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53 Cards in this Set
- Front
- Back
Who should be responsible for formulating the objectives and risk |
The client is ultimately responsible for preservation of his or her own |
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In the second step of the risk management process, “gather pertinent |
insurance policy checklists |
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In the first step of the risk management process, “identify risk |
This step involves deciding precisely what the client wants from his or |
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Why is it important to obtain thorough information on the client and |
Virtually all of the client’s assets and activities may result in liability. All |
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How do you identify risk exposures facing the client? |
The planner carefully reviews the client data, looking for risk |
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Why is monitoring, evaluating, and updating the risk management |
First, things change. Both risks and techniques for treating those risks |
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What are the basic rules of risk management? Explain what is meant |
1. Don’t risk more than you can afford to lose. - Don’t transfer risk where the probability of loss is very high. |
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What is the “large-loss principle”? |
Essential coverages (those covering exposures with potentially |
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What is the “law of large numbers”? Why is it considered the basis of |
The law of large numbers states that the observed frequency of an event |
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What are the four elements of an insurable risk? |
There must be a sufficiently large number of homogeneous |
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How do the four elements of an insurable risk help prevent adverse |
Large numbers provide the quantity of risk exposures necessary to |
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What is underwriting and what is its purpose? |
Underwriting is the process of selecting and classifying risks. This |
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What are the practical implications of the underwriting process? |
The most important practical implication is that there are definite limits on the amount and type of insurance that can be obtained for the |
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What is the agent’s role in the underwriting process? |
The agent’s role is to submit business that will produce profit for the |
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What are the various underwriting policy regulations that the underwriter applies to incoming applications? |
lines of insurance that will be written |
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Post-selection underwriting involves not only reviewing applications |
The insurer must give advance notice of an intent to refuse renewal. |
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What five sources of information are used in the underwriting of |
the application |
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Why is risk avoidance sometimes considered a negative technique? |
Nothing is actively done to deal with risk. Furthermore, the activity |
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How does voluntary risk retention differ from involuntary risk |
-Voluntary risk retention: characterized by recognition that risk exists; a -Involuntary risk retention: the individual exposed to risk does not |
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What is probability theory? |
Probability theory is a body of knowledge concerned with measuring |
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What is adverse selection, and why is it a problem? |
Adverse selection is the tendency of poorer-than-average risks to |
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Why is “self-insurance” a misleading term? |
The insurance mechanism essentially consists of a transfer of risk or |
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criminal acts |
public wrongs |
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intentional torts |
Such torts are infringements of the rights of others resulting from |
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trespasser |
A trespasser is a person who comes onto property without right |
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licensee |
A licensee is a person who comes onto property with the |
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invitee |
An invitee is a person who has been invited into or onto the |
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survival of tort actions |
A cause of action for most torts survives the death of either the |
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attractive nuisance |
A high degree of care is imposed on a land occupier for certain |
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What is the collateral source rule and what prevents a plaintiff from |
The collateral source rule states that a tortfeasor (one who |
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negligence |
(unintentional tort) This term refers to wrongs resulting from negligence or |
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negligence per se |
Negligence per se describes a situation where the standard of |
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absolute liability |
If a person maintains an extra-hazardous condition (such as |
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vicarious liability |
This is imputed liability: one person is held liable for the negligent |
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res ipsa loquitur |
Literally, “the thing speaks for itself.” |
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assumption of risk |
This refers to risk assumed by the injured party. If one party |
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contributory negligence |
Any negligence on the part of the injured party, even though slight, |
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comparative negligence |
This is an alternative to contributory negligence. Comparative |
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last clear chance |
This is a modification of the contributory negligence rule. |
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Does liability insurance cover liability for all types of conduct? |
No. It is generally against public policy to protect an individual from |
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What type of insurance is available to an individual accused of a |
There is no insurance that will protect an individual from financial |
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five legal requirements for an enforceable insurance contract. |
1. offer and acceptance There must be an offer by one party, and the 2. consideration Each party must give the other something of 3. legal object The purpose of the contract must be legal 4. competent parties The parties to the agreement must be capable of 5. legal form If there are legal requirements concerning the |
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What legal concepts or activities is a planner likely to encounter in his |
contract law |
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contract law |
The planner could be sued for failing to deliver services or plans |
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law of agency |
A planner who is part of a financial planning firm may be |
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professional liability |
A planner makes recommendations to a client based on a “gut |
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waiver |
Waiver occurs when a party, with full knowledge of the material |
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estoppel |
Estoppel is a doctrine that prevents a party from asserting a right |
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parol evidence rule |
Under this rule, when the parties put their agreement into a final, |
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waiver provision |
To avoid liability from an agent offering the client terms not |
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rescission |
Rescission is an equitable remedy by which the contract is |
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reformation |
Reformation is an equitable remedy by which the written |
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Briefly explain the difference between a void contract and a voidable |
A void contract is not a contract at all. It is not enforceable
A voidable contract is one where one party has the option of |