PNC Terms & Definitions

Question 1

Insurance

Answer 1

Is the transfer of risk of loss

Question 2

Risk

Answer 2

Is the uncertainty or chance of loss occurring

Question 3

What are the 2 types of risk?

Answer 3

Pure and speculative risks

Question 4

Pure risk

Answer 4

Is loss or nothing, no chance of gain, only pure risks are insurable

Question 5

Speculative

Answer 5

Loss or gain for EX: gambling

Question 6

What are 5 ways to handle risks

Answer 6

STARR
Sharing, Transfer, Avoidance, Reduction, Retention

EX: I’m a starr at handling risks

Question 7

Exposure

Answer 7

The unit of measurement to determine rates for an insured based on how risky they are

Question 8

Hazards

Answer 8

Increases the chances of the risk occurring

Question 9

What are the three types of hazards?

Answer 9

Physical, Moral & Morale

Question 10

Physical hazards

Answer 10

Are material and structural things you can see & touch

Question 11

Moral hazards

Answer 11

Is lying on purpose
EX: lying on the insurance application

Question 12

Morale hazards

Answer 12

Is a sense of carelessness

Question 13

Loss

Answer 13

Is the reduction or disappearance of value

Question 14

Peril

Answer 14

Is the cause of loss like a fire or accident

Question 15

The Law of Large #’s

Answer 15

Says the more stats you have to look at, the more predictable losses will be

Question 16

Reinsurance

Answer 16

Is when a company indemnifies another. Indemnify is to make whole again after a loss

Question 17

Certificates of Authority

Answer 17

Allows insurer to sell in that state making them admitted and authorized

Question 18

Stock companies

Answer 18

Are owned by shareholders, issue non-participating policies & DIVIDENDS ARE TAXED

Question 19

Mutual Companies

Answer 19

Are owned by policy holders, issue participating policies, & DIVIDENDS ARE NOT TAXED

Question 20

Domestic

Answer 20

Insurer is a state they are incorporated (headquartered & selling) Hint: 1 state

Question 21

Foreign

Answer 21

Insurer is a state where they are not headquartered, but they are selling
Hint: 2 states

Question 22

Alien

Answer 22

Is completed outside of the U.S.
Hint: Country

Question 23

Law of Agency

Answer 23

Agent represents the insurer & the Knowledge of the insurer

Question 24

What are the 3 types of agent authority?

Answer 24

Express, Implied, & Apparent

Question 25

Express

Answer 25

Is written/contract

Question 26

Implied

Answer 26

Is assumed by insurer

Question 27

Apparent (perceived)

Answer 27

Is assumed by customer (Business cards/letterhead/stationary)

Question 28

Fiduciary responsibility

Answer 28

= agent submits premium collected to the insurance company

Question 29

What are the 4 elements of a legal contract?

Answer 29

Agreement, offer, acceptance, consideration

Question 30

Agreement

Answer 30

Known as offer and acceptance

Question 31

Acceptance

Answer 31

Insurer issues a policy

Question 32

Consideration

Answer 32

Both parties bring something of value

Question 33

Consideration on the side of the insured

Answer 33

Application + premium

Question 34

Consideration on the side of the insurer

Answer 34

Promise to pay

Question 35

Competent parties

Answer 35

Not under the influence of drugs or alcohol, sound mind, legal age (felons are ok)

Question 36

Legal purpose

Answer 36

Cannot be against public policy/break the law

Question 37

Adhesion

Answer 37

Insurer writes the policy, customer either takes it or leaves it

Question 38

Aleatory

Answer 38

Unequal exchange (customer pays small monthly premium, insurer pays very large claim)

Question 39

Personal

Answer 39

Between the customer and the insurer

Question 40

Unilateral

Answer 40

One sided promise, only the insurer is legally bound to do anything

Question 41

Conditional

Answer 41

Both parties have rules/duties they must follow/do

Question 42

Reasonable expectations

Answer 42

A customer can expect the coverage if an agent implied it during the sale

Question 43

Representations

Answer 43

Statements that are believed to be true but are not guaranteed to be true

Question 44

Misrepresentation

Answer 44

An untrue statement

Question 45

Warranty

Answer 45

Absolutely true statements

Question 46

Concealment

Answer 46

With holding or hiding in the application

Question 47

Fraud

Answer 47

Deceive or lying to cheat the insurance company

Question 48

Insurance is the transfer of ___?

Answer 48

Risk

Question 49

Peril is the cause of ___?

Answer 49

Loss

Question 50

All of the following are examples of a peril EXCEPT? A) Hail B) Wet side walk C) Lightning striking a tree D) Wind

Answer 50

Wet side walk

Question 51

Which of the following is an example of a hazard? A) Lightening B) Fire C) Slippery Floor D) Flood

Answer 51

C) Slippery Floor

Question 52

An example of a moral hazard is ___? A) incorrect electrical wiring B) Not fixing leaking water pipes C) Lying on the insurance application D) being careless

Answer 52

C)

Question 53

What type of hazard does a person behaves indifferently or carelessly represent?

Answer 53

Morale Hazard

Question 54

Which law states that the more statistics you have to look at, the more predictable losses will be?

Answer 54

Law of large numbers

Question 55

To indemnify means to?

Answer 55

Restore the insured to their previous financial condition before loss

Question 56

What allows an insurer to sell in a specific state, making them admitted and authorized?

Answer 56

Certificate of authority

Question 57

Stock companies are owned by ___?

Answer 57

Shareholders

Question 58

Which of the following refers to an insurance company that has been formed under the laws of this (one) State?

Answer 58

Domestic

Question 59

A foreign insurer is a state where they are ___?

Answer 59

Not headquartered and selling

Question 60

The three types of agent authority are ____, ____ and ____?

Answer 60

Express, implied, apparent

Question 61

What does consideration mean in a legal contract?

Answer 61

Both parties bring something of value to

Question 62

A competent party excludes all options excepts ___? A) someone under the influence of alcohol B) a felon C) a 12 year old girl D) someone under the influence of drugs

Answer 62

B) A felon

Question 63

Which term refers to unequal exchange?

Answer 63

Aleatory

Question 64

What is meant by conditional?

Answer 64

Both parties have duties they need to follow

Question 65

Which definition describes the term representation best?

Answer 65

Statements that are believed to be true but are not guaranteed to be true

Question 66

Which statement refers to an absolutely true statement?

Answer 66

Warranty