Brainscape's Knowledge GenomeTM

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


See full index

Life and Health Insurance > Unit 1 General Insurance > Flashcards

Unit 1 General Insurance Flashcards

1
Q

Insurance

A

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 about whether a loss will occur

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

2 types of risk

A

speculative and pure

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

speculative risk

A

a possibility of a loss or gain. not insurable

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

pure risk

A

only the possibility or experiencing a loss. insurable

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

loss

A

a reduction in the value of an asset

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

total amount of loss

A

value before loss - value after loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
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
9
Q

peril

A

cause of loss. examples include accidents, sickness, lightning, fire, etc.

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

hazard

A

anything that increases the chance a loss will occur. does not cause a loss, but makes them more likely to occur

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

3 types of hazards

A

-physical hazard
-moral hazard
-morale hazard

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

physical hazard

A

a type of hazard with physically identifiable factors that increase the chance of loss (heart condition, wet floor)

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

moral hazard

A

a type of hazard due to an individual’s character (dishonesty, thief)

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

morale hazard

A

a type of hazard due to a state of mind or careless attitude (leaving the door unlocked)

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

STARR

A

methods of handling risk
-Sharing
-Transfer
-Avoidance
-Retention
-Reduction

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

Sharing (STARR)

A

a method for handling risk in which 2+ 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
17
Q

Transfer (STARR)

A

a method for handling risk which occurs with insurance. The insurer agrees to pay if an individual or business has a loss and the cost is in the form of a premium payment

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

Avoidance (STARR)

A

a method for handling risk which eliminates 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
19
Q

Reduction (STARR)

A

a method for handling risk which lessens the chance a loss will occur or lessening the extent of a loss (wearing seatbelts)

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

Retention (STARR)

A

a method for handling risk in which the individual will pay for the loss if it occurs

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

law of large numbers

A

the larger the group, the more accurate losses can be predicted

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

CANHAM

A

elements of insurable risk
-Calculable
-Affordable
-Non-Catastrophic
-Homogeneous
-Accidental
-Measurable

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

Calculable (CANHAM)

A

a characteristic of insurable risk. states that premiums must be determined based on prior statistics for that particular risk to predict future losses

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

Affordable (CANHAM)

A

a characteristic of insurable risk. states the premium for transferring risk should have costs achievable for the average customer

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

Non-Catastrophic (CANHAM)

A

a characteristic of insurable risk. states insurance cannot insure events that cause wide-spread losses to large numbers

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

Homogeneous (CANHAM)

A

a characteristic of insurable risk. states the individual risks that the insurer 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
27
Q

Accidental (CANHAM)

A

a characteristic of insurable risk. states insurance must be a method of handling risk. if loss is certain to occur, there is no risk

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

Measurable (CANHAM)

A

a characteristic of insurable risk. states 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
29
Q

adverse selection

A

the tendency for higher-risk individuals to get and keep insurance more than individuals at an average level of risk

risks that have a greater than average chance of loss

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

underwriting

A

the process of insurers making an extensive evaluation of information related to a particular risk

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

reinsurance

A

an insurance company (the ceding company) paying another insurance company (reinsurer) 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
32
Q

2 types of reinsurance

A

-facultative
-treaty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

facultative reinsurance

A

the reinsurer evaluates each risk before allowing the transfer

34
Q

treaty reinsurance

A

the reinsurer accepts the transfer according to an agreement (called a treaty)

35
Q

6 types of insurers

A

-stock insurers
-mutual insurers
-fraternal benefit societies
-reciprocal insurers
-Lloyd’s associations
-self-insurance

36
Q

stock insurers

A

a type of insurer that is owned by stockholders/ shareholders.
-has a board of directors chosen by the stockholders/ shareholders
-if the company makes money, a taxable dividend from the profits may be paid to the stockholders/ shareholders
-issues non-par policies

37
Q

mutual insurers

A

a type of insurer that is owned by the policyholders (customers)
-board of directors chosen by the policyholders
-if the company is profitable, excess premiums can be returned to its policyholders-nontaxable dividend
-issues participating (par) policies

38
Q

fraternal benefit societies

A

a type of insurer that provides insurance and other benefits
-must be a member of the society to get the benefits
-policies are called certificates
-assessable (open contract) meaning may need to pay additional charges if premiums are not sufficient

39
Q

reciprocal insurers

A

a type of insurer that is unincorporated
-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

40
Q

Lloyd’s associations

A

a type of insurer that provides insurance from individual underwriters, not insurance companies. may insure unusual risks

41
Q

self-insurers

A

a type of insurer where a business pays its own claims

42
Q

residual market

A

insurance from the state or federal government

43
Q

domestic insurer

A

the state in which the insurer was formed is also the state in which it does business

44
Q

foreign insurer

A

the insurer does business in a different state than in which it was formed

45
Q

alien insurer

A

the insurer does business in a different country than in which it was formed (outside of US and it’s territories)

46
Q

certificate of authority

A

state license for an insurance company

47
Q

surplus lines

A

exceptionally large or specialized risk insurance that may be obtained from an unauthorized/ non-admitted insurer

48
Q

financial strength rating

A

a report card of the company. most insurance companies use AM Best

49
Q

4 types of agents

A

-independent
-exclusive or captive
-general or managing general
-direct-writing companies

50
Q

independent insurance agent

A

type of agent. sales are made by agent/ producer who represent more than one company. they own the renewals of the policies they sell

51
Q

exclusive or captive agent

A

type of agent that sells insurance for one company. the insurance company owns the renewals of the policies sold on their behalf

52
Q

general agents (GA) or managing general agents (MGA)

A

type of agent who recruits other agents in a certain area who actually sell the insurance to the customer. they do not sell insurance

53
Q

direct-writing companies

A

type of agent that uses direct response marketing. the company sells the insurance through salaried employees of the company

54
Q

direct response marketing

A

no producer/ agent involved. policies are sold directly to the public by the insurer by using advertisements

55
Q

agency

A

the insurance agent acts on behalf of the principal (insurance company)

56
Q

law of agency

A

contacts made by the agent are considered to be contracts of the principal

57
Q

3 types of agent authority

A

-express
-implied
-apparent

58
Q

express agent authority

A

what the agents written contract with the company says

59
Q

implied agent authority

A

not written, but the things agents normally do to sell insurance (taking applications)

60
Q

apparent agent authority

A

things the agent does that a reasonable person would assume as authority, based on the agents’ actions and statements (wearing branded clothing)

61
Q

fiduciary

A

a person in position of financial trust. must have knowledge of products and comply with laws and regulations

62
Q

commingling

A

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

63
Q

suitability considerations

A

the responsibility of an agent to make appropriate purchase recommendations

64
Q

CLOAC

A

elements of a legal contract
-consideration
-legal purpose
-offer
-acceptance (offer and acceptance can be combined to agreement)
-competent parties (age 18+)

65
Q

adhesion

A

a characteristic of an insurance contract. the policy is written by the insurance company and if something is ambiguous (not clear) a court will take the side of the insured

66
Q

aletory

A

a characteristic of an insurance contract. meaning not of equal value. a small premium for a large amount of coverage

67
Q

utmost good faith

A

a characteristic of an insurance contract. the insured and insurance company have a reasonable expectation to expect honesty

68
Q

unilateral

A

a characteristic of an insured contact. the contract is one-sided because only one party is legally bound to perform under the contract
-insurance company promises to pay for a covered loss
-insured does not promise to pay the premium

69
Q

personal

A

a characteristic of an insured contract. the contact between the insurance company and the insured and cannot be changed to someone else

70
Q

conditional

A

a characteristic of an insured contract. the insured must pay the premium for coverage and file a claim if a loss occurs

71
Q

indemnity

A

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

72
Q

representation

A

a statement that is believed to be true

73
Q

misrepresentation

A

information given that is not true- however, the correct information would not affect the insurance company’s decision. example- providing an incorrect middle initial

74
Q

material misrepresentation

A

information given that is not true and does affect the insurer’s decision. example- stating a clean driving history, when you have tickets

75
Q

warranty

A

promise - a statement that is guaranteed to be true. if this is broken, the contract is void

76
Q

concealment

A

failure to disclose known facts. if intentional, coverage can be voided

77
Q

fraud

A

intentional act designed to deceive and induce another party. voids the policy

78
Q

fraud/ false statements

A

may include a fine and/ or imprisonment (10-15 years). includes embezzelment

79
Q

waiver

A

intentional voluntary giving up of a known right

80
Q

estoppel

A

legal doctrine that prevents a party from denying an action if it had been accepted previously (late payments)

Life and Health Insurance (22 decks)

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