Basic Principles of Insurance Flashcards
a company that provides financial protection to insurance companies
They handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to.
reinsurer
a federal law requiring an individual to be informed if she is being investigated by an inspection company
it also outlines the sharing and impact of such information and requires individuals to be notified prior to the start of the investigation
Fair Credit Reporting Act
a form of insurance that insures the beneficiary’s earned income against the risk that a disability creates a barrier for a worker to complete the core functions of their work
Disability
a general way of describing insurance against loss through sickness or accidental bodily injury; applies to many different types of insurance
health insurance
a guarantee to restore the insured to the position they were in before the uncertain incident that caused a loss for the insured
principle of indemnity
a mandatory health insurance provision stating that the insured must provide a completed claim form with proof to the insurer of their loss within days of the date of loss
proof of loss
a piece of paper which provides basic key information about the insurance policy including name and address of the insured, policy period, location of property, and policy
declaration page
a plan under which the policy owner receives shares (or dividends) of the divisible surplus of the company
participating plan
a policy provision that describes the policy owner’s obligation to provide notification of loss to the insurer within a reasonable period of time; only requires the insurance company to be notified, not proven
notice of claim
an informational document with a summary of the terms of an insurance policy, including the conditions, coverage limitations, and premiums
the insurance company is required to give this to the applicant
Policy Summary
a type of life insurance in which a single contract covers an entire group of people; the insured typically does not own the policy
group life insurance
an association established by each state to support insurers and protect consumers in the case of insurere insolvency
State Guaranty Association
an association of all of the state insurance commissioners active in insurance regulartory problems and in forming and recommending model legislation and requirements
this association does not make laws, but rather works on suggesting standards for state adoption; their goal is to standardize the insurance industry
National Association of Insurance Commissioners (NAIC)
An insurance company or independent agent that provides a one-stop shop for businesses or individuals seeking coverage for all their insurance needs.
multi-line insurer
an insurance policy provision stating that the application and policy contain all provisions
entire contract
an insurance policy that provides financial reimbursement to the owner or renter of a structure and its contents in the event of damage or theft
property insurance
any situation that presents the possibility of a loss
loss exposure
home service or “debit” insurance companies that specialize in insurance for work related injuries and illnesses (worker’s compensation)
industrial insurer
individual characteristics that increase the chance of peril
physical hazards
industrial insurer
home service or “debit” insurance companies that specialize in insurance for work related injuries and illnesses (worker’s compensation)
informational consumer guide books that explain insurance policies and concepts
they are often required to be given to applicants who are considering certain types of coverage
often used with life insurance, long-term care insurance, and annuities
Buyer’s Guide
insurance against loss due to the death of a particular person (the insured) upon whose death the insurance company agrees to pay a stated sum or income to the beneficiary
“we will pay this amount when this person dies”
life insurance
Insurance companie characterized by having no capital stock; it is owned by its policy owners and usually issues participating insurance
for the purposes of insurance
mutual companies
Insurance companies owned and controlled by a group of stockholders whose investment in the company provides the safety margin necessary in issuance of guaranteed, fixed premium, nonparticipating policies.
for the purposes of insurance
stock companies
insurance that pays benefits for nonsurgical doctors’ fees commonly rendered in a hospital; sometimes pays for home and office calls
medical expense insurance
Insurance under which the insured is not entitled to share in the divisible surplus of the company
nonparticipating plan
insurance which broadly encompasses insurance not directly concerned with life, health or property insurance; it protects you financially in the event that someone sues you
casualty (liability) insurance
life insurance
insurance against loss due to the death of a particular person (the insured) upon whose death the insurance company agrees to pay a stated sum or income to the beneficiary
“we will pay this amount when this person dies”
insurance that provides beneficiaries with a lump sum upon the insured’s death
life insurance protection for a set number of years
designed to provide temporary protection in case a person dies during a set period of time
term life insurance
nonprofit benevolent organization that provides insurance to its members
Fraternal Benefit Societies
permanant life insurance protection for a person’s “whole of life,” from policy issue to the death of the insured
whole life insurance
protects the insured from damage caused by property owned by the insured
main kinds include auto, homeowner’s, renters, and umbrella insurance
property and casualty insurance
risks that are not insurable because they involve the chance of both loss and gain
Example: gambling at the casino, or investing in the stock market
speculative risks
similar objects of insurance that are exposed to the same group of perils
homogeneous exposure units
something that can cause a financial loss; the accident itself
peril
states that the larger the number of individual risks (or exposures) that are combined in a group, the more certainty there is as to the amount of loss incurred in any given period
Law of Large Numbers
tendencies that people may have that arise from an attitude or state of mind causing indifference to loss, and loss increasing the chance of loss
Example: someone with a habit of driving recklessly
morale hazards
tendencies that people may have which increase risk and the chance of loss
Example: alcoholism and drug addiction
moral hazards
the act of putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past-due premiums requires
reinstatement
the amount of expense or loss to be paid by the insured before an insurance policy starts paying benefits
typically applies to property, casualty, and health insurance
deductible
the only insurable type of risks; they involve only the chance of loss and there is never a possibility of gain or profit
pure risks
- the value given in exchange for the promises sought
- a clause in an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments
Consideration
the portion of the insurance policy in which the insurer promises to make payment to or on behalf of the insured; states the scope and limits of coverage
the insuring agreement
aka insuring clause or insurance provision
the practice of accepting the risk and confronting it if and when it occurs through self-insurance
risk retention
