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General Insurance Flashcards

1
Q

Who does the agent or producer always represent?

A

The insurer

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2
Q

What are the 4 elements of a contract?

A

Agreement - offer/acceptance
Consideration
Competent party
Legal purpose

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3
Q

What is consideration?

A

The insurance companies promised to pay per the contract

The applicants promise to pay the premium

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4
Q

What defines a competent party?

A

Mentally sound and of legal age 18 or older

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5
Q

What is the contract of adhesion?

A

A contract drafted by one party
AKA
take it or leave it

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6
Q

What is an aleatory contract?

A

Contracts that involve an exchange of unequal amounts.

Such as an insurance policy

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7
Q

What is a personal contract?

A

A contract between insured and the policy owner can be person or individual business

I.E life or health policy

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8
Q

What is a unilateral contract?

A

A contract where one party makes an enforceable promise

.. such as an insurance policy where only insurer makes the promise that can be enforced

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9
Q

Who do ambiguities in a contract favor

A

They always favor the insured

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10
Q

Indemnity

A

To make a person whole not profit

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11
Q

What is an estopple ?

A

A stop will exist when a party cannot regain a right or privilege that was voluntarily waved or given up

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12
Q

What can a risk be?

A

Person, Property or activity

that is insured.

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13
Q

What are the 2 types of risk?

A

Pure risk - only risk insurable

Speculative risk

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14
Q

What is the only risk and insurance company will cover?

A

Pure risk

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15
Q

Name the 4 types of hazards

A

Physical hazard
Moral hazard - dishonest
Morale hazard - careless
Legal hazard

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16
Q

What Is a cause of not lost known as?

A

Peril

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17
Q

What are the 5 methods of handling risk?

STARR

A 
Sharing- oldest way sharing w/group
Transfer - most common buying insurance 
Avoidance - 
Reduction - Reducing
Retention - Do nothing use own funds to pay (deductible in Health ins)
18
Q

What happens to the risk when a person purchases an insurance policy?

A

They TRANSFER the risk

19
Q

Under the law of large numbers when the sample size increases the prediction becomes more or less accurate?

A

More accurate.

20
Q

What type of insurer is owned by the shareholder or stockholder?

A

A stock insurance company

21
Q

What type of insurer is owned by policy holders?

A

A mutual insurance company

and the dividends are not taxable

22
Q

Is lloyds of London an insurance company?

A

No It’s more like a stock exchange

23
Q

What is a captive insurance company?

A

An insurer owned by a parent company that uses the captive insurer to insure the risk of the parent company or affiliate at a lower rate

24
Q

What are the 6 classes of insurers?

A

Private and Government
Admitted and Non-admitted
Domestic, foreign and alien

25
Q

If an individual can’t get coverage on the private market what market do they go to?

A

Government market

26
Q

The government market is also known as what?

A

Residual market -last chance

27
Q

Other than the annual report how can you find out the financial strength of a company?

A 
A. M. Best company
Conning & company
Demotech 
Fitch Ratings
Moody's
Standard and Poor's
Weiss Ratings
28
Q

What are the 4 marketing distribution systems?

A

Independent agency - non exclusive
Executive agency - exclusive
Managerial System - only one insurer
Direct response marketing - TV marketing

29
Q

What is the difference in an independent and exclusive agent?

A

Independent agent representsone or more companies

Exclusive agents represent only one company

30
Q

What is the common law principle that governs the relationship between the producer and the company?

A

The rules (or Law) of Agency

31
Q

Name 2 parties involved in the agency relationship

A

The principal and the agent

32
Q

Name the 3 types of authority in the agency relationship

A

Express authority - written authority
Implied authority - implied bot not written
Apparent authority - authority assumed

33
Q

What are the 4 components of a legal contract?

LACC

A

Legal Purpose
Agreement (offer/acceptance)
Consideration
Competent Purpose

34
Q

What is consideration?

A

The extension for consideration is insurance co promised to pay claims versus applicants promise to pay premiums. Consideration is something of value.

35
Q

Who is a competent party?

A

Over the age of 18 and mentally sound

36
Q

What are the characteristics of an insurance policy?

A

Contracts of adhesion - take it or leave it
Allatory contracts - exchange of un equal amounts
Personal contracts - contracts between insurer & indv person or business
Unilateral contracts - only 1 party makes enforceable promise
Conditional contracts - conditions insurer/insured obligated to

37
Q

What characteristics of an insurance contract states unequal values are exchanged?

A

Aleatory

38
Q

Which characteristic of an insurance contract states that only 1 party is legally bound to the agreement?

A

Unilateral contracts

39
Q

What principle indicates a person has given up a known or legal right that will not be able to reaquire that right?

A

Waiver and Estoppel

40
Q

What is endimity?

A

To make a person whole

41
Q

What is a captive insurer?

A

An insurance company created only to cover insurance risk of his parent company for affiliates

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