Study 2 Key Terms

Question 1

Define indemnify

Answer 1

To provide compensation for loss or expense incurred

Question 2

Define contract

Answer 2

An agreement or promise btwn 2 or more persons that is intended to be legally enforceable and is constituted by the acceptance by one party of an offer made to him by another party, to do or to abstain from doing a specific act. The offer and acceptance may either be expressed or be inferred through the conduct of the parties.

Question 3

Define agent

Answer 3

A person who is employed or authorized on behalf of another. Agents can be independent or direct writers. An independent agent is one who contracts w/at least 2 or more insurance companies to sell their insurance policies to the public and is paid a commission based on the % of each premium paid. This includes a fee for each policy serviced. A direct agent represents only one company and is also paid on a commission basis similar to the independent agent.

Question 4

Define broker

Answer 4

A licensed independent person or firm who acts on behalf of an insured in placing business w/insurance companies.

Question 5

Define adjuster

Answer 5

One who investigates insurance claims, makes recommendations regarding the payment of benefits from insurance policies, and negotiates payments and settlements.

Question 6

Define unearned preniums

Answer 6

The part of the premium that has not been used or earned; premium representing the expired portion of a policy.

Question 7

Define earned premium

Answer 7

(1) That portion of premium earned or charged for the period of time a policy remained effective. E.g. an annual policy paid for in advance would be 1/12 “earned at the end of the 1st full month of its term.
(2) An amt calculated by taking the earned premium reserve at the beginning of the period plus the premium written during the period, less the unearned premium reserve at the end of the period
(3) Premium actually exposed to loss

Question 8

Define unearned premium reserve

Answer 8

A reserve fund of an insurance company or reinsurance company, representing the unearned preniums

Question 9

Define property insurance

Answer 9

1st-party insurance that indemnifies the owner or user of property for its loss, or the loss of its income-producing ability, when the loss or damage is caused by a covered peril, such as fire or explosion

Question 10

Define casualty insurance

Answer 10

Loosely used to describe an area of insurance not particularly or directly concerned w/life insurance, fire insurance, or automobile insurance. Most frequently refers to liability, burglary, and plate glass insurance but may include fidelity and surety.