General Credit Insurance

Question 1

Which method of managing risk are you utilizing when you purchase insurance?

Answer 1

Transfer

Question 2

Which type of risk does insurance deal with?

Answer 2

Pure risk (lose/lose)- no possibility of win

Question 3

The larger the number of similar risks, the more accurate the prediction of loss will be over a period of time

Answer 3

The law of large numbers

Question 4

Owned by stock holders. Dividends are paid to stockholders. Policyholders do not pay dividends

Answer 4

Stock companies

Question 5

Owned by policyholders. Policyholders do not participate in dividends

Answer 5

Mutual companies

Question 6

promotes social and charitable activities and services, and is also licensed as an insurer

Answer 6

Fraternal benefit society

Question 7

The company that provides insurance underwriters

Answer 7

Lloyds of London

Question 8

The spreading of financial risk over a large group of people in order to minimize the potential economic loss to any one individual.

Answer 8

Insurance

Question 9

The type of authority you are exercising when you are doing the duties of your job

Answer 9

Implied authority

Question 10

Specific written authorities. It is the responsibility of the agent to know what is in the agency agreement

Answer 10

Expressed authority

Question 11

Covers the relationship between the agent and the customer

Answer 11

Apparent authority

Question 12

Both parties of the contract (insurer and insured) cannot attempt to conceal or deceive the other party

Answer 12

Utmost Good Faith

Question 13

A policy should accomplish to the policyowner what is reasonably expected

Answer 13

Reasonable Expectations

Question 14

Characterized by an economic interest, love and affection (a blood relationship), or a creditor-debtor relationship. must exist between the policyowner and the insured

Answer 14

Insurable interest

Question 15

Equal value is not given by both parties to the contract. The policyowner pays a small premium. The insurer provides a substantial benefit. *They are “one-sided”.

Answer 15

An Aleatory Contract

Question 16

The contract and its provisions are prepared by one party- the insurer. If the contract is ambiguous or contradictory, the courts will hold the insurer responsible. Insurer must comply with provisions and there is no opportunity for the them to negotiate.

Answer 16

A contract of adhesion

Question 17

Only the insurer must abide by the terms of the contract. The policy owner may or may not pay the premium. Insurer must comply with terms of the contract.

Answer 17

Unilateral Contract

Question 18

Giving up of a known or legally enforceable right.

Answer 18

Waiver

Question 19

One party is prevented from asserting a right that would be to the detriment of another party. This happens when a right is waived.

Answer 19

Estoppel

Question 20

Warranty vs Representation

Answer 20

Warranty is a statement considered and guaranteed to be “true”. Representation is a statement, by the applicant, that is believed to be true. **All statements on the application are representations, not warranties.

Question 21

Adverse Selection

Answer 21

There are more insurance risks selected that have a possibility of loss than standard risks.

Question 22

Incontestable Clause (time limit on certain defenses)

Answer 22

The insurer may not contest dispute or deny a claim based on information contained in the application after the policy has been in force for two years. THIS INCLUDES FRAUD after 2 years- incontestable.

Question 23

Free look period

Answer 23

AKA the right to examine. Provides the policyowner with the right to review the policy. If, for any reason, the policyowner is not satisfied with the policy, it may be returned to the insurer within 10 days of delivery, for a full premium refund. It can be more than 10 days but not less.