Things you should know Flashcards
There are six unique characteristics of insurance contracts:
- Personal Contract
- Contract of Adhesion
- Utmost Good Faith Contract
- Aleatory Contract
- Unilateral Contract
- Conditional Contract
There are six unique characteristics of insurance contracts:
- Personal Contract
● It protects the policyholder from financial losses
● It does not protect property from becoming damaged
● Coverage follows the person, not the property
There are six unique characteristics of insurance contracts:
- Contract of Adhesion
● The insurer is responsible for the terms of the contract
● The insured has no say in the wording
● Courts favor the insured in the event of an ambiguity
There are six unique characteristics of insurance contracts:
- Utmost Good Faith Contract
● Applicants are expected to be completely honest about the risk to the insurer
● The insurer must rely on applicants not to conceal or misrepresent pertinent
fact
There are six unique characteristics of insurance contracts:
- Aleatory Contract
depending on an unknown future event
● Neither party can know future losses
● Insurer only has to pay if and when covered losses occur
● Policyholders could pay more in premiums than they ever get for claims, or insurer could pay more in claims than it receives
There are six unique characteristics of insurance contracts:
- Unilateral Contract
● The insurer has an obligation to pay for covered losses
● The insured has no obligation (he can stop paying premiums)
There are six unique characteristics of insurance contracts:
- Conditional Contract
● The insurer only has to perform if certain conditions are met (such as a
covered loss)
● The insured must fulfill all conditions listed in the policy
Risk: two meanings
- The potential for financial loss; being exposed or open to damage
- An insured item
Speculative Risk:
● Undertaken with no certainty of either gain or loss
● Made knowingly, by conscious choice
● Cannot be insured
Pure Risk:
● Risk with no chance of gain
● Only two possible results: 1) loss or 2) no loss
● No chance of gain
● Can be insured
Hazard vs. Exposure:
● Exposure is the possibility of loss
● Hazards are things that increase that possibility
● More Hazards = Higher Exposure
Principle of Indemnity
Restoration to previous financial condition; no more, no less
Insurer Classifications (4)
- Government
- stock
- private
- Mutual
Insurer Classifications: Government
mandatory, run by gov, suited to needs of general public
Insurer Classifications:
Private
offer insurance products based on customer preferences
Insurer Classifications:
Stock
publicly traded; stockholders participate in dividends (non-participating)
Insurer Classifications:
Mutual
no stockholders; policyholders participate in dividends (participating)
Other Private Insurers (4):
- reciprocal insurer
- re-insurer
- fraternal benefit society
- risk retention group
Other Private Insurers (4): reciprocal insurer
group of people or organizations that insure each other
Other Private Insurers (4): re-insurer
insurance for insurers
Other Private Insurers (4): fraternal benefit society
non-profit, mutual aid organization that will usually offer
insurance benefits to members and their families
Other Private Insurers (4): risk retention group
an alternative to traditional insurance, owned by its members;
provides liability coverage for multiple companies in the same business.
Basic(SFP)
Coverage
-Fire
-Lightning
Extended Coverage
Fire & Lightning+
-Windstorm
-Hail
-Explosion
-Riot or civil commotion
-Vehicles
-Aircraft
-Volcanic eruption
-Smoke
