Idaho Law and Ethics

Question 1

Risk

Answer 1

Uncertainty about whether a loss will occur

Question 2

Loss

Answer 2

Reduction of quality, quantity or the value of something.

Question 3

Hazard

Answer 3

A condition that increases the probability or severity of a loss

Question 4

Peril

Answer 4

A cause of potential loss - Fire, Wind, Flood, Theft or Sickness, Injury

Question 5

Speculative Risk

Answer 5

Gain, Break-even, Loss

Owning a business, gambling, stock market

Question 6

Pure Risk

Answer 6

No possible gain. Break-even or loss.

Property ownership, liability, exposure, living

Question 7

Risk Management Tool: Avoidance

Answer 7

Elimination of any risks, sell property, withdraw from any activity that may cause loss

Question 8

Risk Management Tool: Reduction

Answer 8

Containment or isolation of the hazard that may cause loss. (Safety devices, proper nutrition, stop smoking)

Question 9

Risk Management Tool: Retention

Answer 9

That portion of the risk that can’t be avoided after all efforts to reduce or loss. Cash or asset reserves, suffer loss without replacement

Question 10

Risk Management Tool: Transfer

Answer 10

Shifts the responsibility for loss from one party to another. Purchase insurance or a hold harmless agreement.

Question 11

Insurable Interest: 3 Elements Must Exist

Answer 11

1. Face personal risk of loss.
2. Have a financial interest in what is being insured.
3. No potential for gain to the insured.

Question 12

Loss Ratio

Answer 12

Dividing losses by the total premiums

Question 13

4 Elements of a Contract

Answer 13

1. Offer and Acceptance: A meeting of the minds that the contract is now in force
2. Consideration: An exchange of value- money, an act, a promise or giving up a legal right
3. Competent Parties: Must be able to legally enter into a contract
4. Legal Purpose

Question 14

Concealment

Answer 14

Failure to disclose all material facts. Can void the contract.

Question 15

Misrepresentation

Answer 15

A false statement of a material fact. A lie. Can void the contract.

Question 16

Representation

Answer 16

Statements made to the best of your knowledge

Question 17

Warranty

Answer 17

Facts, known

Question 18

Waiver

Answer 18

Giving up a right by taking action.

Does not have to be in writing.

Question 19

Estoppel

Answer 19

Giving up a right by lack of action.

Question 20

Binder

Answer 20

A temporary contract that places insurance in effect prior to policy issue.

Question 21

Agency Relationship

Answer 21

PRINCIPLE (insurance company)—-> AGENT—->THIRD PARTY (insured)

Question 22

Broker

Answer 22

Authority to represent clients- Is licensed!

Question 23

Consultant

Answer 23

Represents the insured as an advisor.

Paid directly by the insured

Question 24

2 Types of Insurers- most common

Answer 24

Stock- owned by stakeholders, shareholders

Mutual- owned by policy holders

Question 25

Fair Credit Reporting Act of 1971 (Consumer Protection)

Answer 25

Consumer has the right to challenge any erroneous information reported.

Question 26

Gramm-Leach-Bliley Act of 1999 (Consumer Protection)

Answer 26

Privacy Initiatives: Must notify client that you will use information in credit reports, etc. Consumer must be notified of any adverse outcome.

Question 27

Medicare

Answer 27

Federally funded for the elderly

Question 28

Medicaid

Answer 28

State and federally funded for the poor