Characteristics of Insurance

Question 1

ACTUAL CASH VALUE

Answer 1

REPRESENTS THE DEPRECIATED VALUE OF THE PROPERTY

Question 2

ADHESION

Answer 2

A TAKE IT OR LEAVE IT CONTRACT

Question 3

ADVERSE SELECTION

Answer 3

THE TENDENCY OF THOSE THAT MOST NEED INSURANCE TO SEEK IT OUT

Question 4

AGENTS

Answer 4

LEGAL REPRESENTATIVES OF AN INSURER AND ACT ON BEHALF OF THE INSURER

Question 5

ALEATORY

Answer 5

A TYPE OF INSURANCE CONTRACT IN WHICH THE DOLLAR AMOUNTS EXCHANGED ARE UNEVEN

Question 6

APPARENT AUTHORITY

Answer 6

WHEN THE THIRD PARTY BELIEVES IMPLIED OR EXPRESS AUTHORITY EXISTS, BUT NO AUTHORITY ACTUALLY EXISTS

Question 7

APPRAISED OR AGREED UPON VALUE

Answer 7

USED FOR HARD TO VALUE ITEMS AND WHERE THE INSURED MAY OWN PROPERTY THAT EXCEEDS STANDARD LIMITS OF PROPERTY INSURANCE POLICY

Question 8

BROKERS

Answer 8

LEGAL REPRESENTATIVES OF AN INSURED AND ACT IN THE BEST INTEREST OF THE INSURED

Question 9

COINSURANCE

Answer 9

THE PERCENTAGE OF FINANCIALRESPONSIBILITY THAT THE INSURED AND THE INSURER MUST UPHOLD IN ORDER TO ACHIEVE EQUITY IN RATING

Question 10

CONCEALMENT

Answer 10

WHEN THE INSURED IS INTENTIONALLY SILENT REGARDING A MATERIAL FACT DURING THE APPLICATION PROCESS

Question 11

CONDITIONAL

Answer 11

THE INSURED MUST ABIDE BY ALL THE TERMS AND CONDITIONS OF THE CONTRACT, IF THE INSURED INTENDS TO COLLECT UNDER THE POLICY

Question 12

COPAYMENT

Answer 12

A LOSS-SHARING ARRANGEMENT WHEREBY THE INSURED PAYS A FLAT DOLLAR OR PERCENTAGE OF THE LOSS IN EXCESS OF THE DEDUCTIBLE

Question 13

DECLARATIONS SECTION

Answer 13

THE SECTION OF THE INSURANCE POLICY THAT DESCRIBES EXACTLY WHAT PROPERTY IS BEING COVERED

Question 14

DEDUCTIBLE

Answer 14

A SPECIFIED AMOUNT OF MONEY THE INSURED IS REQUIRED TO PAY ON A LOSS BEFORE THE INSURER WILL MAKE ANY PAYMENTS UNDER THE POLICY

Question 15

DEFINITION SECTION

Answer 15

THE SECTION OF AN INSURANCE POLICY THAT DEFINES KEY WORDS, PHRASES, OR TERMS USED THROUGHOUT THE INSURANCE CONTRACT

Question 16

DESCRIPTION SECTION

Answer 16

THE SECTION OF AN INSURANCE POLICY THAT DESCRIBES EXACTLY WHAT IS BEING INSURED

Question 17

ENDORSEMENT

Answer 17

A MODIFICATION OR CHANGE TO THE EXISTING PROPERTY INSURANCE POLICY

Question 18

ESTOPPEL

Answer 18

THE LEGAL PROCESS OF DENYING A RIGHT YOU MIGHT OTHERWISE BE ENTITLED TO UNDER THE LAW

Question 19

EXCLUSION SECTION

Answer 19

THE SECTION OF AN INSURANCE POLICY THAT WILL EXCLUDE CERTAIN PERILS, LOSSES AND PROPERTY

Question 20

EXPRESS AUTHORITY

Answer 20

AUTHORITY GIVEN TO AN AGENT THROUGH A FORMAL WRITTEN DOCUMENT

Question 21

FINANCIAL RISK

Answer 21

A LOSS OF FINANCIAL VALUE, SUCH AS THE PREMATURE DEATH OF A FAMILY’S PRIMARY WAGE EARNER

Question 22

FUNDAMENTAL RISK

Answer 22

A RISK THAT CAN IMPACT A LARGE NUMBER OF INDIVIDUALS AT ONE TIME (EARTHQUAKE OR FLOOD)

Question 23

HAZARDS

Answer 23

A SPECIFIC CONDITION THAT INCREASES THE POTENTIAL OR LIKELIHOOD OF A LOSS OCCURRING

Question 24

IMPLIED AUTHORITY

Answer 24

THEW AUTHORITY THAT A THIRD PARTY RELIES UPON WHEN DEALING WITH AN AGENT BASED UPON THE POSITION HELD BY THE AGENT

Question 25

LACKING SOUND MIND

Answer 25

THE STATE OF NOT HAVING THE CAPACITY TO UNDERSTAND THE PURPOSE AND TERMS OF THE CONTRACT, THEREFORE THE CONTRACT LACKS A MEETING OF THE MINDS OR MUTUAL CONSENT

Question 26

LAW OF LARGE NUMBERS

Answer 26

A PRINCIPLE THAT STATES THE MORE SIMILAR EVENTS OR EXPOSURES, THE MORE LIKELY THE ACTUAL RESULTS WILL EQUAL THE PROBABILITY EXPECTED

Question 27

MINORS

Answer 27

IN MOST STATES, A MINOR IS UNDER THE AGE OF 18. IF A MINOR ENTERS INTO A CONTRACT, THE MINOR CAN VOID THE CONTRACT AT ANY TIME

Question 28

MORAL HAZARD

Answer 28

THE POTENTIAL LOSS OCCURRING BECAUSE OF THE MORAL CHARACTER OF THE INSURED, AND THE FILING OF A FALSE CLAIM WITH THEIR INSURANCE COMPANY

Question 29

MORALE HAZARD

Answer 29

THE INDIFFERNCE TO A LOSS CREATED BECAUSE THE INSURED HAS INSURANCE

Question 30

MUTUAL CONSENT

Answer 30

COMMON UNDERSTANDING AND AGREEMENT BETWEEN PARTIES TO A CONTRACT REGARDING WHAT THE CONTRACT COVERS AND THE TERMS OF THE CONTRACT

Question 31

NON-FINANCIAL RISK

Answer 31

A RISK THAT WOULD RESULT IN A LOSS, OTHER THAN A MONETARY LOSS

Question 32

OBJECTIVE RISK

Answer 32

THE VARIATION OF ACTUAL AMOUNT OF LOSSES THAT OCCUR OVER A PERIOD OF TIME COMPARED TO THE EXPECTED AMOUNT OF LOSSES

Question 33

OFFER AND ACCEPTANCE

Answer 33

CONSISTS OF ONE PARTY MAKING AN OFFER TO PURCHASE A GOOD OR SERVICE, AND THE ACCEPTANCE IS WHEN CONSIDERATION IS RECEIVED

Question 34

OUT-OF-POCKET-MAXIMUM

Answer 34

THE SUM OF THE DEDUCTIBLE, THE INSURED'S PORTION OF THE COINSURANCE, AND GENERALLY ANY COPAYMENTS BY THE INSURED

Question 35

PAROL EVIDENCE RULE

Answer 35

STATES THAT "WHAT IS WRITTEN PREVAILS." ORAL AGREEMENTS THAT ARE NOT REFLECTED IN THE WRITTEN CONTRACT ARE NOT VALID

Question 36

PARTICULAR RISK

Answer 36

A RISK THAT CAN IMPACT A PARTICULAR INDIVIDUAL, SUCH AS DEATH OR THE INABILITY TO WORK BECAUSE OF A SICKNESS OR ACCIDENT

Question 37

PERILS

Answer 37

THE IMMEDIATE CAUSE AND REASON FOR A LOSS OCCURRING

Question 38

PHYSICAL HAZARD

Answer 38

A PHYSICAL CONDITION THAT INCREASES THE LIKELIHOOD OF A LOSS OCCURRING

Question 39

PRINCIPLE OF INDEMNITY

Answer 39

ASSERTS THAT AN INSURER WILL ONLY COMPENSATE THE INSURED TO THE EXTENT THE INSURED HAS SUFFERED AN ACTUAL FINANCIAL LOSS

Question 40

PRINCIPLE OF INSURABLE INTEREST

Answer 40

ASSERTS THAT AN INSURED MUST SUFFER A FINANCIAL LOSS IF A COVERED PERIL OCCURS, OTHERWISE NO INSURANCE CAN BE OFFERED

Question 41

PURE RISK

Answer 41

THE CHANCE OF LOSS OR NO LOSS OCCURRING

Question 42

REINSURANCE

Answer 42

A MEANS BY WHICH AN INSURANCE COMPANY TRANSFERS SOME OR ALL OF ITS RISK TO ANOTHER INSURANCE COMPANY

Question 43

REPLACEMENT COST

Answer 43

REPRESENTS THE AMOUNT TO REPAIR OR REPLACE PROPERTY, WITHOUT ANY DEDUCTION FOR DEPRECIATION

Question 44

REPRESENTATION

Answer 44

A STATEMENT MADE BY THE APPLICANT DURING THE INSURANCE APPLICATION PROCESS

Question 45

RIDER

Answer 45

A MODIFICATION OR CHANGE TO A LIFE OR HEALTH INSURANCE POLICY

Question 46

RISK

Answer 46

THE CHANCE OF LOSS, UNCERTAINTY ASSOCIATED WITH LOSS, OR THE POSSIBILITY OF A LOSS

Question 47

RISK AVOIDANCE

Answer 47

A RISK MANAGEMENT TECHNIQUE USED FOR ANY RISKS THAT ARE HIGH IN FREQUENCY AND HIGH IN SEVERITY

Question 48

RISK REDUCTION

Answer 48

THE PROCESS OF REDUCING THE LIKELIHOOD OF A PURE RISK THAT IS HIGH IN FREQUENCY AND LOW IN SEVERITY OR OF REDUCING THE SEVERITY OF LOSSES FROM CERTAIN PERILS

Question 49

RISK RETENTION

Answer 49

ACCEPTING SOME OR ALL OF THE POTENTIAL LOSS EXPOSURE FOR RISKS THAT ARE LOW IN FREQUENCY AND LOW IN SEVERITY

Question 50

RISK TRANSFER

Answer 50

THE PROCESS OF TRANSFERRING A LOW FREQUENCY AND HIGH SEVERITY RISK TO A THIRD PARTY, SUCH AS AN INSURANCE COMPANY

Question 51

SPECULATIVE RISK

Answer 51

THE CHANCE OF LOSS, NO LOSS, OR A PROFIT

Question 52

SUBJECTIVE RISK

Answer 52

THE RISK AN INDIVIDUAL PERCEIVES BASED ON THEIR PRIOR EXPERIENCES AND THE SEVERITY OF THOSE EXPERIENCES

Question 53

SUBROGATION CLAUSE

Answer 53

A CLAUSE IN AN INSURANCE POLICY THAT REQUIRES THAT THE INSURED RELINQUISH A CLAIM AGAINST A NEGLIGENT THIRD PARTY, IF THE INSURER HAS ALREADY INDEMNIFIED THE INSURED

Question 54

UNDERWRITING

Answer 54

THE PROCESS OF CLASSIFYING APPLICANTS INTO A RISK POOLS, SELECTING INSUREDS, AND ASSIGNING A PREMIUM

Question 55

UNILATERAL

Answer 55

THERE IS ONLY ONE PROMISE MADE; AND IN THE CASE OF AN INSURANCE CONTRACT, IT'S MADE BY THE INSURER TO PAY IN THE EVENT OF A LOSS

Question 56

WAIVER

Answer 56

THE RELINQUISHMENT OF A KNOWN LEGAL RIGHT

Question 57

WARRANTY

Answer 57

A PROMISE MADE BY THE INSURED THAT IS PART OF THE INSURANCE CONTRACT