General Insurance

Question 1

Who does the agent or producer always represent?

Answer 1

The insurer

Question 2

What are the 4 elements of a contract?

Answer 2

Agreement - offer/acceptance
Consideration
Competent party
Legal purpose

Question 3

What is consideration?

Answer 3

The insurance companies promised to pay per the contract

The applicants promise to pay the premium

Question 4

What defines a competent party?

Answer 4

Mentally sound and of legal age 18 or older

Question 5

What is the contract of adhesion?

Answer 5

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

Question 6

What is an aleatory contract?

Answer 6

Contracts that involve an exchange of unequal amounts.

Such as an insurance policy

Question 7

What is a personal contract?

Answer 7

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

I.E life or health policy

Question 8

What is a unilateral contract?

Answer 8

A contract where one party makes an enforceable promise

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

Question 9

Who do ambiguities in a contract favor

Answer 9

They always favor the insured

Question 10

Indemnity

Answer 10

To make a person whole not profit

Question 11

What is an estopple ?

Answer 11

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

Question 12

What can a risk be?

Answer 12

Person, Property or activity

that is insured.

Question 13

What are the 2 types of risk?

Answer 13

Pure risk - only risk insurable

Speculative risk

Question 14

What is the only risk and insurance company will cover?

Answer 14

Pure risk

Question 15

Name the 4 types of hazards

Answer 15

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

Question 16

What Is a cause of not lost known as?

Answer 16

Peril

Question 17

What are the 5 methods of handling risk?

STARR

Answer 17

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)

Question 18

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

Answer 18

They TRANSFER the risk

Question 19

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

Answer 19

More accurate.

Question 20

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

Answer 20

A stock insurance company

Question 21

What type of insurer is owned by policy holders?

Answer 21

A mutual insurance company

and the dividends are not taxable

Question 22

Is lloyds of London an insurance company?

Answer 22

No It’s more like a stock exchange

Question 23

What is a captive insurance company?

Answer 23

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

Question 24

What are the 6 classes of insurers?

Answer 24

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

Question 25

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

Answer 25

Government market

Question 26

The government market is also known as what?

Answer 26

Residual market -last chance

Question 27

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

Answer 27

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

Question 28

What are the 4 marketing distribution systems?

Answer 28

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

Question 29

What is the difference in an independent and exclusive agent?

Answer 29

Independent agent representsone or more companies | Exclusive agents represent only one company

Question 30

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

Answer 30

The rules (or Law) of Agency

Question 31

Name 2 parties involved in the agency relationship

Answer 31

The principal and the agent

Question 32

Name the 3 types of authority in the agency relationship

Answer 32

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

Question 33

What are the 4 components of a legal contract? | LACC

Answer 33

Legal Purpose Agreement (offer/acceptance) Consideration Competent Purpose

Question 34

What is consideration?

Answer 34

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

Question 35

Who is a competent party?

Answer 35

Over the age of 18 and mentally sound

Question 36

What are the characteristics of an insurance policy?

Answer 36

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

Question 37

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

Answer 37

Aleatory

Question 38

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

Answer 38

Unilateral contracts

Question 39

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

Answer 39

Waiver and Estoppel

Question 40

What is endimity?

Answer 40

To make a person whole

Question 41

What is a captive insurer?

Answer 41

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