Term
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Definition
| risk that involves the possibility of gain and/or loss |
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Term
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Definition
| involves only the possibility of loss |
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Term
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Definition
| the larger the number of individual risks that are combined into a group, the more certainty there is as to the amount of loss incurred in any given period. |
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Term
| speculative risk and pure risk - which one is insurable? |
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Definition
| Only pure risk is insurable |
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Term
| 6 elements of insurable risk |
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Definition
1. loss must be due to chance
2. lost must be definite and measurable
3. loss must be predictable
4. loss cannot be catastrophic
5. loss exposures must be large
6. loss exposures must be randomly selected |
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Term
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Definition
| the SOURCE of the risk - any factor that gives rise to a peril |
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Term
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Definition
| the immediate event that causes the risk (fire, car accident) |
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Term
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Definition
| spreading the risk over a large group - transferring the risk from the individual to the group |
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Term
| 4 methods of handling risk |
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Definition
1. Avoidance
2. Reduction
3. Retention
4. Transference |
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Term
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Definition
| simply avoiding as many risks as possible |
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Term
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Definition
| reducing the possibility of loss (smoke alarm reduces the risk of loss from fire) |
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Term
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Definition
| accepting the risk and confronting it when it occurs (self insuring) |
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Term
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Definition
| transfer the risk of loss to another party (purchasing insurance) |
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Term
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Definition
| less favorable insurance risks tend to seek insurance to a greater extent than other risks (sick people want to buy insurance more than a healthy person would) |
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Term
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Definition
| individual characteristics that increase a chance of peril (blindness, deafness) |
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Term
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Definition
| tendencies that people have that increase risk and chance of loss (alcoholism, drug addiction) |
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Term
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Definition
| individual tendencies that arise from an attitude or state of mind causing indifference to loss (reckless driving with no fear of injury or death) |
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Term
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Definition
| companies that write more than one line of insurance |
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Term
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Definition
| publicly traded insurance company that is owned and controlled by a group of stockholders |
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Term
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Definition
| policy owner does NOT receive policy dividends |
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Term
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Definition
| policy dividends can be paid to the policy owner |
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Term
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Definition
| conversion of an insurer's corporate ownership into a mutual company by buying back all the shares of stock and retiring them |
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Term
| a stock insurance company is owned by... |
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Definition
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Term
| a mutual insurance company is owned by... |
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Definition
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Term
| are assessment insurance allowed in Florida? |
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Definition
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Term
| Assessment mutual companies are typified by the way in which they... |
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Definition
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Term
| a reciprocal insurance company is owned by the... |
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Definition
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Term
| in a reciprocal insurance company, who assumes the risk of the policyholders? |
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Definition
| all of the policy holders insure the risk of each other (reciprocity) |
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Term
| is Lloyd's of London and insurer? |
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Definition
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Term
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Definition
| an association of individuals and companies that individually underwrite insurance |
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Term
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Definition
| one insurer transfers part of its risk to another insurer - protects against catastropic loss for one company |
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Term
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Definition
| provide liability coverage to groups of people who are of the same group (or class) - a group of pharmacists, a group of physicians |
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Term
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Definition
| small face values ($1000-$2000) with premiums paid weekly |
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Term
| HMOs are known for stressing... |
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Definition
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Term
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Definition
| Health Maintenance Organization |
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Term
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Definition
| Preferred Provider Organization |
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Term
| Social Security, Medicare, Medicaid and worker's comp are examples of... |
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Definition
| social insurance programs |
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Term
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Definition
| create their own reserves to provide coverage for future losses |
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Term
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Definition
| works only for one insurer and only sells that insurer's products |
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Term
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Definition
| self-governing, and can represent several different insurers |
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Term
| Legally, the agent represents whom? |
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Definition
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Term
| The McCarran-Ferguson Act |
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Definition
| exmpted the insurance industry from Federal antitrust legislation and determined that insurance regulated by state law "is in the public's interest" |
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Term
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Definition
| a company practicing within the state in which it is incorporated |
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Term
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Definition
| a company operating in a state other than that in which it is incorporated |
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Term
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Definition
| a company incorporated outside the US, that is practicing business in the US |
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Term
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Definition
| inducing a customer to cancel an existing policy and buy a new policy with similar coverage under a different insurer, using incomplete or incorrect representation. Also called External Replacement. |
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Term
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Definition
| inducing a customer to drop their current policy and buy another policy with the same insurer and usually the same producer |
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Term
| who bears the burden of proving that policy replacement was in the best interest of the insured? |
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Definition
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Term
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Definition
| returning part of the commission or giving anything of value to the insured as an inducement to buy the policy. |
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Term
| If you rebate, how long must you keep the paperwork? |
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Definition
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Term
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Definition
| any written or oral statement that does not accurately describe a policy's features, benefits or coverage |
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Term
| rebating is only allowed in what two states? |
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Definition
| Florida and California (and only under strict regulation) |
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Term
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Definition
| National Association of Insurance Commissioners |
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Term
| 4 functions of NAIC (National Association of Insurance Commissioners) |
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Definition
1. uniformity in state insurance laws
2. assist in administration of state insurance laws
3. protect the interest of policy owners and consumers
4. preserve STATE regulation |
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Term
| Financial Services Modernization Act |
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Definition
| Allows commercial banks, investment banks, retail brokerages, and insurance companies can enter each other's lines of business |
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Term
| Before an entity may practice insurance in Florida, the entity must obtain... |
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Definition
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Term
| Florida Life and Health Guaranty Association's limit of liability for an insolvent insurer |
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Definition
$100k in cash values
$300k for all benefits including cash values |
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Term
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Definition
| an agreement enforceable by law |
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Term
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Definition
1. offer and acceptance
2. consideration
3. legal purpose
4. competent parties |
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Term
| Insurance contracts are ALEATORY. This means 2 things: |
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Definition
1. There is an element of chance for both parties
2. The dollar values exchanged may not be equal |
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Term
| the opposite of an aleatory contract is... |
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Definition
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Term
| A commutative contract means... |
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Definition
1. there is no element of chance
2. dollar value being exchanged is equal |
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Term
| insurance contracts are contracts of ADHESION. This means... |
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Definition
| one party prepared the contract, and the other party agrees to adhere to it (there was no negotiation to come up with the terms) |
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Term
| insurance contracts are unilateral, which means that... |
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Definition
| only one party (the insurer) makes any kind of enforceable promise |
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Term
| Is life insurance a PERSONAL contract between the insurer and the insured? |
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Definition
| No - the policy owner can give it away (assign it) |
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Term
| Is an insurance contract CONDITIONAL? |
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Definition
| Yes - a certain event must take place in order for the benefit to be paid |
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Term
| a VALUED contract pays... |
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Definition
| a stated sum, regardless of the actual loss incurred |
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Term
| an INDEMNITY contract pays... |
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Definition
| an amount equal to the loss (up to the limit of the contract) - it attempts to restore the insured to the original financial position. |
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Term
| Insurable interest must exist when? |
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Definition
| At the time the policy is purchased (but it does not have to exist at the time of a claim) |
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Term
| agents and brokers are both considered |
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Definition
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Term
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Definition
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Term
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Definition
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Term
| The acts of the agents are considered... |
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Definition
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Term
| 3 types of authority given by the insurer to the agent |
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Definition
1. Express authority
2. Implied authority
3. Apparent authority |
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Term
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Definition
| the voluntary surrendering of a legal, given right |
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Term
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Definition
| legal enforcement of a waiver |
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Term
| The PAROL EVIDENCE RULE prohibits... |
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Definition
| making any additional verbal changes to a contract once it becomes a written document |
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Term
| A VOID CONTRACT is one that is... |
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Definition
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Term
| With life insurance policies, insurers have typically how much time from the date of the contract to dispute the validity of the contract? |
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Definition
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Term
| 3 types of life insurance |
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Definition
1. Ordinary
2. Industrial
3. Group |
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Term
| What type of insurance has NO cash values? |
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Definition
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Term
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Definition
| Stipulates a certain time when the policy matures. If the insured is still alive at that time, he would receive the benefit amount. Otherwise the death benefit goes to the beneficiary. |
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