Chapter 1-General insurance Flashcards
(44 cards)
Who is a legal representative of an insurance company?
Agent/Producer
Who is the person applying for insurance?
Applicant/Proposed insured
Who receives the benefits of an insurance policy?
Beneficiary
What is a broker in insurance?
An insurance producer who represents the client, not the company
What is the principle of indemnity?
Insured cannot recover more than their loss; they are restored to their original position
What is an insurance policy?
A contract between the policyholder and the insurance company agreeing to pay for losses
Who is the person covered by a policy?
Insured
What is an insurer?
The company issuing the policy
What is the law of large numbers?
Larger groups with similar risks allow better prediction of losses
Who is entitled to rights in a policy?
Policy owner
What is a premium?
Money paid to the insurance company for coverage
What is reciprocity/reciprocal?
Mutual rights and privileges
What is insurance?
Transferring the risk of loss from an individual to an insurer
What principles is insurance based on?
Indemnity, risk pooling, and the law of large numbers
What is risk in insurance terms?
Uncertainty regarding financial loss
What are the two types of risk?
Pure (only loss) and speculative (loss or gain)
Which type of risk is insurable?
Pure risk
What are the key elements of insurable (pure) risk?
- Due to chance
- Definite/measurable
- Predictable
- Not catastrophic
- Large exposure
- Randomly selected exposure
What are the 5 methods of handling risk (STARR)?
- Sharing
- Transfer
- Avoidance
- Reduction
- Retention
What is a hazard?
A condition that increases the chance of loss
What are the types of hazards?
- Physical
- Moral
- Morale
What is a peril?
The cause of loss covered in the policy
What factors are used in determining life insurance rates?
- Age
- Medical history
- Occupation
- Sex
How are insurers classified by funding?
- Government (taxes)
- Private (premiums)
