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CFP Course 2 Flashcard Kaplan > Module 1 > Flashcards

Module 1 Flashcards

1
Q

Static Risk

A

Result from factors other than changes in the economy (earthquakes, floods, etc.)

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2
Q

Dynamic Risks

A

Changes in the economy, insurance does not typically cover dynamic risks

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3
Q

Fundamental Risks

A

Affects large groups of people

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4
Q

Particular Risk

A

individuals or small groups of people at risk

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5
Q

Pure risk

A

only risk of loss, no chance of gain (insurable risk)

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6
Q

Speculative Risk

A

chance of loss or chance of gain (uninsurable)

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7
Q

Risk

A

Possibility of a loss

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8
Q

Peril

A

Cause of the loss

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9
Q

Hazard

A

increases potential for loss

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10
Q

Seven steps of the risk management process (7 steps)

A
  1. Identify and Establish Risk Management Goals
  2. Gather Pertinent Data to Determine Risk Exposures
  3. Analyze and Evaluate the Info to Identify Risk Exposures
  4. Develop a Risk Management Plan
  5. Communicate Recommendations
  6. Implement Recommendations
  7. Monitor the Recommendations for Needed Changes
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11
Q

Step 1: Identify and Establish Risk Management Goals

A
  • How much loss could be tolerated in the current financial situation?
  • What general and specific risks does this client face?
  • Compare the potential financial loss and consequences to the probability of the risk
  • Determine the amount of income to be used for risk mitigation
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12
Q

Step 2: Gather Pertinent Data to Determine Risk Exposures

A
  • Property at Risk
  • Personal Illness and Injury
  • Liability
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13
Q

Step 3: Analyze and Evaluate the Info to ID Risk Exposures

A

1) Asset Related Risk
2) Risk of Liability on Contract Law
3) Risk of Liability on Tort Law

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14
Q

What are the four Risk Management Strategies?

A

1) Risk Avoidance (Risk Control)
2) Risk Reduction (Risk Control)
3) Risk Retention (Risk Financing)
4) Risk Transfer (Risk Financing)

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15
Q

Insurable Risk Elements

A
  • Law of Large Numbers
  • Is the loss from risk definite and Measurable
  • The loss must be accidental
  • The loss must not be catastrophic to the company
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16
Q

Liability of the Insurer

A

1) Insurable Interest
2) Actual Cash Value of Loss
3) Policy Limits (or FV)
4) Other Insurance
5) Coinsurance
6) Deductibles
7) Subrogation

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17
Q

Insurable Interest

A

when the insured party will suffer a financial loss if the loss occurs

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18
Q

Actual Cash Value

A

The replacement value minus the depreciation

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19
Q

Coinsurance

A

Splitting the cost of insurance

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20
Q

Deductible

A

A retained risk, the amount that the insured is willing to pay before the insurance pays

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21
Q

Subrogation

A

the right of the insurance company to get it’s money back if it’s found that another company paid for the same thing, so that someone cannot profit off of the insurance payback

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22
Q

Social Insurance

A

Mandatory insurance administered by the government (medicare, medicaid, etc)

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23
Q

Public Insurance

A

Designed to enhance public trust in financial institutions (FDIC, SIPC, etc.)

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24
Q

Private Insurance

A

Insurance sold in the private sector (disability, health, long-term care, P+C, Liability and Life Insurance)

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25
Self Insurance
Larger companies will self insure their own health care insurance or will combine their self-insurance with other insuracne above a certain level of claims
26
Independent Agent
represent several insurance companies doing business under the American or Independent Agency insurance system
27
Captive Agents
sell property and liability insurance for companies that are known as "direct writers." Represents only 1 company
28
Career Agents
usually Life Insurance agents in a general agency or a company owned office under the agencies management
29
Producing General Agents
* Produce majority income selling insurance personally * No specified territories * Can hire agents to work for them
30
Broker
Agent for the insurance buyer, generally cannot bind the prospective insured to a contract. Insurer is not bound by brokers actions.
31
Surplus-Line, Excess-Line Broker/Agent
handle any insurance that cannot be purchased using normal distribution chance. P+C mostly
32
Principal
Give an agent the authority to solicit and bind insurance contracts, subject to the limitations of the agency agreement
33
Agent
Represents the insurer
34
Types of Authority
1. Express Authority 2. Implied Authority 3. Apparent Authority
35
Express Authority
specific contract authority
36
Implied Authority
Authority the agent is assumed to have to transact the business. Between the insurer and agent
37
Apparent Authority
the appearance of authority based on the actions, words, or deeds the agent/insurer. this is between the client/agent
38
NAIC
National Association of Insurance Commissioners: * Composed of the state insurance commissioners of all 50 states * Set models as recommendations for states to abide by * Accreddidation program to increase oversight reliability in various states
39
Aleatory Contract
the outcome is controlled by chance, and the dollars that change hands are often of equal amounts
40
Contract of Adhesion
Prepared by one party and either accepted or rejected by the other
41
Conditional Insurance
the insurance company pays on the condition that a covered loss occurs
42
Indemnity
the insureds are restored to the financial positions they were before they suffered their losses
43
Collateral Source Rule
If others cause you to suffer a loss, they are still required to pay the full loss even if the insurance covers it.
44
Bilateral Contract
When either party can enforce the contract in a court of law
45
Utmost Good Faith
The insurance company doesn't have to do all the research for every thing.
46
Misrepresentation
A false statement is made that at least partially induces the company to issue the contract
47
Warranty
a statement by the applicant that all of the info on the app is absolutely true
48
Concealment
intentional withholding of material information
49
Elements of a legally enforceable contract (5)
1. Offer and Acceptance 2. Consideration 3. Legal Object 4. Competent Parties 5. Legal Form
50
Void Contract
is not enforceable and lacks one or more of the requirements of an enforceable contract
51
Voidable Contract
one party has the option of voiding the contract, the other party is bound
52
Parts of Insurance (4)
1) Declarations 2) Insuring Agreement 3) Exclusions 4) Conditions
53
Declarations
includes applicant information
54
Insuring Agreement
ID's what is insured, for how much and under what conditions
55
Exclusions
ID's circumstances or situations that would exclude the company from paying a claim
56
Conditions
rights and duties of both parties
57
Parol Evidence Law
Nothing previous to the written contract will be used when determining disputes
58
Doctrine of Waiver
A party, by her own actions, has voluntarily relinquished a known right.
59
Doctrine of Estoppel
prevents a party from going back on their word to, for example, pay a claim. Works together with the Doctrine of Waiver
60
Recission
OG Contract is deemed null from the beginning
61
Reformation
change contract language to conform with what was originally intended in the contract
62
Tort
When someone causes physical, emotional or financial harm to another
63
Tortfeasor
The person who commits a tort
64
Unintentional Tort
Involved Negligence
65
Negligence Parts (4)
1) Duty is Owed 2) Duty was Breached 3) Actual Damages 4) Proximate Cause
66
Proximate Cause
an uninterrupted sequence of events that brought about the damage of a negligent act
67
Attractive Nuisance
refers to something about a property that is likely to attract and possibly injure children
68
Negligence Per Se
Duty of care owed is determined by reference to a stature
69
Absolute Liability (Strict Liability)
The Standard Imposed when a person is held responsible for damages, even when there has been no negligence
70
Vicarious Liability
When someone is held liable for the actions of another (parent-child)
71
Contributory Negligence
if neglegence on the part of the injured party contributes to the injury it absolves the other party of liability
72
Comparative Negligence
has replaced Contributory negligence, in which is just reduces the defendants liability by the amount of fault thaey had
73
Last Clear Chance
modifies Comparitve negligence if the other party, immediately prior to the accident, had a last clear chance to prevent the accidents but failed to seize the chance.

CFP Course 2 Flashcard Kaplan (5 decks)

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