Unit 1 introduction to insurance principles and concepts Flashcards
Risk is the…..
Possibility that loss may occur:
Life insurance protects against the death of a loved one , or business associate.
Life Insurance protects against…
Loss-
a loss is the reduction of the quantity or value of something. life insurance is most commonly used to protect family and business from any financial effects due to premature death. In the event of the tragedy, life insurance proceeds can help pay the bills, continue the family business, finance future needs like education and protect spouses retirement plans.
There are two kinds of risk what are they?
Pure and speculative.
Pure risk has a chance of…..? Speculative risk has a chance of…..?
loss only; loss or gain
Their are five ways to handle risk, what are they?
Sharing; transfer; avoidance; reduction; retention
To be insurable, the risk must be……..(5 facts)
...be a large number of similar risk to pool and share (statistically predictable). ...be measurable. ...be uncertain. ...must cause economic hardship. ... Cannot be catastrophic.
Terms:
Loss
A reduction in the quantity or value of something.
Term:
Risk
The possibility that a loss might occur.
Terms:
The immediate event causing a loss.
Peril
Terms:
The factor that gives rise to a peril.
Hazard
Explain the law of large numbers.
The larger the number of similar risks, the more accurate the prediction of future loss. This is important because insurance rates and premiums are based on these numbers.
The most common insurers are…
Stock & Mutual
Stock insurers (companies) are made up of ___ ___ who have ___ in the company and receive ___ based on company ___.
Stock holders; shares; dividends; profits
The dividends received from stock insurers are…..
Taxable
Mutual insurers (companies) are owned by___and___received from___insurers are based on a return of___premium and are therefore not___.
Policyholders; dividends; mutual; excess; taxable
Insurers are also classified by their place of origin which means where they conduct business. There are three types what are they?
Domestic; foreign; alien
Terms:
A chartered or incorporated within the state is a ___ insurer.
Domestic
Terms:
Chartered in another state, US territory, or District of Columbia is a___insurer.
Foreign
An___ insurer is charted outside of the US, US territories or district of Columbia.
Alien
Individuals who solicit applications for life insurance are___or___.
Producers; agents
Producers or agents represent who?
The insurer.
Producers or agents authority can be___,___or___authority.
expressed; implied; apparent
A contract is a legally binding agreement between two or more legally competent parties. To form a valid contract, four elements are necessary what are they?
agreement; consideration; competent parties; legal purpose
_______is an offer, followed by acceptance. The application and initial premium, if collected from the proposed insured is the offer and the insurance company from approving the application and issuing a policy is the acceptance.
Agreement (offer and acceptance)
_____ Is the exchange of something of value for a service, such as the exchange of premiums for insurance coverage.
Consideration
Who have legal capacity to enter into a contract. Parties to a contract must be of legal age, saying, sober of sound mind.
Competent parties
The purpose of an insurance contract must be legal this is called what?
Legal purpose
Terms:
A statement guaranteed to be true, the absolute truth.
Warranties
Terms:
A statement believed to be true to the best of one’s knowledge.
Representations
A false statement is called?
Misrepresentation
Terms:
Concealment is…..
Failure to disclose a known fact.
Terms:
intentional act designed to deceive and induce (a life for financial gain).
Fraud
Term:
To intentionally give up a known fact.
Waiver
