History Of Insurance – Lesson 1 Flashcards
The principle of indemnity has to do with what?
The insured should not receive more than the loss.
What is the mechanism of insurance?
To transfer potential loss from the insured to the insurer.
Concerning the law of large numbers, what does it say about the greater the number of insureds?
The greater the number of insureds, the easier it is to predict losses of the group.
For a valid contract, agreement, consideration, legal purpose, and what else is needed?
Competent parties
Life insurance contracts are considered to be contract between whom?
The insurer and the policyowner.
When entering a contract, any doubt or ambiguity found in the document by the person to whom it is offered will be construed against the party who drew up the contract. This is because an insurance policy is a contract of:
Adhesion
What does insurable interest mean in life insurance?
Financial interest in having the life of the insured continue.
In life insurance, when must insurable interest exist?
At the time of application
What is the consideration given by the policy owner of an insurance contract?
Premium
Regulation of the insurance industry comes from which sources?
- State government
- Federal government
- Self regulation from groups like the NAIC
What would be considered a pure Risk?
Jane’s house burns down
What would be regarded as a moral hazard?
- Filing a false claim
- Drug abuse
- Lying on an application for insurance
What is a hazard?
Anything that contributes to a loss
What is the mortality table?
A table that predicts the number of deaths at various ages
A contract in which one seeks to indemnify another against loss, damage, or liability is the definition of:
Insurance
Every insured item may suffer a loss. Each item insured is referred to as:
An exposure unit
In a life insurance policy, a certain performance is promised in exchange for?
Valuable consideration
What is a McCarran Ferguson Act?
Federal government would not interfere with the states if they did an adequate job and regulating insurance industry.
What is the NAICs primary objectives?
To encourage uniformity in state laws and regulations.
What is a pure risk?
There is a chance of loss; it may or may not happen.
What is a speculative risk?
It involves an uncertainty of loss, but there is also a chance of gain.
What is a morale hazard?
A person’s indifference or carelessness.
Who is required to have an insurable interest at the time of issuance of a policy?
Policy owner
What are contract requirements?
- Mutual agreements
- Legal capacity
- Consideration (something of value)
4 legal purpose
