Insurance Basics

Question 1

Factors to be Insurable

Answer 1

large # sim exp
sig in scope
measurable
accidental
non catastrophic

Question 2

3 Requirements: Ins Contracts

Answer 2

unilateral
conditional
good faith

Question 3

Traditional Insurance

Answer 3

Traditional
-stock (sells stock) and mutual (owned by policy holders)

Question 4

Reciprocal

Answer 4

subscribers insure other members

Question 5

Automatic treaty
(reinsurance)

Answer 5

comp accepts risk of other comp (allstate)

Question 6

Excess of Loss (reinsurance)

Answer 6

up to an amount

the primary insurer pays the amount of each claim for each risk UP TO A LIMIT determined in advance, and the reinsurer pays the amount of the claim above that specific limit

Question 7

Quota Share (reinsurance)

Answer 7

the primary insurer and the reinsurer(s) involved will pay claims in direct relationship with the percentage of the risk that each is insuring

predetermined %s

Question 8

Domestic Insurer

Answer 8

formed under laws of NC

Question 9

Foreign Insurer

Answer 9

laws of other state operating in NC

Question 10

Alien Insurers

Answer 10

company formed under laws of other country

Question 11

Valued Contract

Answer 11

insurer agrees to a certain sum of money (life insurance)

Question 12

Reimbursement Contract (type of contract)

Answer 12

reimburses expenses - typically medical

Question 13

Adverse Selection

Answer 13

more than normal share of risk

Question 14

Assigned Risk

Answer 14

high risk factors, insurance is required

an individual or business that is not insurable under regular insurance contracts due to high risk factors is assigned to an insurance company when insurance is required to be carried.

For example, some states require automobile liability insurance

Question 15

Described Location

Answer 15

the house, structures and grounds of property, where you live

Question 16

Law of Large Numbers

Answer 16

greater chance of calculating risk price

Question 17

Facultative (optional) Reinsurance

Answer 17

form of reinsurance that is negotiated separately for each insurance contract.

The reinsuring company decides whether to insure or reject individual risks from a ceding company.

Question 18

Lloyds of London

Answer 18

Attorney-in-fact

Supporting capital is provided by investment institutions, specialist investors, international insurance companies and individuals.

Lloyd’s is famous for insuring unusual and even speculative risks.

Question 19

Automatic (Treaty)
-Reinsurance

Answer 19

a ceding company is contractually bound to cede (give up or surrender) a percentage of the risk, and a Reinsurer is bound by contract (treaty) to accept some portion of the of risk

Question 20

Valued Contract

Answer 20

type of contract in which the insurer agrees to pay a specific sum of money no matter what the amount of loss may be

Question 21

Reimbursement Contract

Answer 21

type of contract which reimburses expenses. Typically, this refers to medical insurance contracts in which the insured receives reimbursement for medical expenses that he or she paid

Question 22

Indemnity Contract

Answer 22

type of contract that promises to pay an amount equal to the loss covered under the policy. Although all insurance contracts promise to pay some amount for loss, only property contracts follow the strict definition of indemnity

Question 23

Casualty Insurance

Answer 23

term for non-property insurance coverage

Question 24

Estoppel

Answer 24

legal impediment to one party denying the consequences of its own actions

Question 25

Expiration Date

Answer 25

date on which coverage terminates under a policy.

Question 26

Friendly Fire

Answer 26

a fire that is set intentionally in a fireplace, stove, furnace or other containment that has not spread beyond the container

Question 27

Hostile Fire

Answer 27

fire that is not confined to its normal habitat, such as a fireplace, or has been started by accident

Question 28

Libel

Answer 28

a form of personal injury that is communicated through material that can be seen such as a printed publication

Question 29

Warranty

Answer 29

a provision in a policy pledging by the insured that a condition does or will exist when the insurance policy is issued

Question 30

Short Rate

Answer 30

if the insured cancelled the policy before the expected expiration date of the policy

Question 31

Pro-Rata

Answer 31

insurance company must return any advanced unused premium paid by the policyowner

if the insurance company terminates the contract before the policy period ends

Question 32

Age for Life insurance or Annuity

Answer 32

15

Question 33

Representation

Answer 33

true to the best of one’s knowledge

Question 34

Insuarable Risk Requirements