Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

OR Property and Casualty License > Intro to Insurance Unit 1 > Flashcards

Intro to Insurance Unit 1 Flashcards

1
Q

What is Risk?

A
  • The possibility that a loss will occur.

- Uncertainty, possibility of loss.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is Insurance?

A

A contract that transfers the risk of financial loss from an individual or business to an insurance company.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Insurance is designed to cover only losses that involve ____?

A

Risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

It is the ____ of a risk from a person or a business to an insurer.

A

Transfer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Name the Two Types of Risk:

A

1) Speculative

2) Pure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is Speculative Risk?

A

Risks that have a possibility of a loss and also the possibility of a gain.

Ex: Gambling, Investing.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is Pure Risk?

A

Risks only involve the possibility of experiencing a loss, not a gain.

Ex:Chance of being in a car accident.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What type of risk can be covered by insurance?

A

Pure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is Exposure?

A
  • The potential for accidents and other losses.

- Risks for which the insurance company would be liable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a Peril?

A

-The cause of loss

Ex: House burns down - peril is the fire.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is Loss?

A
  • The unintended, unforeseen damage to property
  • Injury
  • Amount Paid
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Name the Two Types if Loss:

A

1) Direct loss

2) Indirect Loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is Direct Loss?

A
  • Is physical loss to property with no intervening cause.
  • Physical loss

Ex: Lightning striking a house and an automobile hitting tree

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what is Indirect loss?

A
  • Is a Consequential loss as the result from a direct loss.
  • Consequence of physical loss.

Ex: loss of rental income due to a house fire, which cause a loss of profit for the landlord.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a Hazard?

A
  • Anything that increases the chance that a loss will occur.

- Increases the chance of loss.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Name the Three Types of Hazards:

A

1) Physical
2) Moral
3) Morale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is a Physical Hazard?

A
  • The hazard can be seen

Ex: A dead tree increases the possibility of a tree falling on the house.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is a Moral Hazard?

A
  • Dishonesty that intentionally causing a loss is acceptable.
  • Arise from individuals Character.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is a Morale Hazard?

A

-A state of mind or careless attitude, Carelessness

20
Q

Methods of handling Risk?

-S.T.A.R.R

A
  • Sharing
  • Transfer
  • Avoidance
  • Retention
  • Reduction
21
Q

Methods of handling Risk explain Sharing?

A

Two or more individuals or businesses agree to pay a portion of any loss incurred by any member of the group.

22
Q

Methods of handling Risk explain Transfer?

A

The insurer (Ins. comp) agrees to pay if an insured (customer) has loss-the insured no longer bears the risk.

23
Q

Methods of handling Risk explain Avoidance?

A

-eliminating a particular risk by not engaging in a certain activity.
Ex: doesn’t drive avoids the risk of injuring someone in an automobile accident.

24
Q

Methods of handling Risk explain Retention?

A

-The individual or business will pay for the loss it it occurs, or a portion of the loss via deductible.

25
Methods of handling Risk explain Reduction?
-Refers to lessening the chance that a loss will occur, or lessening the extent of a loss if it occurs.
26
Insurance uses the risk management method of _____ to spread the risk of loss among thousands.
Transfer
27
What are the Two Parties to an Insurance Contract?
1) The 1st party is the insured | 2) Second Party is the company, or insurer.
28
What does a legally enforceable contract define?
-The limits of coverage provided to the insured and the risk of loss being transferred, and identifies under what circumstances the insurer will pay for a loss.
29
What is a Contract?
-An agreement between the insured and the insurer.
30
What is Law of Large Numbers?
- The principal that makes insurance possible. | - The larger the group, the more accurately losses can be predicted.
31
Elements of Insurable Risk: | C.A.N.H.A.M
- Calculable - Affordable - Non-catastrophic - Homogeneous - Accidental - Measurable
32
Elements of Insurable Risk explain Calculable?
-Premiums must be calculable based upon prior loss statistics for that particular risk in order to predict future losses.
33
Elements of Insurable Risk explain Affordable?
-The premium for transferring the risk should be affordable for the average consumer.
34
Elements of Insurable Risk explain Non-Catastrophic?
-The risk must not be non-catastrophic for the insurance company. Ex: floods, earthquakes have limited coverage, war is excluded from most policies.
35
Elements of Insurable Risk explain Homogeneous?
- The risk must be similar in nature so the same factors affect the chance of loss. Ex: The actuary predicts the likelihood of a wood house burning in Cali, the actuary would not include brick houses in the sample.
36
Elements of Insurable Risk explain Accidental?
-The loss must have been caused due to chance (accident). Intentional losses lost by the insured are not covered by the insurer.
37
Elements of Insurable Risk explain Measurable?
-A definite ( time and place) and a measurable loss means that proof of loss must be established w/ numbers and dollar amounts, not just casual references.
38
What is Adverse Selection?
-Is the Tendency for higher-risk individuals to get and keep insurance as compared to individuals that represent an average level risk. - Risks that have a greater-than-average chance of loss - Not wanted by insurers - Tendency for higher-risk individuals to get and keep insurance. - Why insurer go through the underwriting process. - High Risk= Higher rate to insure or refusal.
39
What is Underwriting?
The process when Insurers make an extensive evaluation of information related to a particular risk.
40
What is Reinsurance?
- An insurance company's insurance company. - Transfers risk from one insurer to another insurer. - Helps insurers spread their risk.
41
Ceding Insurer
-The company reducing its risk
42
What is Facultative Reinsurance?
-When the reinsurer considers each risk before allowing the transfer from the ceding company.
43
What is the Reinsurer?
-The company assuming the risk
44
What is Stock Insurer?
- Owned by stockholders - Dividend is not guaranteed - Dividend is paid to policyholder - Dividend is non taxable; considered refund of premium - Issue participating policies.
45
What is Fraternal Benefit Societies?
- Provides insurance and other benefits | - Must be a member to get the benefits
46
what is Reciprocal Insurers?
- Unincorporated - Members are assessed if a loss occurs to any member of the group - Managed by an attorney-in-fact
47
What does a Attorney-in-Fact do ?
-Handles Administration , underwriting, sales promotion, and claims handling for the reciprocal insurance.

OR Property and Casualty License (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions