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ChFC HS311 FP:FUNDAMENTALS OF INSURANCE PLANNING > Characteristics of Insurance > Flashcards

Characteristics of Insurance Flashcards

1
Q

ACTUAL CASH VALUE

A

REPRESENTS THE DEPRECIATED VALUE OF THE PROPERTY

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2
Q

ADHESION

A

A TAKE IT OR 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 ACT ON BEHALF OF THE 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 OR AGREED UPON VALUE

A

USED FOR HARD TO VALUE ITEMS AND WHERE THE INSURED MAY OWN PROPERTY THAT EXCEEDS STANDARD LIMITS OF PROPERTY INSURANCE POLICY

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8
Q

BROKERS

A

LEGAL REPRESENTATIVES OF AN INSURED AND ACT IN THE BEST INTEREST OF THE INSURED

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9
Q

COINSURANCE

A

THE PERCENTAGE OF FINANCIALRESPONSIBILITY 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 FLAT DOLLAR OR PERCENTAGE OF THE LOSS IN EXCESS OF THE DEDUCTIBLE

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13
Q

DECLARATIONS SECTION

A

THE SECTION OF THE 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 PAYMENTS 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 THROUGHOUT 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 OR 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 OR FLOOD)

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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

THEW 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 OR 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 FALSE CLAIM WITH THEIR INSURANCE COMPANY

29
Q

MORALE HAZARD

A

THE INDIFFERNCE TO A LOSS CREATED BECAUSE THE INSURED HAS INSURANCE

30
Q

MUTUAL CONSENT

A

COMMON UNDERSTANDING AND AGREEMENT BETWEEN PARTIES TO A CONTRACT REGARDING WHAT THE CONTRACT COVERS AND THE TERMS OF THE CONTRACT

31
Q

NON-FINANCIAL RISK

A

A RISK THAT WOULD RESULT IN A LOSS, OTHER THAN A MONETARY LOSS

32
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

33
Q

OFFER AND ACCEPTANCE

A

CONSISTS OF ONE PARTY MAKING AN OFFER TO PURCHASE A GOOD OR SERVICE, AND THE ACCEPTANCE IS WHEN CONSIDERATION IS RECEIVED

34
Q

OUT-OF-POCKET-MAXIMUM

A

THE SUM OF THE DEDUCTIBLE, THE INSURED’S PORTION OF THE COINSURANCE, AND GENERALLY ANY COPAYMENTS BY THE INSURED

35
Q

PAROL EVIDENCE RULE

A

STATES THAT “WHAT IS WRITTEN PREVAILS.” ORAL AGREEMENTS THAT ARE NOT REFLECTED IN THE WRITTEN CONTRACT ARE NOT VALID

36
Q

PARTICULAR RISK

A

A RISK THAT CAN IMPACT A PARTICULAR INDIVIDUAL, SUCH AS DEATH OR THE INABILITY TO WORK BECAUSE OF A SICKNESS OR ACCIDENT

37
Q

PERILS

A

THE IMMEDIATE CAUSE AND REASON FOR A LOSS OCCURRING

38
Q

PHYSICAL HAZARD

A

A PHYSICAL CONDITION THAT INCREASES THE LIKELIHOOD OF A LOSS OCCURRING

39
Q

PRINCIPLE OF INDEMNITY

A

ASSERTS THAT AN INSURER WILL ONLY COMPENSATE THE INSURED TO THE EXTENT THE INSURED HAS SUFFERED AN ACTUAL FINANCIAL LOSS

40
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

41
Q

PURE RISK

A

THE CHANCE OF LOSS OR NO LOSS OCCURRING

42
Q

REINSURANCE

A

A MEANS BY WHICH AN INSURANCE COMPANY TRANSFERS SOME OR ALL OF ITS RISK TO ANOTHER INSURANCE COMPANY

43
Q

REPLACEMENT COST

A

REPRESENTS THE AMOUNT TO REPAIR OR REPLACE PROPERTY, WITHOUT ANY DEDUCTION FOR DEPRECIATION

44
Q

REPRESENTATION

A

A STATEMENT MADE BY THE APPLICANT DURING THE INSURANCE APPLICATION PROCESS

45
Q

RIDER

A

A MODIFICATION OR CHANGE TO A LIFE OR HEALTH INSURANCE POLICY

46
Q

RISK

A

THE CHANCE OF LOSS, UNCERTAINTY ASSOCIATED WITH LOSS, OR THE POSSIBILITY OF A LOSS

47
Q

RISK AVOIDANCE

A

A RISK MANAGEMENT TECHNIQUE USED FOR ANY RISKS THAT ARE HIGH IN FREQUENCY AND HIGH IN SEVERITY

48
Q

RISK REDUCTION

A

THE PROCESS OF REDUCING THE LIKELIHOOD OF A PURE RISK THAT IS HIGH IN FREQUENCY AND LOW IN SEVERITY OR OF REDUCING THE SEVERITY OF LOSSES FROM CERTAIN PERILS

49
Q

RISK RETENTION

A

ACCEPTING SOME OR ALL OF THE POTENTIAL LOSS EXPOSURE FOR RISKS THAT ARE LOW IN FREQUENCY AND LOW IN SEVERITY

50
Q

RISK TRANSFER

A

THE PROCESS OF TRANSFERRING A LOW FREQUENCY AND HIGH SEVERITY RISK TO A THIRD PARTY, SUCH AS AN INSURANCE COMPANY

51
Q

SPECULATIVE RISK

A

THE CHANCE OF LOSS, NO LOSS, OR A PROFIT

52
Q

SUBJECTIVE RISK

A

THE RISK AN INDIVIDUAL PERCEIVES BASED ON THEIR PRIOR EXPERIENCES AND THE SEVERITY OF THOSE EXPERIENCES

53
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

54
Q

UNDERWRITING

A

THE PROCESS OF CLASSIFYING APPLICANTS INTO A RISK POOLS, SELECTING INSUREDS, AND ASSIGNING A PREMIUM

55
Q

UNILATERAL

A

THERE IS ONLY ONE PROMISE MADE; AND IN THE CASE OF AN INSURANCE CONTRACT, IT’S MADE BY THE INSURER TO PAY IN THE EVENT OF A LOSS

56
Q

WAIVER

A

THE RELINQUISHMENT OF A KNOWN LEGAL RIGHT

57
Q

WARRANTY

A

A PROMISE MADE BY THE INSURED THAT IS PART OF THE INSURANCE CONTRACT

ChFC HS311 FP:FUNDAMENTALS OF INSURANCE PLANNING (10 decks)

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