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General Insurance Flashcards

1
Q

Agent/Producer

A

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

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2
Q

Applicant or proposed insured

A

a person applying for insurance.

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3
Q

Beneficiary

A

a person who receives the benefits of an insurance policy

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4
Q

Broker

A

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

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5
Q

Insurance policy

A

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.

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6
Q

Insured

A

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

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7
Q

insurer (principal)

A

the company who issues an insurance policy.

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8
Q

Policyowner

A

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

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9
Q

Premium

A

the money paid to the insurance company for teh insuranc epolicy

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10
Q

Reciprocity/Reciprocal

A

a mutual interchange of rights and privileges

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11
Q

indemnify

A

make whole

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12
Q

What is Insurance?

Important!

A

The transfer of risk of loss. the cost of an insured’s loss is transferred over to the insurer and spread among other insureds.

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13
Q

Risk

A

the uncertainty or chance of a loss occurring.

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14
Q

What are the two types of risk

A

Pure and speculative.

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15
Q

What kind of risk is insurable?

A

Pure risk

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16
Q

Pure risk

A

situations that can only result in a loss or no change. There is no opportunity for financial gain. These risks are insurable.

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17
Q

Speculative risk

A

Involves the opportunity for either loss or gain. EX gambling. These risks are not insurable.

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18
Q

Exposure

A

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

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19
Q

What factors are considered in life insurance for determining rates?

A
  • Age
  • medical history
  • occupation
  • sex
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20
Q

Homogeneous

A

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

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21
Q

Hazards

A

conditions or situatioins that increase the probability of an insured loss occuring.

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22
Q

Types of hazards

A

Physical
moral
morale

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23
Q

Physical hazards

A

are individual characteristics that increase the chanse of the cause of loss. Exist because of a conditions, medical history, or a condition at birth, such as blindness.

24
Q

Moral hazards

A

tendencies towards increased risk. Involves evaluating the character and reputation of the proposed insured. EX people who may lie on an application or who have submitted fraudulent claims.

25
Morale hazards
Similar to moral hazards, except that they arise from a state of mind that causes indifference to loss, such as carelessness. Actions taken without forethought may cause physical injuries.
26
Peril
causes of loss insured against in a insurance policy
27
Life insurance insures against...
financial loss caused by the premature death of the insured.
28
Health insurance insures against...
the medical expenses and or loss of income caused by the insured's sickness or accidental injury.
29
Property insurance insures against...
the loss of physical property or the loss of its income-producing abilities.
30
Casualty insurance insures against...
the loss and/or damage of property and resulting liabilities
31
Loss
the reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril.
32
Know THis! A ___ is a chance that a loss will occur; a ___increased the probability of loss; a ___ is the cause of loss.
A risk is a chance that a loss will occur; a hazard increased the probability of loss; a peril is the cause of loss.
33
Methods of handling risk
Avoidance Retention Sharing Reduction Transfer
34
Avoidance
eliminating exposure to a loss
35
Retention
the planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance. It is also known as self-insurance when the insured accepts the responsibility for the loss before the insurance company pays.
36
What's the purpose of retention?
-reduce expenses and improve cash flow -increase control of claim reserving and claims settlement -fund for losses that cannot be insured.
37
Sharing
Dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within that group. A reciprocal insurance exchange is a formal risk-sharing arrangement.
38
Reduction
Since we usually cannot avoid risk entirely, we often atempt to lessen the possibility or severity of a loss. EX: installing smoke detectors or having an annual physical to detect health problems early. Or even lifestyle changes
39
TRansfer
Transfer the risk so the loss is borne by another party. Insurance is the most common meth of transferring risk from an individual or group to a insurance company. It won't eliminate the risk of death or illness; it does relieve the insured of the financial losses these risks bring.
40
Elements of insurable risks
- Due to chance - Definite and measurable - Statistically predictable - Not catastrophic - Randomly selected and large loss exposure
41
Adverse selection
The insuring of risks that are more probe to losses than the average risk.
42
The law of large numbers
the larger the number of people with a similar exposure to loss, the more predictable actual losses will be.
43
Classifications of insurers
- Ownership - Authority to transact business - Location - Marketing and distributions systems - Rating (Financial Strength)
44
Types of ownership
Stock and Mutual
45
Domicile (location)
Domestic (in state) Foreign (from other state) Alien (outside US)
46
Authority
Admitted/ Authorized Nonadmitted/nonauthorized
47
Marketing/ Distribution system
Independent Agency Exclusive Agency General Agency Managerial System Direct Response Marketing
48
Who do insurance agents represent?
The insurer (principal)
49
Elements of a contract
Agreement - offer and acceptance consideration competent parties legal purpose
50
What is the consideration in insurance contracts?
Insurer's consideration is the promise to pay for losses Insured's consideration is the payment of premium and statements on the application
51
Legal purpose
Must have insurable interest and consent.
52
Aleatory
unequal values
53
unilateral
one sided (one party makes a promise)
54
Adhesion
only one party (insurer) prepares a contract, and the other party (insured) accepts it as is
55

Life Insurance (1 decks)

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