General Insurance

Question 1

Agent/Producer

Answer 1

a legal representative of an insurance company; the classification of producer usually includes agents and brokers; agents are the agents of the insurer.

Question 2

Applicant or proposed insured

Answer 2

A person applying for insurance

Question 3

Broker

Answer 3

an insurance producer not appointed by an insurer and is deemed to represent the client

Question 4

Insurance policy

Answer 4

a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events.

Question 5

Insured

Answer 5

the person covered by the insurance policy. This person may or may not be the policyowner.

Question 6

Insurer (principal)

Answer 6

the company who issues an insurance policy

Question 7

Policyowner

Answer 7

the person entitled to exercise the rights and privileges in the policy

Question 8

Premium

Answer 8

the money paid to the insurance company for the insurance policy

Question 9

Reciprocity/Reciprocal

Answer 9

a mutual interchange of rights and privileges

Question 10

Risk

Answer 10

the uncertainty or change of loss ocurring.

Question 11

Pure risk

Answer 11

situations that can only result in a loss or no change. only risk that is insurable.

Question 12

Speculative risk

Answer 12

the opportunity for either loss or gain. Not insurable.

Question 13

Hazard

Answer 13

condition or situation that increases the probability of an insured loss occurring.

Question 14

Physical hazard

Answer 14

individual characteristics that increase the chances of the cause of loss.

Question 15

Moral hazard

Answer 15

tendencies toward increased risk.

Question 16

Morale hazard

Answer 16

similar to moral hazards, except that they arise from a state of mind that causes indifference to loss, such as carelessness.

Question 17

Peril

Answer 17

the causes of loss insured against in an insurance policy.

Question 18

Loss

Answer 18

reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril.

Question 19

Exposure

Answer 19

a unit of measurement used to determine rates charged for insurance coverage.

Question 20

Homogeneous

Answer 20

A large number of units having the same or similar exposure to loss.

Question 21

Chance/Probability/Cause

Answer 21

A risk is a chance that a loss will occur; a hazard increases the probability of a loss; peril is the cause of loss.

Question 22

Risk retention

Answer 22

the planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance.

Question 23

Sharing

Answer 23

a method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss and share losses that occur within that group.

Question 24

Reduction

Answer 24

includes actions such as installing smoke detectors in our homes, having an annual physical to detect health problems early, or perhaps making a change in our lifestyles.

Question 25

Insurable risk characteristics

Answer 25

Due to chance, definite and measurable, statistically predictable, not catastrophic, randomly selected and large loss exposure.

Question 26

Adverse selection

Answer 26

the insuring of risks that are more prone to losses than the average risk.

Question 27

Law of large numbers

Answer 27

the larger the number of people with a similar exposure to loss, the more predictable actual losses will be.

Question 28

Stock companies

Answer 28

owned by the stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses.

Question 29

Mutual companies

Answer 29

owned by policyowners and issue participating policies.

Question 30

Fraternal benefit society

Answer 30

an organization formed to provide insurance benefits for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government.

Question 31

Reciprocal insurance company

Answer 31

insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers

Question 32

Lloyd’s

Answer 32

provides support facilities for underwriters or groups of individuals that accept insurance risk.

Question 33

Risk retention group

Answer 33

a liability insurance company owned by its members.

Question 34

Domestic insurer

Answer 34

insurance company that is incorporated in this state.

Question 35

Foreign insurer

Answer 35

insurance company that is incorporated in another state (or US territory)

Question 36

Alien insurer

Answer 36

insurance company incorporated outside US

Question 37

Reinsurance

Answer 37

a contract under which one insurance company (the reinsurer) indemnifies another insurance company for part or all of its liabilities.

Question 38

Law of agency

Answer 38

the relationship between the principal and the agent/producer: the acts of the agent/producer within the scope of authority are deemed to be the acts of the insurer.