general insurance Flashcards
Transfer of Risk
Insurance
Loss
reduction, decrease or disappearance of value
pure risk
situations that can only result in a loss or no change and insurable
risk
uncertainty or chance of a loss occurring
speculative risk
involves the opportunity for either loss or gain
hazards
conditions or situations that increase the chance of loss
physical hazard
individual characteristics that in crease the chance of the cause of loss
(physical conditions are past medical history, condition at birth)
moral hazard
tendencies towards risk (applicants that lie on application of insurance)
morale hazards
similar to moral they arise from a state of mind (carelessness)
peril
causes of loss
exposure
a unit of measure used to determine rates charged for insurance coverage (age, medical history, occupation and sex)
Homogeneous
a large number of units having the same or similar exposure to loss
avoidance
eliminated exposure to a loss (avoid being killed in airplane crash by never choosing to fly)
retention
planned assumption of risk by the insured through deductibles, com payments or self insurance to reduce expenses and improve clash flow, increase control of claim reservations and settlements, and to fund losses that cannot be insured
reduction
to lessen the possibility or severity of loss (installing smoke detectors, having an annual physicals to detect health issues early and making lifestyle changes
elements of insurable risks
due to chance, definite and measurable, statistically predictable, mot catastrophic, randomly selected and large exposure
adverse selectioj
insuring of risks that are more prone to losses than average risk
reinsurance
contract under which one insurance company reimburses another insurance company for all or part of its liabilities
stock companies
owned by stockholders - non participating - doesn’t pay dividends to policyowners but does pay dividends to stockholders
mutual companies
owned by policyholders - participating- policyholders are intitles to dividend( return of excess premiums) non taxable
express
powers specifically stated in the contract
implied
not specially stated in the contract but is assumed necessary to conduct insurance business
apparent
appearance of a relationship between the agent and the principal (insurer) based on words or actions (also know as perceived)
elements of a contract
agreement -offer and acceptance
consideration
competent parties
legal purposes
acceptance
when the underwriter approved application and issues policy
consideration
something of value each party gives to the other
insured–pay premiums–insurer is pay in the event of loss
competent parties
legal age
mentally competent
and not under drugs or alcohol
aleatory
unequal values
adhesion
only one party (insurer) prepares a contract and the other part (insured) accepts or rejects it
unilateral
one sided (only one party makes a promise)
contract of adhesion
in favor of insured
indemnity / reimbursement
a provision in an insurance policy that states the event of a loss an insured or beneficiary is permitted to collect to the extent of the financial loss (not gain any extra)
utmost good faith
implies that there is no fraud, misrepresentations, or concealment between the parties
representations
statements believed to be true to the best of ones knowledge
misrepresentations
untrue statements
warranty
is an absolutely true statement
concealment
legal term for the intention withholding of information of material that is a crucial fact in making a decision.
waiver
voluntary act of relinquishing a legal right, claim or privileges
estoppel
legal consequence of a waiver
fraud
intentional representations or intentional concealment of a material fact
domestic
incorporated in this state
foreign
incorporated in another state
alien
incorporated in another country
agent/producer
a legal representative of an insurance company
broker
an insurance producer not appointed by an insurance company so represents the client
reciprocity/reciprocal
a mutual exchange of rights and privileges
