Insurance terms

Question 1

transfer of risk from a person to an insurer

Answer 1

insurance

Question 2

uncertainty/possibility of a loss

Answer 2

risk

Question 3

chance of loss OR gain
-not insurable

Answer 3

speculative risk

Question 4

chance of loss only
-insurance companies will insure

Answer 4

pure risk

Question 5

risks for which the insurance company would be liable

Answer 5

exposure

Question 6

cause of loss

Answer 6

peril

Question 7

physical loss

Answer 7

direct loss

Question 8

consequence of a direct loss
-loss of income

Answer 8

indirect loss

Question 9

increases the chance of a loss

Answer 9

hazard

Question 10

hazard can be seen
-ex: wet floor

Answer 10

physical hazard

Question 11

dishonesty

Answer 11

moral hazard

Question 12

carelessness
-ex: leaving door open

Answer 12

morale hazard

Question 13

STARR

Answer 13

methods of handling risk

Question 14

STARR

Answer 14

-sharing
-transfer
-avoidance
-retention
-reduction

Question 15

an agreement between the insured and insurer

Answer 15

contract (policy)

Question 16

insured (customer)

Answer 16

1st party

Question 17

insurer (insurance company)

Answer 17

2nd party

Question 18

the larger the group, the more accurately future losses can be predicted

Answer 18

law of large numbers

Question 19

elements of an insurable risk

Answer 19

CANHAM

Question 20

CANHAM

Answer 20

-calculable
-affordable
-non-catastrophic
-homogenous
-accidental
-measurable

Question 21

risks that have greater than average chance of loss
-higher risk = higher rate or refusal to insure
-why underwriting process exists

Answer 21

adverse selection

Question 22

-owned by stockholders
-dividend taxable
-issues non-participating policies

Answer 22

stock insurer

Question 23

-owned by the policyholders
-dividend non-taxable
-issues participating policies

Answer 23

mutual insurer

Question 24

-provides insurance and other benefits
-must be a member of society to get benefits

Answer 24

fraternal insurer

Question 25

-attorney–in-fact

Answer 25

reciprocal insurer

Question 26

insurance provided by individual underwriters, not companies

Answer 26

Lloyd’s association

Question 27

-hole in one contest
-celebrity’s hair

Answer 27

unusual risks

Question 28

liability insurance company created for policyholder’s in the same industry

Answer 28

risk retention group

Question 29

group of businesses form the same industry joining together to buy liability insurance from an insurance company

Answer 29

risk purchasing group

Question 30

business that pays its own claims
-retains risk rather than transfer

Answer 30

self-insurance

Question 31

-war risk
-nuclear energy
-flood
-federal crop

Answer 31

federal level

Question 32

-worker’s compensation
-unemployment

Answer 32

state level

Question 33

state where company is incorporated

Answer 33

domestic

Question 34

company is in another state or U.S. territory

Answer 34

foreign

Question 35

company in another country

Answer 35

alien

Question 36

state requires the insurance company to have certificate of authority

Answer 36

admitted

Question 37

report card for company

Answer 37

financial strength rating

Question 38

no agent/producer involved
-direct mail, magazines, TV

Answer 38

direct response

Question 39

insurance agent acts on behalf of the principal (insurance company)

Answer 39

agency

Question 40

what the agent’s written contract says

Answer 40

direct

Question 41

not written; activities an agent normally goes

Answer 41

implied

Question 42

activities an agent does that a reasonable person would assume as authority

Answer 42

apparent