General Insurance Flashcards
What is a warranty in an insurance contract?
An absolutely true statement upon which the validity of the insurance contract is based
When does an insurance policy go into effect?
When the policy is delivered and the premium is paid
In insurance, when is the offer usually made on a contract?
When insurance application is submitted
When would a misrepresentation on an insurance application be considered fraud?
When it’s intentional and material
The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?
Fiduciary
What are the five characteristics of an ideally insurable risk?
Loss must be
1) due to chance
2) definite and measurable
3) statistically predictable
4) not catastrophic
5) coverage cannot be mandatory
An insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer’s classification in Nevada?
Foreign
An insurance policy paid a non taxable dividend to the insured one year and nothing the next. From what type of insurer sis the insured purchase the policy?
Mutual
What type of report provides information about the applicant’s hobbies, habits and financial status?
Inspection report
What are the strategies used by underwriters to prevent adverse selection?3
1 restriction of coverage
2 refusal to accept a risk
3 accepting a risk at a higher rate
What are the four elements of an insurance contract?
1 agreement (offer and acceptance)
2 consideration
3 competent parties
4 legal purpose
Wagering on a sports event is known as what type of risk?
Speculative
What type of risk is insurable?
Pure
What two elements are necessary for a life insurance contract to have a legal purpose?
1 insurable interest
2 consent
According to the law of agency, a principal is represented by whom?
Agent or producer
What are the three types of agent authority?
1 Express
2 implied
3 apparent
A person who does not lock the doors of his or her house shows an indifferent attitude. This person presents what type of hazard?
Morale
In the agent insurer relationship who is considered the principal?
The insurer
Who owns stock companies?
Stockholder’s
Whose responsibility is it to determine that all the questions on an insurance application are answered?
The agent’s
If an insurer meets the state’s financial requirements and is approved to transact business in the state, it is considered what type of insurer?
Authorized or admitted
If an applicant does not receive his insurance policy, who would be held responsible?
The agent
An applicant conceals relevant health information on the application. The applicant presents what type of hazard?
Moral
The insurer organized to return a profit to the stockholder’s is what type of insurer?
Stock company
When agents act within the scope of their contract, their actions will be assumed to be acts of whom?
Insurer
A situation in which a person can only experience a loss and no gain presents what type of risk?
Pure risk
What document is required for an insurance company to transact insurance?
Certificate of Authority
Whom does an insurance agent represent?
Insurance company
If an agent fails to obtain the applicants signature on the insurance application, what must the insurer do?
Send the application back to the applicant for signature
When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?
Adverse selection
For the purpose of insurance, what is risk?
Uncertainty of loss
In forming an insurance contract, when does an acceptance usually occur?
When the insurer approves a prepaid application
The reduction, decrease or disappearance of value of the person or property insured in a policy is known as what?
Loss
What is the term for the causes of loss insured in an insurance policy?
Peril
Conditions that increase the chance of loss are known as what?
Hazards
What entities make up the medical information bureau?
Insurers
The type of insurance company organized to return any surplus money to its policy holders is known as what?
Mutual company
What are three types of hazards?
1 moral
2 morale
3 physical
Insurance is a contract that protects the insured from what?
Loss
What do individuals use to transfer risk of loss to a larger group?
Insurance
What type of insurer is formed under the laws of another country?
Alien
Insurers are classified according to their domicile. What are. Three types of insurers?
1 domestic
2 foreign
3 alien
An insurance company that is formed under the laws of another state is known as what type of insurance company?
Foreign
What is the best way to handle incomplete insurance applications?
Return the application to the applicant for completion
When a chance needs to be made on the application for insurance which is the best method for correcting the information?
Complete a new application or ask the applicant to initial the correction on the original application
Which is the following is an example of a producer’s fiduciary duty?
The trust that a client places in the producer in regard to handling premiums
Because an agent is using stationary with the logo of an insurance company, applicants for insurance assume the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe?
Apparent
What documentation grants express authority to an agent?
Agent’s contract with the principal
Which of the following is the closest term to authorized insurer?
Admitted
