chapter one - general insurance Flashcards
If an insurance company wants to transfer all or part of the risk it has accepted, it would buy what type of insurance?
Reinsurance.
What is an insurance company that is organized under the laws of a different state within the United States?
Foreign.
What insurance company department accepts the insurance risk?
Underwriting.
What type of authority does the public assume an agent has, based on the agent’s conduct?
Apparent.
A federal regulation called the _______ protects customer privacy?
Fair Credit Reporting Act.
A physical condition that increases the probability of loss; use, condition, or occupancy of property.
Physical Hazard.
Dishonest tendencies that increase the probability of a loss; certain characteristics and behaviors of people.
Moral Hazard.
An attitude that increases the probability of a loss.
Morale Hazard.
What six things must be included in an insurable risk?
Accidental losses, excluded catastrophic perils, calculable change of loss, a large number of groups with the same perils, affordable premiums, and the loss must be measurable.
What principal of insurance restores the insured to the same economic condition that existed before the loss?
Indemnity.
The four elements of a legal contract are:
Agreement, legal purpose, consideration, and a competent party or someone that has the legal capacity to enter into a legal contract.
A statement in the application that is guaranteed to be true, and if later discovered to be false, the contract may be voided.
Warranty.
What is the equation that equals a company’s loss ratio?
(paid losses + loss reserves) / total earned premium
When Applicant P fails to disclose all motor vehicle violations in an application for automobile insurance, P may be guilty of:
Estoppel
Concealment
Breach of warranty
Avoidance
Concealment.
The failure to disclose material facts.
Concealment.
When writing the application for Homeowners insurance, B’s agent asked if B had any theft losses in the past 3 years. B answered no, despite the fact that B was a theft victim 3 times in the past 3 years. B is guilty of which of the following?
Waiver
Unilateral statement
Misrepresentation
Representation
Misrepresentation.
Which of the following powers describes the authority stated in an agent’s agency contract?
Express
Implied
Apparent
Assumed
Express.
The agency contract, which exists between an insurer and a producer, sets forth the powers that are granted to the producer. These powers are referred to as ____ because they are directly stated in the contract.
Express.
Something that increases the change of a loss
Hazard.
___ prevents a party from denying a fact, if that fact was admitted to be true by previous actions.
Estoppel.
All of the following are producer responsibilities, EXCEPT:
Solicit and accept applications, and forward them to the insurer
Represent the insurer
Issue policies
Provide quotes and collect premiums
Issue policies.
K makes a statement on the insurance application, which becomes part of the contract, that K has an alarm system. Having the alarm system qualifies K for a premium discount. This statement is considered a:
Endorsement
Representation
Warranty
Provision
Warranty.
A false statement in the application for insurance is ___________.
Misrepresentation
Concealment
Representation
Unilateral
Misrepresentation.
When an insurance policy is not clear, the court will usually interpret in favor of the insured because of which characteristic?
The policy is a conditional contract
The policy is an aleatory contract
The policy is a contract of adhesion
The policy is a bilateral contrac
The policy is a contract of adhesion.
A contract of ___ is a contract between two parties that is written on a take-it-or-leave-it basis.
Adhesion.
An agent is best described as which of the following?
A producer who represents members of the public wishing to purchase insurance
A producer authorized by the Department of Insurance to adjust insurance claims
A producer who represents persons who have contracted with him/her to obtain insurance for them
A producer who has a contract with an insurer to represent that insurer in the sale of its products
A producer who has a contract with an insurer to represent that insurer in the sale of its products
An agent has authority to do all of the following, except:
Countersign insurance contracts
Appoint a solicitor as his or her representative
Represent the insured’s interest
Solicit applications on the insurer’s behalf
Represent the insured’s interest.
Because the agent is primarily the representative of an insurer
The insurer’s promise to pay a covered loss and the insured’s payment of the first premium are examples of:
Offer
Acceptance
Legal Purpose
Consideration
Consideration.
(This is the term used to describe the rights, money, promises, or property exchanged between the parties as part of a contract transaction).
What is the name for an insurer authorized to write insurance policies in a particular state?
Admitted
Non-Admitted
Foreign
Domestic
Admitted.
(An admitted insurer is an insurer that is authorized to transact insurance in a state by that state’s insurance department, as evidenced by a certificate of authority to transact business.)
An insurer that is authorized to do business in a particular state is said to be:
Foreign
Non-Admitted
Domestic
Admitted
Admitted.
Which statement defines estoppel?
Estoppel is the intentional abandonment of a known right
Estoppel is the failure to disclose known facts
Estoppel is the intentional misrepresentation of a material fact
Estoppel prevents the denial of a fact previously established to be true
Estoppel prevents the denial of a fact previously established to be true.
An individual faces the risk of economic loss in the event of property damage because of which of the following?
Limit of recovery
Indemnity
Subrogation
Insurable interest
Insurable Interest
Typically, if there is a risk of financial loss, there must be an insurable interest
All of the following are types of insurers, except:
Reciprocal insurers
Proprietary insurers
Mutual insurers
Stock insurers
Proprietary insurers
