General Insurance Flashcards
The transfer of PURE risk to the insurance company in consideration for a
premium.
Insurance
The chance of loss without any chance of gain is…
Pure risk
Has the possibility for gain or loss and is not insurable, (gambling is an example of this).
Speculative risk
The chance of loss.
Risk
A condition that could result in a loss is known as an…
Exposure
Something that increases the
chance of loss.
Hazard
Defined as a cause of loss, such as fire
Peril
This allows insurers to predict claims more accurately
Law of Large Numbers
To be insurable, losses must be…
Calculable
The Law of Large Numbers applies to…
Groups of people, not to individuals. The more people in the
group, the more accurate the predictions are.
Most insurers buy___to protect themselves from catastrophic loss.
Reinsurance
Insurance laws are_____to be uniform from one state to another.
Not required
T/F
Insurers cannot enforce a contract that they enter into with a minor, but the minor can enforce the
contract against the insurer.
True
T/F
A stock insurer may pay dividends to its shareholders (stockholders), and they’re
guaranteed.
False, they may not be guaranteed
T/F
The government offers insurance primarily based upon social needs, such as flood insurance and
workers compensation, but does not offer insurance for the purpose of preventing fraud.
True
A_____company has their home or office in another state.
Foreign
• An insurer based in Canada who sells in the U.S. is an…
Alien
T/F
Producers represent the insurance company, not the insured.
True
T/F
A producer isn’t personally liable when violating the producer’s contract.
False. They are liable.
T/F
Independent producers own their own accounts and are not insurance company employees.
True
Producers have___, ___ and ___ authority.
Express, implied, apparent
The authority a producer has that is written in his or her contract is known as…
Express authority
The authority not expressly (written) granted, but is actual authority the producer has to transact
normal business activities, is known as…
Implied authority
T/F
A producer’s binding authority (if any) is expressed (written down) in the producer’s contract
with the insurer the producer represents.
True
The elements of a legal contract are…
Consideration, Offer, Acceptance, Legal purpose and Legal Capacity (C-O-A-L)
A requirement for a valid contract is…
Offer and acceptance
A specific and definite proposal to enter into a contract is known as an…
Offer
T/F
The consideration on a policy needs to be equal
False. It need not be equal.
T/F
A policy may not be voided due to unequal consideration.
True
Under the consideration clause, something of___must be exchanged.
Value
T/F
An aleatory contract is one where the outcome depends upon chance.
True, (and unequal values)
The doctrine of adhesion states that…
Policy ambiguities always favor the insured.
Insurance policies are considered to be___contracts, in that only one party makes an
enforceable promise the insurer.
Unilateral
The principle of indemnity states…
The purpose of insurance is to restore the insured to the same
position as before the loss occurred.
The doctrine of utmost good faith states that…
All parties to an insurance transaction are honest.
A representation is defined as…
The truth to the best of one’s knowledge.
A warranty is defined as…
Sworn statement of truth, guaranteed to be true.
Concealment is defined as…
The failure to disclose a material fact.
When an insurer voluntarily gives up the right to obtain information that they are entitled to.
Waiver
