Study 4 Key Terms Flashcards
Define independent agency system
A system of marketing insurance through independent contractors (agents) who sell insurance on a commission or fee basis with one or more insurers.
Define independent brokerage system
A system in which independent insurance professionals, licensed as insurance brokers, are contracted to sell insurance on behalf of an insurer or multiple insurers.
Define exclusive agency system
A system of marketing insurance through agents who represent only one company or a group of companies under similar management.
Define direct writer
Insurance company selling directly to the public and not through independent agents or brokers.
Define general agent
One who is appointed by a company in a specific territory. He or she is usually given an exclusive territory and may appoint sub-agents in that territory.
Define law of agency
Applies when an agent is authorized to do something on behalf of a principal. The principal is the person or entity for whom the agent or broker acts.
Define express contract
One in which the terms of the arrangement have been specifically stated and agreed to by both parties either orally or in writing.
Define implied contract
One in which the parties have acted in such a way that it is understood that a principal– agent relationship exists, even though no expressed statement may have been made by either.
Define binding authority
The capacity to confirm to people who have submitted insurance applications that they have insurance coverage. It gives agents and brokers the power to make decisions that enter insurers into contracts of insurance.
Define interim receipt
A temporary measure to insure in an agreed manner while waiting for the completed policy to be issued. Also known as a “binder.”
Define binder
A written or oral agreement given by an insurer to insure a risk, pending the issuance of a formal policy. A binder is deemed to be the policy and must be cancelled in the same manner.
Define cover note
A document with insurance, or the insurance protection provided.
Define trust
The transference of property to an individual or a corporation, known as the “trustee,” who holds the property for the benefit of an individual, known as the “beneficiary.”
Define trust account
An account managed by an individual or a corporation for the benefit of another, known as the “beneficiary.”
Define operating account
An account used to hold funds for the day-to-day operation of a business.
