Insurance Flashcards
Insurance
What is the concept of risk
Risk evolves from uncertainty - a condition in which a chance of loss exists
State of Michigan Office of Financial and Insurance Regulation ( OFIR )
Regulates all Insurance companies doing business in the state, protects consumers from the Insurance company becoming insolvent ( unable to pay debts owed )
Insurance rating services
Ex:
- A.M Best Company
- Moodts Investor Services
- Standard & Poors
Unauthorized Company
( Not Licensed )
Not admitted to do business in the state
Authorized Company
( Licensed )
Admitted to do business in the state
The major difference between private insurers and government insurers
Government insurers rely on tax dollars
Mutual Insurance Company
An insurer without permanent Capitol stock, policyholders own the company, dividends may be paid to policyholders.
AKA: Par companies ( Policyholders PARticipate in dividends
Stock Insurance company
An insurer with its Capitol stock owned by its stockholders
Non - Par: Policyholders DO NOT participate in dividends
If a dividend is declared it is paid to the stockholders
Difference between Personal and Commercial Insurance policy
Personal Insurance Policy - Covers an individual
Ex: Auto Insurance
Commercial Insurance Policy - Covers an entire business ( that could include multiple drivers, multiple vehicles, ect.
Insurance is provided by what 3 main types of companies?
- Private Commercial Insurers ( for profit companies )
- Private Non - Commercial Insurers ( Non - Profit Organizations)
- The federal government
Pays off all or some of your loan if you die during the term of coverage
Credit Life Insurance
The larger the # of similar risks, the more accurate the prediction of loss
Law of Large #’s
4 main types of credit insurance
Credit Life
Credit Disability
Credit Involuntary Unemployment
Credit Property
Group credit insurance is covering a group of individuals and the insurer issues a ________ then issues ________ to each person covered
Master policy
Certificates of Insurance
When a group credit life policy is issued, the lender is the _________ ?
Beneficiary
Mortality Expense
The cost of death protection
Elements in insurable risk
- Loss must be predictable
- Loss must be definite
- Loss must be due to chance
- Loss cannot be catastrophic
- Loss exposure must be large
Purchasing insurance is
Transferring risk
The basis for insurance
The idea of sharing risk
A creditor is also referred to as
Lender
What are the two types of risk?
Speculative Risk and Pure Risk
What type of risk is insurable?
Pure risk
What type of risk involves the chance of winning or losing? ( win - lose situation)
Speculative Risk
Will only void a life policy during the first two policy years
Fraud Incontestable Clause
What type of risk creates only financial loss ? ( lose - lose situation )
Pure Risk
According to federal law, the mortgage insurance will be automatically terminated when the loan is paid down to _____ % of the original property value
78%
Mutual companies are owned by ?
Policyholders
Stock companies are owned by ?
Stockholders
Policyholders DO NOT participate in dividends in what type of insurance company ?
Stock Insurance company
Policyholders DO participate in dividends in which type of insurance company?
Mutual Insurance Company
What are the four classifications of risk ( for underwriting ) ?
Define each
- Standard Risk - An average risk
- Substandard Risk - A less than average risk ( high risk )
- Preferred Risk - Exceeds the insurers average risk requirements ( low risk )
- Uninsurable - Applicant will be denied/declined
Define a closed - end transaction
Borrowing a certain amount of money for a specific period of time
( has an end date )
What are the methods of repayment in closed - end transactions ?
Installment payments
Single payment loans
Balloon payment
Paying a fixed amount for a fixed period of time.
While the loan is being re - paid, tge credit insurance is reduced then at the time when the loan is paid in full the credit insurance ceases.
Installment Payments
What type of authority is specific written authorities ( specifically expressed ) in the agency agreement ?
Powers given to the agent is a part of the agency agreement.
Expressed Authority
What type of authority is powers or duties that may not be covered in the agency agreement but is needed/assumed for the agent to do their job ?
( Authority not necessarily covered in agreement but implied because is needed for agent to do their job )
Implied Authority
What authority is when the powers are not given by the agency agreement but which a reasonable presume ( it would be apparent the agent has authority?
( covers the relationship between the agen and the customer. The actions and words of the agent are considered that of the company, even if fraudulent in nature, the insurance company is liable.
Apparent Authority
A borrower of money or a purchaser or lessee of goods, services, property, rights or privileges for which payment is arranged through a credit transaction.
Debtor
Does not qualify for a standard premium, and therefore, will generally have to pay an extra premium. The applicant will be classified as __________ usually due to some medical problem.
Substandard Risk
High Exposure
The concept of risk
Risk evolves from uncertainty - a condition in which a chance of loss exists
State of Michigan, Office of Financial and Insurance Regulation
( OFIR )
Regulates all insurance companies doing business in the state.
Protects consumers from the insurance company becoming insolvent ( unable to pay debts owed )
