Exam 1 Content Flashcards
Pure Risk
Loss or no loss
Speculative Risk
Profit, loss, or no loss
Fundamental Risk
Impacts a large number of individuals at once
Particular risk
Impacts one individual
The Law of Large Numbers
The more exposures, the more likely probable results will equal true results
Peril
Actual cause of a loss
Hazard
Condition that increases likelihood of loss occurring
Example of moral hazard
Filing a false claim
Example of morale hazard
Leaving the car unlocked
Example of physical hazard
Icy roads, poor lighting, etc
5 elements of valid contract
Mutual consent, offer and acceptance, performance/delivery, lawful purpose, legal competency of all parties
The Principle of Indemnity
The insured is only entitled to compensation to the extent of the insured’s loss
Subrogation Clause
If insured pays out a claim, only insurance company can pay out a claim, not an individual
For property/liability insurance, when insured must have insurable interest
At inception and time of loss
For life insurance, when insured must have an insurable interest
Only at time of inception
Adhesion characteristic of a contract
“Take it or leave it”
Aleatory characteristic of a contract
Money exchanged may be unequal
Express Authority
Given to agent through agreements
Implied Authority
Authority public percieves
Apparent Authority
Authority that seems to be there but doesn’t actually exist
Estoppel
Where, through legal process, one is denied a right they might otherwise be entitled to
Waiver
Relinquishing a known right
What stock insurer does
Issues stock and is publicly held
Who mutual company stock insurer is owned by
Policyholders
