General Insurance Principles Flashcards
Insurance companies that is owned by stockholders who purchase shares of stock as an investment. do NOT issue participating policies, and pay stock dividends to
stockholders.
Stock Insurance Company
Insurance companies that are owned by policyowners, issue participating policies which pay policy
dividends to their policyowners.
Mutual Insurance Company
Bigg Insurance Company, which is organized as a stock insurance company, is owned by its:
Stockholders
Ann, an agent, tells Julia that the homeowners policy she is selling to Julia will provide full coverage on Julia’s $5,000 cocktail ring against any loss. This is not true, because coverage for theft of jewelry is limited to a smaller amount. What duty to her client did Ann fail to properly discharge?
a duty to fairly represent the terms or conditions of a proposed policy
After finding it difficult to obtain the insurance it needs, Mathews Corporation joins other companies in the same industry and forms an insurance company that they all own. The insurance company they formed is most likely organized as a(n):
captive insurance company
The chance of loss
Risk
Unplanned reduction in
economic value
loss
State of being subject to a
possible loss
High exposure = high
risk
Exposure
The cause of a loss (fire,
flood, theft)
Peril
Condition that increases
the chance of a peril
Hazard
Hazard Example: Alcohol abuse, bad credit
Moral Hazard
Hazard Example: Driving recklessly, not
locking doors
Morale Hazard
Hazard Example: Slippery floors, congested
traffic
Physical Hazard
3 Types of Hazards
- Moral
- Physical
- Morale
Transferring of financial risk
An economical way for an individual or group to transfer the financial risk
of loss to an insurance company.
Insurance
transfers to a property insurance company the risk of financial loss resulting from damage or destruction of the insured’s personal or commercial
property.
Property Insurance
