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Licensing 101 > Unit 1 > Flashcards

Unit 1 Flashcards

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1
Q

INSURANCE

A

IS A CONTRACT THAT TRANSFERS THE RISK OF FINANCIAL LOSS FROM AN INDIVIDUAL OR BUSINESS TO AN INSURER. IN RETURN THE INSURER AGREES TO COVER THE INDIVIDUAL OR BUSINESS FOR CERTAIN LOSSES IF THEY OCCUR.

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2
Q

RISK

A

IS UNCERTAINTY ABOUT WHETHER A LOSS WILL OCCUR. IF A LOSS IS CERTAIN TO OCCUR, IT DOES NOT INVOLVE RISK. INSURANCE IS DESIGNED TO COVER ONLY LOSSES THAT INVOLVE RISK.

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3
Q

SPECULATIVE RISK

A

HAVE A POSSIBILITY OF A LOSS AND ALSO HOLD THE POSSIBILITY OF MAKING A GAIN. IE GAMBLING OR INVESTMENTS

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4
Q

PURE RISKS

A

ONLY INVOLVE THE POSSIBILITY OF EXPERIENCING A LOSS. IE CAR ACCIDENT

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5
Q

LOSS

A

IS A REDUCTION IN THE VALUE OF AN ASSET- TO DETERMINE THE AMOUNT OF A LOSS, THE VALUE OF THE ASSET IS MEASURED BEFORE AND AFTER THE LOSS.

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6
Q

EXPOSURE

A

IS THE RISK ASSUMED BY AN INSURER AND THE AMOUNT THAT THE INSURER IS RESPONSIBLE TO PAY OUT AT ANY GIVEN TIME. EXPOSURE IS EXPRESSED IN UNITS.

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7
Q

PERIL

A

IS A CAUSE OF LOSS. (FIRE, LIGHTNING, HAIL, ETC)

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8
Q

HAZARD

A

ANYTHING THAT INCREASES THE CHANCE THAT A LOSS WILL OCCUR. THEY DO NOT CAUSE THE LOSS, BUT THEY MAKE THEY LOSS MORE LIKELY.

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9
Q

PHYSICAL HAZARD

A

PHYSICALLY IDENTIFIABLE USING LAB EQUIPMENT THAT PRODUCES TANGIBLE EVIDENCE OF ITS EXISTENCE. IE: A HEART CONDITION

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10
Q

MORAL HAZARD

A

ARISE FROM AN INDIVIDUAL’S CHARACTER.

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11
Q

MORALE HAZARD

A

ARE A STATE OF MIND OR CARELESS ATTITUDE, LIKE LEAVING THE DOOR UNLOCKED BECAUSE YOU HAVE INSURANCE.

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12
Q

SHARING

A

TWO OR MORE INDIVIDUALS AGREE TO PAY A PORTION OF ANY LOSS INCURRED BY ANY MEMBER IN THE GROUP. STOCKHOLDERS IN A CORPORATION SHARE THE RISK OF PROFIT OR LOSS.

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13
Q

TRANSFER

A

THE INSURER AGREES TO PAY IF AN INDIVIDUAL OR BUSINESS HAS A LOSS

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14
Q

AVOIDANCE

A

ELIMINATING A PARTICULAR RISK BY NOT ENGAGING IN A CERTAIN ACTIVITY.

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15
Q

REDUCTION

A

LESSENING THE CHANCE A LOSS WILL OCCUR, OR LESSENING THE EXTENT OF A LOSS THAT DOES OCCUR. EXAMPLE: WEARING SEATBELTS

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16
Q

RETENTION

A

INDIVIDUAL WILL PAY FOR A LOSS IF IT OCCURS.

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17
Q

LAW OF LARGE NUMBERS

A

THE LARGER THE GROUP, THE MORE ACCURATELY LOSSES CAN BE PREDICITED

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18
Q

CALCULABLE

A

PREMUIMS MUST BE CALCULABLE BASED UPON PRIOR LOSS STATISTICS FOR THAT PARTICULAR RISK IN ORDER TO PREDICT FUTURE LOSSES.

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19
Q

AFFORDABLE

A

THE PREMIUM FOR TRANSFERRING THE RISK SHOULD BE AFFORDABLE TO THE AVERAGE CONSUMER

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20
Q

NON-CATASTROPHIC

A

INSURANCE CANNOT INSURE EVENTS THAT CAUSE WIDESPREAD LOSSES TO LARGE NUMBERS OF INSUREDS AT THE SAME TIME.

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21
Q

HOMOGENEOUS

A

THE INDIVIDUAL RISKS THAT THE INSURER COVERS MUST ALL BE SIMILAR, IN REGARD TO FACTORS THAT AFFECT THE CHANCE OF LOSS.

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22
Q

ACCIDENTAL

A

INSURANCE IS A METHOD OF HANDLING RISK. IF LOSS IS CERTAIN TO OCCUR THERE IS NO RISK.

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23
Q

MEASURABLE

A

IT MUST BE POSSIBLE TO ESTIMATE THE LOSS AS A DOLLAR AMOUNT.

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24
Q

ADVERSE SELECTION

A

IS THE TENDENCY FOR HIGHER RISK INDIVIDUALS TO GET AND KEEP INSURANCE MORE THAN INDIVIDUALS WHO REPRESENT AN AVERAGE LEVEL OF RISK. — THIS COULD CAUSE THE INSURANCE COMPANY TO EXPERIENCE MORE LOSSES THAN PREDICTED.

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25
Q

REINSURANCE

A

INSURANCE FOR INSURERS- TRANSFERS RISK FROM ONE INSURER TO ANOTHER INSURER. THE COMPANY REDUCING THE RISK IS CALLED THE CEDING INSURER, THE COMPANY ASSUMING THE RISK IS CALLED THE REINSURER.

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26
Q

FACULTATIVE REINSURANCE

A

WHEN THE REINSURER CONSIDERES EACH RISK BEFORE ALLOWING THE TRANSFER TO BE MADE FROM THE CEDING COMPANY.

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27
Q

TREATY REINSURANCE

A

WHEN THE REINSURER ACCEPTS ALL RISKS OF A CERTAIN TYPE FROM THE CEDING COMPANY.

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28
Q

STOCK INSURER

A

IS A BUSINESS FORMED AS A PUBLIC OR PRIVATE CORPORATION AND OWNED BY ITS STOCKHOLDERS, ALSO KNOWN AS SHAREHOLDERS. THE BOARD OF DIRECTORS OVERSEES THE OPERATION OF THE COMPANY. THE POLICIES ISSUED BY STOCK INSURERS ARE CALLED NON-PARTICIPATING OR NON-PAR POLICIES.

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29
Q

MUTUAL INSURER

A

OWNED BY POLICY HOLDERS. THEY ELECT A BOARD OF DIRECTORS THAT IN TURN APPOINTS THE OFFICERS WHO OPPERATE THE COMPANY. POLICIES ARE REFERRED TO AS PARTICIPATING POLICIES OR PAR

30
Q

FRATERNAL BENEFIT SOCIETIES

A

EXIST FOR THE BENEFIT OF ITS MEMBERS AND OFFER LIFE INSURANCE AS OF THE BENEFITS OF MEMBERSHIP. ALSO PROVIDE SOCIAL ACTIVITIES AND USUALLY ENGAGE IN CHARITABLE AND BENEVOLENT CAUSES.

31
Q

RECIPROCAL INSURER

A

UNINCORPORATED GROUPS OF PEOPLE THAT AGREE TO INSURE EACH OTHERS LOSSES UNDER A CONTRACT. ALSO KNOWN AS SUBSCRIBERS; RUN BY AIF.

32
Q

RISK RETENTION GROUP (RRG)

A

IS AN INSURER FORMED FOR THE SOLE PURPOSE OF PROVIDING LIABILITY INSURANCE TO ITS POLICYHOLDERS. – LIABILITY INSUARNCE COMPANY CREATED FOR POLICY HOLDERS FROM THE SAME INDUSTRY . EXAMPLE CAR DEALERS ONLY CAR DEALERS CAN BE POLICY HOLDERS

33
Q

LLYODS ASSOCIATION

A

PROVIDE A HUB FOR THE EXCHANGE OF INFORMATION AMONG MEMBER UNDERWRITERS WHO ACTUALLY TRANSACT THE BUSINESS OF INSURANCE.

34
Q

SELF INSURANCE

A

IS A MEANS OF RETAINING RATHER THAN TRANSFERRING RISK. BUSINESSES MAY DEVELOP A FORMAL PROGRAM FOR SELF INSURING ALL OR A PORTION OF CERTAIN RISKS.

35
Q

SELF INSURANCE

A

IS A MEANS OF RETAINING RATHER THAN TRANSFERRING RISK. BUSINESSES MAY DEVELOP A FORMAL PROGRAM FOR SELF INSURING ALL OR A PORTION OF CERTAIN RISKS.

36
Q

RESIDUAL MARKET

A

INSURANCE FROM THE STATE OR FEDERAL GOVERNMENT

37
Q

DOMESTIC INSURER

A

INSURER IN ITS HOME STATE

38
Q

FOREIGN INSURER

A

AND INSURER THAT WRITES BUSINESS IN STATES OTHER THAN WHERE IT IS DOMICILED

39
Q

ALIEN INSURER

A

AN INSURER FORMED UNDER THE LAWS OF ANY COUNTRY OTHER THAN THE US AND ITS TERRITORIES

40
Q

CERTIFICATE OF AUTHORITY

A

STATE LICENSE FOR AN INSURANCE COMPANY

41
Q

SURLUS LINES INSURER

A

WHEN AN INDIVIDUAL OR BUSINESS WILL HAVE AN EXCEPTIONALLY LARGE OR SPECIALIZED RISK THAT NO AUTHORIZED INSURER CAN OR WILL COVER. EXAMPLES; GAMING, CASINOS, ENTERTAINMENT, MINING, SKYSCRAPERS

42
Q

INDEPENDENT INSRUANCE AGENT

A

SELL THE INSURANCE PRODUCTS OF SEVERAL COMPANIES AND WORK FOR THEMSELVES OR OTHER AGENTS.

43
Q

EXCLUSIVE OR CAPTIVE AGENTS

A

REPRESENT ONLY ONE COMPANY

44
Q

GENERAL AGENTS (GAs) OR MANAGING GENERAL AGENTS (MGAs)

A

HIRE TRAIN AND SUPERVISE OTHER AGENTS WITHIN A SPECIFIC GEOGRAPHICAL AREA.

45
Q

DIRECT WRITING COMPANIES

A

USUALLY PAY SALARIES TO EMPLOYEES WHOSE JOB FUNCTION IS TO SELL INSURANCE PRODUCTS FROM A COMPANY OFFICE.

46
Q

DIRECT RESPONSE

A

THERE IS NO PRODUCER/AGENT. POLICIES ARE SOLD DIRECTLY TO THE PUBLIC BY THE INSURER.

47
Q

AGENCY

A

IS A RELATIONSHIP IN WHICH ONE PERSON IS AUTHORIZED TO REPRESENT AND ACT FOR ANOTHER PERSON OR FOR A CORPORATION.

48
Q

EXPRESS AUTHORITY

A

IS THE AUTHORITY MADE EXPLICIT IN A PRODUCERS WRITTEN AGENCY AGREEMENT WITH THE INSURER.

49
Q

IMPLIED AUTHORITY

A

IS NOT WRITTEN IN THE AGENCY CONTRACT, BUT IT IS ASSUMED TO BE GRANTED TO AN AGENT IN ACCORDANCE WITH GENERAL BUSINESS PRACTICES.

50
Q

APPARENT AUTHORITY

A

IS AUTHORITY THAT OTHER BELIEVE THE AGENT HAS.

51
Q

COMMINGLING

A

MIXING PERSONAL FUNDS WITH THE INSURED’S OR INSURER’S FUNDS

52
Q

COMMINGLING

A

MIXING PERSONAL FUNDS WITH THE INSURED’S OR INSURER’S FUNDS

53
Q

SUITABILITY CONSIDERATIONS

A

AN AGENT HAS THE RESPONSIBILITY TO MAKE PURCHASE RECOMMENDATIONS THAT ARE APPROPRIATE IN LIGHT OF A CLIENT’S PARTICULAR NEEDS OBJECTIVES AND CIRCUMSTANCES.

54
Q

OFFER

A

IS A PROPOSAL MADE BY ONE OF THE POTENTIAL PARTIES TO THE CONTRACT.

55
Q

ACCEPTANCE

A

MUST BE UNCONDITIONAL AND UNQUALIFIED

56
Q

CONSIDERATION

A

REFERS TO AN EXCHANGE OF VALUE —THINK $$$$$$

57
Q

ADHESION

A

PROVISIONS ARE WRITTEN BY ONLY ONE PARTY TO THE CONTRACT, AND THE OTHER PARTY IS REQUIRED TO ADHERE—POLICY WRITTEN BY THE INSURANCE COMPANY— IF THE AMBIGUOUS (NOT CLEAR) COURT WILL TAKE THE SIDE OF THE INSURED

58
Q

ALEATORY

A

VALUE RECEIVED FROM THE CONTRACT BY EACH PARTY MAY BE UNEQUAL

59
Q

UTMOST GOOD FAITH

A

THE INSURED AND THE INSURANCE COMPANY HAVE THE RIGHT TO EXPECT HONESTY FROM EACH OTHER.

60
Q

UNILATERAL

A

ONSIDED- ONLY ONE PARTY IS LEGALLY BOUND TO PERFORM UNDER THE CONTRACT.

61
Q

PERSONAL CONTRACT

A

A CONTRACT MADE WITH A PARTICULAR PERSON AND NOONE ELSE. THE CONTRACT CANNOT BE TRANSFERRED TO A DIFFERENT PERSON. EXAMPLE: HOMEOWNERS AND AUTO

62
Q

CONDITIONAL POLICIES

A

ARE CONTRACTS THAT REQUIRE CERTAIN CONDITIONS TO BE FULFILLED IN ORDER FOR PERFORMANCE UNDER THE CONTRACT TO BE ENFORCED. IE A DEATH CERTIFICATE MAY NEED TO BE SUBMITTED TO SHOW LOSS HAS OCCURRED FOR LIFE INSURANCE

63
Q

IDEMNITY POLICIES

A

THE CONTRACT IS INTENDED TO RESTORE THE INSURED TO THE FINANCIAL STATE HE OR SHE ENJOYED PRIOR TO THE OCCURENCE OF A LOSS- NO MORE, NO LESS.—–> THE PRINCIPLE OF RESTORING AN INSURED TO HIS OR HER PRE-LOSS FINANCIAL STATE IS KNOWN AS IDEMNIFICATION

64
Q

REPRESENTATION

A

IS A STATEMENT THAT IS BELIEVED TO BE TRUE TO THE BEST OF ONES KNOWLEDGE AT THE TIME

65
Q

MISREPRESENTATION

A

IS A REPRESENTATION THAT IS ACTUALLY FALSE.

66
Q

MATERIAL REPRESENTATION

A

INFORMATION GIVEN THAT IS NOT TRUE. THIS INFORMATION DOES AFFECT THE INSURERS DECISION.

67
Q

WARRANTY

A

A STATEMENT THAT IS GUARANTEED TO BE TRUE- IF A WARRANTY IS NOT KEPT, THERE IS A BREECH OF WARRANTY THAT VOIDS THE CONTRACT.

68
Q

CONCEALMENT

A

THE INTENTIONAL FAILURE TO DISCLOSE KNOWN FACTS

69
Q

FRAUD

A 
AN INTENTIONAL ACT DESIGNED TO DECEIVE AND INDUCE ANOTHER PARTY TO PART WITH SOMETHING OF VALUE. 
SUBJECT TO 
-A FINE
-IMPRISONMENT FOR UP TO 10/15 YEARS 
-OR BOTH
70
Q

WAIVER

A

THE INTENTIONAL AND VOLUNTARY GIVING UP OF A KNOWN RIGHT

71
Q

ESTOPPEL

A

A LEGAL DOCTRINE THAT PREVENTS A PARTY FROM DENYING AN ACTION IF IT HAD BEEN ACCEPTED PREVIOUSLY.

Licensing 101 (27 decks)

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