Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Life & Health Insurance License Exam Minnesota > Unit 1: General Insurance > Flashcards

Unit 1: General Insurance Flashcards

1
Q

Insurance

A

contract that transfers the risk of financial loss from an individual or business to an insurer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Risk

A

The uncertainty or chance of a loss occurring.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Speculative Risk

A

Chance of loss or gain

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Pure Risk

A

only involve the possibility of experiencing a loss. Can be covered by insurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Loss

A

reduction in the value of an asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Loss Reduction

A

value of an asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Exposure

A

risks for which the insurance company would be liable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Peril

A

cause of loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Hazard

A

anything that increases the likelihood of loss will occur

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Physical Hazard

A

an increase in the chance of loss that can be seen or determined. Ex: wet floor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Moral Hazard

A

an increase in the chance of loss that intentionally causes a loss. Ex: dishonesty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Morale Hazard

A

an increase in the chance of loss that is caused by carelessness. Ex: leaving door unlocked

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Handling Risk acronym

A

STARR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Handling Risk; Sharing

A

two or more individuals agree to pay a portion of any loss incurred by any member in the group

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Handling Risk; Transfer

A

Insurer agrees to pay if an individual or business has a loss. The individual or business has a cost in the form of a premium payment. This handling of risk is what happens with insurance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Handling Risk; Avoidance

A

eliminating a particular risk by not engaging in a certain activity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Handling Risk; Reduction

A

lessening the chance that a loss will occur or lessening the extent of a loss that does occur

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Handling Risk; Retention

A

individual will pay for the loss if it occurs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Law of Large Numbers

A

the larger the number of individuals that are randomly drawn from a population, the more representative the resulting group will be of the entire population

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Insurable Risk; Calculable

A

Premiums must be calculable based upon prior loss statistics for that particular risk in order to predict future loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Insurable Risk; Affordable

A

The premium for transferring the risk should be affordable for the average consumer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Insurable Risk; Non-Catastropic

A

Insurance cannot insure events that cause widespread losses to a large numbers of insureds at the same time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Insurable Risk; Homogeneous

A

The individual risks that the insurance covers must all be similar in regard to factors that affect the chance of loss.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Insurable Risk; Accidental

A

Insurance is a method of handling risk-if a loss is certain to occur there is no risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Insurable Risk; Measurable

A

It must be possible to estimate the loss as a dollar amount.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Insurable Risk acronym

A

CANHAM

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Adverse Selection

A

The tendency of risks with higher probability of loss to purchase and maintain insurance more often than the risks who present lower probability.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Reinsurance

A

A form of insurance whereby one insurance company (the reinsurer) paying another insurance company (the ceding company) to take some of the company’s risk of catastrophic loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Facultative Reinsurance

A

Reinsurance of individual loss exposures in which the primary insurer chooses which loss exposures to submit to the reinsurer, and the reinsurer can accept or reject any loss exposures submitted.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Treaty Reinsurance

A

the reinsurer accepts all risks of a certain type from the ceding company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Stock Insurers

A
  • business formed as a public or private corporation and owned by it’s shareholders
  • board of directors chosen by shareholders
  • IF the company makes money, a taxable divined from the profits may be paid to the shareholders
  • issues non-par policies
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Mutual Insurers

A
  • Owned by the Policyholders
  • Board of directors chosen by the Policyholders
  • IF the company is profitable excess premiums can be returned to its policyholders non taxable dividend
  • Issues par policies
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Fraternal Benefit Societies

A
  • Provides insurance and other benefits
  • Must be a member of the society to get benefits
  • Policies are called certificates (which can be accessed for additional charges
  • Policies are referred to as open contract
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Reciprocal insurers

A
  • unincorporated
  • people are called subscribers
  • Members are assessed the amount they have to pay IF a loss to any member of the group occurs
  • Run by an attorney-in-fact
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Lloyd’s Associations

A
  • insurance provided by individual underwriters, not insurance companies
  • may insure unusual risks
  • insurance may need to be sold by surplus lines intermediaries
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Self Insurers

A
  • a business pays its own claims

- they set aside savings to cover losses in advance and may even have a claim system like an insurance company

37
Q

Residual Market

A

Insurance from the state of federal government

38
Q

Domestic Insurance Company

A

the state where a company is incorporated

39
Q

Foreign Insurance Company

A

any state or US territory other than the state where it’s incorporated

40
Q

Alien Insurance Company

A

Incorporated in any country other than the USA

41
Q

Certificate of Authority

A

State license for an insurance company

42
Q

Admitted, authorized, or approved

A

State requires the insurance company to have a certificate of authority

43
Q

Non-admitted, unauthorized, non approved

A

insurance company not required to have a certificate of authority from the state (surplus)

44
Q

Surplus Line Insurers

A
  • insurance sold by unauthorized/non-admitted insurers-if on the states approved list of surplus insurers
  • can only be sold to certain high risk insureds
  • can’t be sold just for a cheaper rather than licensed/admitted insurance
45
Q

Financial Strength Rating

A

a report card of the company

-each firm uses a different rating scale and has different criteria on which companies are evaluated

46
Q

A++

A

superior

AM Best

47
Q

AAA

A

exceptionally strong
Fitch
Standard and Poor’s

48
Q

Aaa

A

Exceptional

Moody’s

49
Q

Independent insurance agents

A

sales are made by agents/producers who represent more than one company

50
Q

Exclusive or captive agents

A

Sell for one company

51
Q

General Agents (GA) or Managing General Agents (MGA)

A

recruits other agents in a certain area who actually sell the insurance to the customer

52
Q

Direct-writing companies

A

the company sells the insurance through salaried employees of the company

53
Q

direct response

A

there is no producer/agent involved

54
Q

agency

A

relationship in which one person is authorized to represent and act for another person for a corporation.

55
Q

agent

A

person authorized to act on behalf of another

56
Q

principal

A

person on whose behalf the agent acts

57
Q

3 types of agent authority

A

express, implied, apparent

58
Q

express authority

A

contract authority

-what the agents written contract with the company states

59
Q

implied authority

A

actions and observable authority

-not written but are the actions agents normally do to sell insurance

60
Q

apparent authority

A

what the person sees type of authority

-actions the agent does that a reasonable person would assume as authority based on the agents’ actions and statements

61
Q

fiduciary

A

a person in a position of financial trust

has an obligation to act in the best interest of the insured.

62
Q

commingling

A

mixing personal funds with the insured’s or insurer’s funds

63
Q

suitability considerations

A

an agent has a responsibility to make purchase recommendations that are appropriate in light of a client’s particular needs, objectives, and circumstances.

64
Q

Fiduciary Trust

A
  • promptly send premiums to insurer
  • knowledge of products
  • comply with laws and regulations
  • no commingling
65
Q

Elements of a legal contract acronym

A

CLOAC

66
Q

Consideration, Legal Purposes, Offer, Acceptance, Competent parties

A

to forma a valid contract these five elements must be present

67
Q

offer

A

proposal made by one of the potential parties to the contract

there is no offer if the applicant sends the application to the insurance company without payment of the premium

68
Q

acceptance of an offer

A

must be unconditional and unqualified

69
Q

legal contact - consideration

A

giving something of value

  • insured gives information and money (premium) to be the insurance company
  • insurance company gives a promise to pay (policy) to the insured
70
Q

legal contact - legal purpose

A

risk transfer doesn’t violate the law

71
Q

legal contact - offer (made my insured)

A

insured submits application and first month’s premium to insurer

72
Q

legal contact - counteroffer (made by insurer)

A

agrees to issue policy but with higher premium or restrictions/exclusions

insured either accepts the conditions or withdraws her application

73
Q

legal contact - acceptance

A

insurer accepts risk as presented

74
Q

legal contact - competent parties

A

insured age is 18+ and sane

75
Q

adhesion

A

policy written by the insurance company

if ambiguous (not clear) court will take the side of the insured

76
Q

Aleatory

A

not equal value –small premium for a large amount of coverage

77
Q

utmost good faith

A

the insured and insurance company have a right to expect honesty from each other

78
Q

unilateral

A

ONE SIDED CONTRACTS

insurance company PROMISES to pay for a covered loss

insured does NOT promise to pay the premium

79
Q

personal contract

A

auto, homeowners insurance

not life and health insurance. However, assignment can take place with life insurance policies pledged as a security for a bank loan

cannot be assigned to someone else

80
Q

Conditional contract

A

insured must pay the premium for coverage and file a claim if a loss occurs

81
Q

indemnity

A

make whole

restore to the insured’s original pre-loss condition, no better, no worse

82
Q

representation

A

believed to be true

83
Q

misrepresentation

A

information given that is not true

however, the correct information would not affect the insurance company’s decision.

ex: Insured mistakenly gives one number of their address wrong

84
Q

material misrepresentation

A

information given that is not true. This information DOES affect the insurer’s decision

ex: insured has a conviction for driving while intoxicated

85
Q

warranty

A

a promise

  • always made by the insurance company-if promise to pay is broken-company could be sued by the insured
  • may be made by the insured-if promise is broken- insured may have no coverage
  • guaranteed to be true
86
Q

concealment

A

failure to disclose

if intentional, and the information is material (important), coverage could be voided
if not intentional, coverage cannot be voided

87
Q

fraud

A

intentional act to cheat another and voids policy

subject to:

  • a fine
  • imprisonment for up to 10-15 years
  • both

embezzlement included

88
Q

waiver

A

voluntarily giving up a right

89
Q

estoppel

A

actions reasonably relied on by one party can’t be denied by the party that accepted same previously

Life & Health Insurance License Exam Minnesota (21 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions