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Life Insurance > General Insurance > Flashcards

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
Q

Morale hazards

A

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
Q

Peril

A

causes of loss insured against in a insurance policy

27
Q

Life insurance insures against…

A

financial loss caused by the premature death of the insured.

28
Q

Health insurance insures against…

A

the medical expenses and or loss of income caused by the insured’s sickness or accidental injury.

29
Q

Property insurance insures against…

A

the loss of physical property or the loss of its income-producing abilities.

30
Q

Casualty insurance insures against…

A

the loss and/or damage of property and resulting liabilities

31
Q

Loss

A

the reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril.

32
Q

Know THis!

A ___ is a chance that a loss will occur; a ___increased the probability of loss; a ___ is the cause of loss.

A

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
Q

Methods of handling risk

A

Avoidance
Retention
Sharing
Reduction
Transfer

34
Q

Avoidance

A

eliminating exposure to a loss

35
Q

Retention

A

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
Q

What’s the purpose of retention?

A

-reduce expenses and improve cash flow

-increase control of claim reserving and claims settlement

-fund for losses that cannot be insured.

37
Q

Sharing

A

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
Q

Reduction

A

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
Q

TRansfer

A

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
Q

Elements of insurable risks

A
  • Due to chance
  • Definite and measurable
  • Statistically predictable
  • Not catastrophic
  • Randomly selected and large loss exposure
41
Q

Adverse selection

A

The insuring of risks that are more probe to losses than the average risk.

42
Q

The law of large numbers

A

the larger the number of people with a similar exposure to loss, the more predictable actual losses will be.

43
Q

Classifications of insurers

A
  • Ownership
  • Authority to transact business
  • Location
  • Marketing and distributions systems
  • Rating (Financial Strength)
44
Q

Types of ownership

A

Stock and Mutual

45
Q

Domicile (location)

A

Domestic (in state)
Foreign (from other state)
Alien (outside US)

46
Q

Authority

A

Admitted/ Authorized
Nonadmitted/nonauthorized

47
Q

Marketing/ Distribution system

A

Independent Agency
Exclusive Agency
General Agency
Managerial System
Direct Response Marketing

48
Q

Who do insurance agents represent?

A

The insurer (principal)

49
Q

Elements of a contract

A

Agreement - offer and acceptance
consideration
competent parties
legal purpose

50
Q

What is the consideration in insurance contracts?

A

Insurer’s consideration is the promise to pay for losses
Insured’s consideration is the payment of premium and statements on the application

51
Q

Legal purpose

A

Must have insurable interest and consent.

52
Q

Aleatory

A

unequal values

53
Q

unilateral

A

one sided (one party makes a promise)

54
Q

Adhesion

A

only one party (insurer) prepares a contract, and the other party (insured) accepts it as is

55
Q
A

Life Insurance (1 decks)

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