally any copayments made by the insured

34
Q

Parol Evidence Rule

A

States that “what is written prevails.” Oral agreements that are not reflected in the written contract are not valid

35
Q

Particular Risk

A

A risk that can impact a particular individual, such a death or the inability to work because of a sickness or accident

36
Q

Perils

A

The immediate cause and reason for a loss occurring

37
Q

Physical Hazard

A

A physical condition that increases the likelihood of a loss occurring

38
Q

Principle of Indemnity

A

Asserts that an insurer will only compensate the insured to the extent the insured has suffered actual financial loss

39
Q

Principle of Insurable Interest

A

Asserts that an insured must suffer a financial loss if a covered peril occurs, otherwise no insurance can be offered

40
Q

Pure Risk

A

The chance of loss or no loss occurring

41
Q

Reinsurance

A

A means by which an insurance company transfers some or all of its risk to another insurance company

42
Q

Replacement Cost

A

Represents the amount to repair or replace property, without any deduction for depreciation

43
Q

Representation

A

A statement made by the applicant during the insurance application process

44
Q

Rider

A

A modification or change to a life or health insurance policy

45
Q

Risk

A

The chance of loss, uncertainty associated with loss, or the possibility of a loss

46
Q

Risk Avoidance

A

A risk management technique used for any risks that are high in frequency and high in severity

47
Q

Risk Reduction

A

The process of reducing the likelihood of a pure risk that is high in frequency and low in severity

48
Q

Risk Retention

A

Accepting some or all of the potential loss exposure for risks that are low in frequency and low in severity

49
Q

Risk Transfer

A

The process of transferring a low frequency and high severity risk to a third party, such as an insurance company

50
Q

Speculative Risk

A

The chance of loss, no loss, or a profit

51
Q

Subjective Risk

A

The risk an individual perceives based on their prior experiences and the severity of those experiences

52
Q

Subrogation Clause

A

A clause in an insurance policy that requires that the insured relinquish a claim against a negligent third party, if the insurer has already indemnified the insured

53
Q

Underwriting

A

The process of classifying applicants into risk pools, selecting insureds, and assigning a premium

54
Q

Unilateral

A

There is only one promise made. In the case of an insurance contract, it’s made by the insurer to pay in the event of a loss

55
Q

Waiver

A

The relinquishment of a known legal right

56
Q

Warranty

A

A promise made by the insured that is part of the insurance contract

ChFC HS311: Insurance Planning (20 decks)

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