Unit 1: Intro to Insurance

Question 1

the possibility that a loss will occur

Answer 1

Risk

Question 2

a contract that transfers the risk of financial loss from an individual / business to an insurance company

Answer 2

Insurance

Question 3

A risk that may result in a loss or gain

Answer 3

Speculative Risk

Question 4

only involves the possibility of experiencing a loss, not a gain

Answer 4

Pure Risk

Question 5

a condition/situation that presents a possibility of loss

Answer 5

exposure

Question 6

the cause of a loss

Answer 6

Peril

Question 7

the unintended, unforeseen damage to a property, injury or amount paid

Answer 7

Loss

Question 8

Physical loss to a property with no intervening cause

Answer 8

Direct Loss

Question 9

A consequential loss as the result from a direct loss

Answer 9

Indirect Loss

Question 10

Anything that increases the chance that a loss will occur

Answer 10

Hazard

Question 11

Hazard created by an individual who would be willing to create a loss situation on purpose just to collect from the insurance company. arise from an individuals character

Answer 11

Moral Hazard

Question 12

Hazard created by an individual’s tendency to contribute to a loss through his own irresponsible actions or carelessness

Answer 12

Morale Hazard

Question 13

Hazard that arises from the condition, occupancy, or use of the property itself.

Answer 13

Physical Hazard

Question 14

Sharing
Transfer
Avoidance
Retention
Reduction

Answer 14

Method of handling risk

Question 15

two or more individuals or businesses agree to pay a portion of any loss occurred by any member of the group. Stockholders in a corporation do this.

Answer 15

Sharing

Question 16

eliminating a particular risk by not engaging in a certain activity

Answer 16

Avoidance

Question 17

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

Answer 17

Retention

Question 18

Lessening the chance that a loss will occur, or lessening the extent of a loss if it occurs.

Answer 18

Reduction

Question 19

An agreement between the insured and the insurer

Answer 19

Contract

Question 20

first party

Answer 20

Insured (I am INSURED)

Question 21

second party

Answer 21

Insurer - insurance company

Question 22

Elements of insurable risk

Answer 22

CANHAM
C - Calculable
A - Affordable
N - Non-catastrophic
H - Homogenous
A - Accidental
M - Measurable

Question 23

the tendency for higher-risk individuals to get and keep insurance as compared to individuals that represent an average level of risk

Answer 23

Adverse Selection

Question 24

insurance for insurers

Answer 24

Reinsurance

Question 25

a business formed as a corporation and owned by its stockholders. The corporation is run by a board of directors elected by the storkcholders

Answer 25

Stock Insurer

Question 26

Insurance company owned by its policyholders; the policyholders share in profits made by the company through dividends or reduction in future premiums

Answer 26

Mutual Insurers

Question 27

exist for the benefit of their members and offer insurance as one of the benefits of membership

Answer 27

Fraternal Benefit Societies

Question 28

unincorporated groups of people that agree to insure each others losses under a contract

Answer 28

Reciprocal Insurance

Question 29

an insurer formed for the sole purpose of providing liability insurance for its policyholders

Answer 29

Risk Retention Group

Question 30

a group formed for the sole purpose of obtaining liability insurance for its members

Answer 30

Risk Purchasing Groups

Question 31

means of retaining, rather than transferring risk

Answer 31

Self-insurers

Question 32

The state where a company is incorporated

Answer 32

Domestic

Question 33

company is incorporated in another state or U.S. territory

Answer 33

Foreign

Question 34

company is incorporated in another country

Answer 34

Alien

Question 35

state license for an insurance company

Answer 35

cert. of authority

Question 36

Company that is not authorized to do business in a particular state...

Answer 36

Non-admitted insurer (unauthorized or non-approved too)

Question 37

Insurance sold by unauthorized/non-admitted insurers - if on the state's approved list of insurer's

Answer 37

surplus lines

Question 38

Agent who represents many insurance companies, rather than a single company.

Answer 38

Independent Insurance Agent

Question 39

individuals that represent just one company

Answer 39

Captive ( exclusive ) agents

Question 40

individuals that hire, train and supervise other agents within a specific geographical area

Answer 40

General Agents (GA's) or managing general agents (MGA's)

Question 41

companies whose products are sold by employees, not independent contractors

Answer 41

Direct-Writing Companies

Question 42

relationship where one person is authorized to represent and act for another person, or for a corporation

Answer 42

Agency

Question 43

person authorized to act on behalf of the other

Answer 43

Agent

Question 44

the person on whose behalf the agent acts...

Answer 44

Principal

Question 45

authority made explicit in a producer's written agency agreement with the insurer

Answer 45

Express Authority

Question 46

is not written in the contract, but is assumed to be granted to an agent in accordance with the general business practices...

Answer 46

Implied Authority

Question 47

authority that others believe the agent has. tasks the agent does that a reasonable person would assume as authority, based on the agent's actions and statements

Answer 47

Apparent Authority

Question 48

a person in a position of financial trust

Answer 48

fiduciary

Question 49

the illegal act of mixing personal funds with the insured's or insurer's funds

Answer 49

Commingling