Insurance 2- Policy, Company Selection/ Analysis & Evalution of Risk Exposures

Question 1

superannuation

Answer 1

risk that an individual or couple will outlive his or their money

Question 2

tort

Answer 2

Tort is a wrongful act other than a breach of contract for which a civil action may be brought against the tortfeasor (person who commits a tort). A tort is generally regarded as a crime. Tort can be intentional (deliberate- assault, battery, slander) or unintentional (carelessness/negligence)

Question 3

attractive nuisance

Answer 3

states that a landowner may be held liable for injuries to children trespassing on the land if the injury is caused by an object on the land that is likely to attract children.- pool that isn’t screened or fence, for example

Question 4

negligence per se

Answer 4

situation where standards of care is set by a statute i.e. school zone, cross walk

Question 5

strict liability

Answer 5

liability is imposed with respect to injury or damage arising from certain types of hazardous activities. For example, under strict liability standards, the manufacturer or distributor of a dangerous product is liable to a person who is injured by the product, regardless of the degree of care exercised by the manufacturer or distributor in the production or sale of the product. (i.e. lettuce with e coli)

Question 6

absolute liability

Answer 6

an extra hazardous condition which results in losses to others (i.e. keeping of wild animals). liability for which there is no excuse. “In other words, absolute liability is imposed upon certain conduct, regardless of whether or not such conduct is negligent. Workers compensation also falls under absolute liability.

Question 7

vicarious liability/respondeat superior

Answer 7

when on person is held liable for the negligent behavior of another person (i.e. insurance agency is responsible for their agents)

Question 8

assumption of risk

Answer 8

if one party recognizes and understands the danger in an activity and voluntarily chooses to do it, another party cannot be held responsible for injury (signing an assumption of risk before skydiving and getting injured)

Question 9

contributory negligence

Answer 9

any negligence on the part of the injured party that defeats the claim (i.e. jaywalking)

Question 10

comparative negligence

Answer 10

any negligence on the part of the injured party that does not defeat the claim, but is used in some manner to mitigate/reduce damaged payable by the other party

Question 11

last clear chance

Answer 11

requires an individual to take every action at hand to avoid an accident where peril to another human being is otherwise imminent. i.e road rage

Question 12

Capital Utilization

Answer 12

Life insurance needs analysis method- factors annuitization to fund future income but leaves NO money at the end of the anticipated distribution period. (Calculate the present value of a future need)

Question 13

Capital Retention/Capital Preservation

Answer 13

Life insurance needs analysis method- presumes that only interest is distributed. The original capital is still left at the end of the income period.

Question 14

Disability Income Insurance

Answer 14

Usually 50-60% if earned income

Question 15

Long term care insurance

Answer 15

purchased to cover certain dollar amount of costs per day. typically range between 200-400

Question 16

Lloyds of London

Answer 16

Insurance company that specializes in high or unusual risk coverage

Question 17

Participating Policy

Answer 17

pays annual dividend to policyholder- charges larger premiums, but if the extra premium is not needed, it is then retired to policyholder as a dividend( generally tax free)

Question 18

Nonparticipating Policy

Answer 18

In a nonparticipating policy, the company retains the profits (investment/mortality-expense) for its shareholders

Question 19

A.M Best

Answer 19

Rating service agency that provides detailed, historical data on insurance carriers. The highest rating for A.M Best is A++

Question 20

Underwriting

Answer 20

Underwriting is the process of selecting and classifying exposures. The underwriter must complete the following– 1) cover a large # of individual insured so that the law of large numbers works 2) obtain homogeneity of insureds so that there is a reasonable equity between the better and poorer individual insureds

Question 21

5 Sources of Information Used by Underwriter

Answer 21

1) An application for insurance 2) information from the agent or broker 3) investigations 4) information bureaus 5) physical examinations or inspections

Question 22

Loss Adjuster + Adjustment Process

Answer 22

a loss adjuster is an individual who investigates losses & determined the insurer’s liability and the amount of payment to be made. The process follows this sequence–> 1) notice of loss, 2) investigation, 3) proof of loss, & 4) payment or denial