Key Terms Flashcards
(22 cards)
Insurance
Is the transfer of risk of loss
Risk
Is the uncertainty or chance of loss occurring
Pure risk
Is loss or nothing, no chance of gain, only pure risk are insurable
Speculative
Loss or gain, for example: gambling (not insurable)
Handling risk
(Starr) Sharing, transfer, avoidance, reduction, retention
Exposure
is the unit of a measurement to determine rates for an insured based on how risky they are. How risky are you? The higher your risk the higher your premium.
Hazards
Increase the chance of risk occurring
Physical hazards 
Our material and structural things you can see in touch 
Moral hazards
Is lying on purpose, example: lying on the insurance application
Morale hazards
Is a sense of carelessness
Loss
Is the reduction or loss of value
Peril
Is the cause of loss like fire or hail
The law of large #’s
Says the more stats you have to look at, the more predictable losses will be
Reinsurance
Is when a company indemnifies another. Indemnify is to make whole again after a loss
Certificates of Authority
Allow insurer to sell in that state making them admitted and authorized
Certificates of authority 
Allow ensure to sell in that state making them admitted and authorized 
Stock companies
Are owned by shareholders, issued non-participating policies and dividends are taxed
Mutual companies
Are companies owned by policy holders, issue, participating policies, dividends are not taxed
Domestic
Insurer is a state they are incorporated (headquartered and selling) Hint: One state
Foreign
Insurer is a state where they are not headquartered, but they are selling. Hint: 2 states
Alien
Is completely outside of the United States. Hint: Country
Law of Agency
Agent represents the insurer and the knowledge of the agent is knowledge of the insurer
