General Insurance Flashcards
What are the three types of agent authority?
- Express
- Implied
- Apparent
If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?
Provide the applicant a Disclosure Authorization Notice
What are the two elements necessary for a life insurance contract to have a legal purpose?
- Insurable Interest
- Consent
In forming an insurance contract, when does acceptance usually occur?
When the insurer approves a prepaid application
What document is required for an insurance company to transact insurance?
Certificate of Authority
What is the best way to handle incomplete insurance applications?
Return the application to the applicant for completion
What law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
Law of large number
If an applicant does not review their insurance policy, who would be held responsible?
The agent
An insurance company that is formed under the laws of another state is known as what type of insurer?
Foreign
What type of report provides information about the applicant’s hobbies, habits, and financial status?
Inspection Report
A state-issued document empowering an insurance company to become an admitted insurer is called what?
Certificate of Authority
In the agent/insurer relationship, who is considered the principal?
Insurer
Insurer are classified according to their domicile. What are the three types of insurers?
- Domestic
- Foreign
- Alien
The insurer organized to return a profit to the stockholders is what type of insurer?
Stock company
What entities make up the Medical Information Bureau?
Insurers
When does an insurance policy go into effect?
When the policy is delivered and the premium is paid
When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?
Insurer
What is the term for the causes of loss insured against in an insurance policy?
Peril
Insurance is used to transfer what to the insurance company?
Financial responsibility for loss
What type of insurer is a voluntarily formed organization that provides insurance benefits for members of an afflicted lodge or religious organization with a representative form of government?
Fraternal Insurer
The type of insurance company organized to return any surplus to its policy is known as what?
Mutual company
For the purpose of insurance, what is risk?
Uncertainty of loss
If an agent fails to obtain the applicant’s signature on the insurance application, what must the insurer do?
Send the application back to the applicant for signature
In order to transact insurance with a given state, an alien insurer must first obtain what?
Certificate of Authority
Whose responsibility is it to determine that all the questions on an insurance application are answered?
The agent’s
A situation in which a person can only experience a loss and no gain presents what type of risk?
Pure risk
What type of insurer is formed under the laws of another country?
Alien
What are the strategies used by underwriters to prevent adverse selection? 3
- Restriction of coverage
- Refusal to accept a risk
- Accepting a risk at a higher rate
Insurance is a contract that protects the insured from what?
Loss
When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?
Adverse selection
An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase a policy?
Mutual
A person who does not lock the doors to their house shows an indifferent attitude. The person presents what type of hazard?
Morale
The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?
Loss
What do individuals use to transfer their risk of loss to a larger group?
Insurance
What is the name of the process that insurance companies use to determine whether or not an applicant is insurable?
Underwriting
Whom does an insurance agent represent?
Insurance company
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
What type of risk is insurable?
Pure
An insurance company is domiciled in California and transacts insurance in Nevada. What is the insurer’s classification in Nevada?
Foreign
Wagering on a sporting event is known as what type of risk?
Speculative
When a change needs to be made on the application for insurance, which is the best method for correction the information?
Complete a new application or ask the applicant to initial the correction on the original application
An applicant conceals relevant health information on the application. The applicant presents what type of hazard?
Moral
What law protects consumers from the circulation of inaccurate or obsolete information?
The Fair Credit Reporting Act
What are the five characteristics of an ideally insurable risk?
Loss must be:
- Due to chance
- Definite and measurable
- Statistically predictable
- Not catastrophic
- Coverage cannot be mandatory
What are the four elements of an insurance contract?
- Agreement (offer and acceptance
- Consideration
- Competent parties
- Legal purpose
In insurance, when is the offer usually made on a contract?
When the insurance application is submitted
What are the three types of hazards?
- Physical
- Moral
- Morale
According to the Law of Agency, a principal is represented by whom?
Agent or producer
Who owns stock companies?
Stockholders
Conditions that increase the chance of a loss are known as what?
Hazards
