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CFP Course 2 Flashcard Kaplan > Module 1 > Flashcards

Module 1 Flashcards

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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
Q

Self Insurance

A

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

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26
Q

Independent Agent

A

represent several insurance companies doing business under the American or Independent Agency insurance system

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27
Q

Captive Agents

A

sell property and liability insurance for companies that are known as “direct writers.” Represents only 1 company

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28
Q

Career Agents

A

usually Life Insurance agents in a general agency or a company owned office under the agencies management

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29
Q

Producing General Agents

A
  • Produce majority income selling insurance personally
  • No specified territories
  • Can hire agents to work for them
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30
Q

Broker

A

Agent for the insurance buyer, generally cannot bind the prospective insured to a contract. Insurer is not bound by brokers actions.

31
Q

Surplus-Line, Excess-Line Broker/Agent

A

handle any insurance that cannot be purchased using normal distribution chance. P+C mostly

32
Q

Principal

A

Give an agent the authority to solicit and bind insurance contracts, subject to the limitations of the agency agreement

33
Q

Agent

A

Represents the insurer

34
Q

Types of Authority

A
  1. Express Authority
  2. Implied Authority
  3. Apparent Authority
35
Q

Express Authority

A

specific contract authority

36
Q

Implied Authority

A

Authority the agent is assumed to have to transact the business. Between the insurer and agent

37
Q

Apparent Authority

A

the appearance of authority based on the actions, words, or deeds the agent/insurer. this is between the client/agent

38
Q

NAIC

A

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
Q

Aleatory Contract

A

the outcome is controlled by chance, and the dollars that change hands are often of equal amounts

40
Q

Contract of Adhesion

A

Prepared by one party and either accepted or rejected by the other

41
Q

Conditional Insurance

A

the insurance company pays on the condition that a covered loss occurs

42
Q

Indemnity

A

the insureds are restored to the financial positions they were before they suffered their losses

43
Q

Collateral Source Rule

A

If others cause you to suffer a loss, they are still required to pay the full loss even if the insurance covers it.

44
Q

Bilateral Contract

A

When either party can enforce the contract in a court of law

45
Q

Utmost Good Faith

A

The insurance company doesn’t have to do all the research for every thing.

46
Q

Misrepresentation

A

A false statement is made that at least partially induces the company to issue the contract

47
Q

Warranty

A

a statement by the applicant that all of the info on the app is absolutely true

48
Q

Concealment

A

intentional withholding of material information

49
Q

Elements of a legally enforceable contract (5)

A
  1. Offer and Acceptance
  2. Consideration
  3. Legal Object
  4. Competent Parties
  5. Legal Form
50
Q

Void Contract

A

is not enforceable and lacks one or more of the requirements of an enforceable contract

51
Q

Voidable Contract

A

one party has the option of voiding the contract, the other party is bound

52
Q

Parts of Insurance (4)

A

1) Declarations
2) Insuring Agreement
3) Exclusions
4) Conditions

53
Q

Declarations

A

includes applicant information

54
Q

Insuring Agreement

A

ID’s what is insured, for how much and under what conditions

55
Q

Exclusions

A

ID’s circumstances or situations that would exclude the company from paying a claim

56
Q

Conditions

A

rights and duties of both parties

57
Q

Parol Evidence Law

A

Nothing previous to the written contract will be used when determining disputes

58
Q

Doctrine of Waiver

A

A party, by her own actions, has voluntarily relinquished a known right.

59
Q

Doctrine of Estoppel

A

prevents a party from going back on their word to, for example, pay a claim. Works together with the Doctrine of Waiver

60
Q

Recission

A

OG Contract is deemed null from the beginning

61
Q

Reformation

A

change contract language to conform with what was originally intended in the contract

62
Q

Tort

A

When someone causes physical, emotional or financial harm to another

63
Q

Tortfeasor

A

The person who commits a tort

64
Q

Unintentional Tort

A

Involved Negligence

65
Q

Negligence Parts (4)

A

1) Duty is Owed
2) Duty was Breached
3) Actual Damages
4) Proximate Cause

66
Q

Proximate Cause

A

an uninterrupted sequence of events that brought about the damage of a negligent act

67
Q

Attractive Nuisance

A

refers to something about a property that is likely to attract and possibly injure children

68
Q

Negligence Per Se

A

Duty of care owed is determined by reference to a stature

69
Q

Absolute Liability (Strict Liability)

A

The Standard Imposed when a person is held responsible for damages, even when there has been no negligence

70
Q

Vicarious Liability

A

When someone is held liable for the actions of another (parent-child)

71
Q

Contributory Negligence

A

if neglegence on the part of the injured party contributes to the injury it absolves the other party of liability

72
Q

Comparative Negligence

A

has replaced Contributory negligence, in which is just reduces the defendants liability by the amount of fault thaey had

73
Q

Last Clear Chance

A

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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