Characteristics of Insurance Flashcards
ACTUAL CASH VALUE
REPRESENTS THE DEPRECIATED VALUE OF THE PROPERTY
ADHESION
A TAKE IT OR LEAVE IT CONTRACT
ADVERSE SELECTION
THE TENDENCY OF THOSE THAT MOST NEED INSURANCE TO SEEK IT OUT
AGENTS
LEGAL REPRESENTATIVES OF AN INSURER AND ACT ON BEHALF OF THE INSURER
ALEATORY
A TYPE OF INSURANCE CONTRACT IN WHICH THE DOLLAR AMOUNTS EXCHANGED ARE UNEVEN
APPARENT AUTHORITY
WHEN THE THIRD PARTY BELIEVES IMPLIED OR EXPRESS AUTHORITY EXISTS, BUT NO AUTHORITY ACTUALLY EXISTS
APPRAISED OR AGREED UPON VALUE
USED FOR HARD TO VALUE ITEMS AND WHERE THE INSURED MAY OWN PROPERTY THAT EXCEEDS STANDARD LIMITS OF PROPERTY INSURANCE POLICY
BROKERS
LEGAL REPRESENTATIVES OF AN INSURED AND ACT IN THE BEST INTEREST OF THE INSURED
COINSURANCE
THE PERCENTAGE OF FINANCIALRESPONSIBILITY THAT THE INSURED AND THE INSURER MUST UPHOLD IN ORDER TO ACHIEVE EQUITY IN RATING
CONCEALMENT
WHEN THE INSURED IS INTENTIONALLY SILENT REGARDING A MATERIAL FACT DURING THE APPLICATION PROCESS
CONDITIONAL
THE INSURED MUST ABIDE BY ALL THE TERMS AND CONDITIONS OF THE CONTRACT, IF THE INSURED INTENDS TO COLLECT UNDER THE POLICY
COPAYMENT
A LOSS-SHARING ARRANGEMENT WHEREBY THE INSURED PAYS A FLAT DOLLAR OR PERCENTAGE OF THE LOSS IN EXCESS OF THE DEDUCTIBLE
DECLARATIONS SECTION
THE SECTION OF THE INSURANCE POLICY THAT DESCRIBES EXACTLY WHAT PROPERTY IS BEING COVERED
DEDUCTIBLE
A SPECIFIED AMOUNT OF MONEY THE INSURED IS REQUIRED TO PAY ON A LOSS BEFORE THE INSURER WILL MAKE ANY PAYMENTS UNDER THE POLICY
DEFINITION SECTION
THE SECTION OF AN INSURANCE POLICY THAT DEFINES KEY WORDS, PHRASES, OR TERMS USED THROUGHOUT THE INSURANCE CONTRACT
DESCRIPTION SECTION
THE SECTION OF AN INSURANCE POLICY THAT DESCRIBES EXACTLY WHAT IS BEING INSURED
ENDORSEMENT
A MODIFICATION OR CHANGE TO THE EXISTING PROPERTY INSURANCE POLICY
ESTOPPEL
THE LEGAL PROCESS OF DENYING A RIGHT YOU MIGHT OTHERWISE BE ENTITLED TO UNDER THE LAW
EXCLUSION SECTION
THE SECTION OF AN INSURANCE POLICY THAT WILL EXCLUDE CERTAIN PERILS, LOSSES AND PROPERTY
EXPRESS AUTHORITY
AUTHORITY GIVEN TO AN AGENT THROUGH A FORMAL WRITTEN DOCUMENT
FINANCIAL RISK
A LOSS OF FINANCIAL VALUE, SUCH AS THE PREMATURE DEATH OF A FAMILY’S PRIMARY WAGE EARNER
FUNDAMENTAL RISK
A RISK THAT CAN IMPACT A LARGE NUMBER OF INDIVIDUALS AT ONE TIME (EARTHQUAKE OR FLOOD)
HAZARDS
A SPECIFIC CONDITION THAT INCREASES THE POTENTIAL OR LIKELIHOOD OF A LOSS OCCURRING
IMPLIED AUTHORITY
THEW AUTHORITY THAT A THIRD PARTY RELIES UPON WHEN DEALING WITH AN AGENT BASED UPON THE POSITION HELD BY THE AGENT
LACKING SOUND MIND
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
LAW OF LARGE NUMBERS
A PRINCIPLE THAT STATES THE MORE SIMILAR EVENTS OR EXPOSURES, THE MORE LIKELY THE ACTUAL RESULTS WILL EQUAL THE PROBABILITY EXPECTED
MINORS
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
MORAL HAZARD
THE POTENTIAL LOSS OCCURRING BECAUSE OF THE MORAL CHARACTER OF THE INSURED, AND THE FILING OF A FALSE CLAIM WITH THEIR INSURANCE COMPANY
MORALE HAZARD
THE INDIFFERNCE TO A LOSS CREATED BECAUSE THE INSURED HAS INSURANCE
MUTUAL CONSENT
COMMON UNDERSTANDING AND AGREEMENT BETWEEN PARTIES TO A CONTRACT REGARDING WHAT THE CONTRACT COVERS AND THE TERMS OF THE CONTRACT
NON-FINANCIAL RISK
A RISK THAT WOULD RESULT IN A LOSS, OTHER THAN A MONETARY LOSS
OBJECTIVE RISK
THE VARIATION OF ACTUAL AMOUNT OF LOSSES THAT OCCUR OVER A PERIOD OF TIME COMPARED TO THE EXPECTED AMOUNT OF LOSSES
OFFER AND ACCEPTANCE
CONSISTS OF ONE PARTY MAKING AN OFFER TO PURCHASE A GOOD OR SERVICE, AND THE ACCEPTANCE IS WHEN CONSIDERATION IS RECEIVED
OUT-OF-POCKET-MAXIMUM
THE SUM OF THE DEDUCTIBLE, THE INSURED’S PORTION OF THE COINSURANCE, AND GENERALLY ANY COPAYMENTS BY THE INSURED
PAROL EVIDENCE RULE
STATES THAT “WHAT IS WRITTEN PREVAILS.” ORAL AGREEMENTS THAT ARE NOT REFLECTED IN THE WRITTEN CONTRACT ARE NOT VALID
PARTICULAR RISK
A RISK THAT CAN IMPACT A PARTICULAR INDIVIDUAL, SUCH AS DEATH OR THE INABILITY TO WORK BECAUSE OF A SICKNESS OR ACCIDENT
PERILS
THE IMMEDIATE CAUSE AND REASON FOR A LOSS OCCURRING
PHYSICAL HAZARD
A PHYSICAL CONDITION THAT INCREASES THE LIKELIHOOD OF A LOSS OCCURRING
PRINCIPLE OF INDEMNITY
ASSERTS THAT AN INSURER WILL ONLY COMPENSATE THE INSURED TO THE EXTENT THE INSURED HAS SUFFERED AN ACTUAL FINANCIAL LOSS
PRINCIPLE OF INSURABLE INTEREST
ASSERTS THAT AN INSURED MUST SUFFER A FINANCIAL LOSS IF A COVERED PERIL OCCURS, OTHERWISE NO INSURANCE CAN BE OFFERED
PURE RISK
THE CHANCE OF LOSS OR NO LOSS OCCURRING
REINSURANCE
A MEANS BY WHICH AN INSURANCE COMPANY TRANSFERS SOME OR ALL OF ITS RISK TO ANOTHER INSURANCE COMPANY
REPLACEMENT COST
REPRESENTS THE AMOUNT TO REPAIR OR REPLACE PROPERTY, WITHOUT ANY DEDUCTION FOR DEPRECIATION
REPRESENTATION
A STATEMENT MADE BY THE APPLICANT DURING THE INSURANCE APPLICATION PROCESS
RIDER
A MODIFICATION OR CHANGE TO A LIFE OR HEALTH INSURANCE POLICY
RISK
THE CHANCE OF LOSS, UNCERTAINTY ASSOCIATED WITH LOSS, OR THE POSSIBILITY OF A LOSS
RISK AVOIDANCE
A RISK MANAGEMENT TECHNIQUE USED FOR ANY RISKS THAT ARE HIGH IN FREQUENCY AND HIGH IN SEVERITY
RISK REDUCTION
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
RISK RETENTION
ACCEPTING SOME OR ALL OF THE POTENTIAL LOSS EXPOSURE FOR RISKS THAT ARE LOW IN FREQUENCY AND LOW IN SEVERITY
RISK TRANSFER
THE PROCESS OF TRANSFERRING A LOW FREQUENCY AND HIGH SEVERITY RISK TO A THIRD PARTY, SUCH AS AN INSURANCE COMPANY
SPECULATIVE RISK
THE CHANCE OF LOSS, NO LOSS, OR A PROFIT
SUBJECTIVE RISK
THE RISK AN INDIVIDUAL PERCEIVES BASED ON THEIR PRIOR EXPERIENCES AND THE SEVERITY OF THOSE EXPERIENCES
SUBROGATION CLAUSE
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
UNDERWRITING
THE PROCESS OF CLASSIFYING APPLICANTS INTO A RISK POOLS, SELECTING INSUREDS, AND ASSIGNING A PREMIUM
UNILATERAL
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
WAIVER
THE RELINQUISHMENT OF A KNOWN LEGAL RIGHT
WARRANTY
A PROMISE MADE BY THE INSURED THAT IS PART OF THE INSURANCE CONTRACT
