Ny Life Insurance Test Review(2015)

Front 1

Insurance transfers the risk of loss from ___ to ___?

Back 1

Individual

Insurance Company

Front 2

_____ is the uncertainty or chance of a loss occurring.

Back 2

Risk

Front 3

Hazards are conditions or situations that ________the probability of an insured loss occurring.

A) Increase

B) Decrease

Back 3

A) Increase

Front 4

A hazard that exists because of past medical history, or a condition at birth such as blindness

A)Physical hazard

B) Moral Hazard

C) Morale Hazard

Back 4

A

Front 5

A hazard that exists due to applicants who may lie on an application for insurance.

A)Physical hazard

B) Moral Hazard

C) Morale Hazard

Back 5

B

Front 6

A hazard that exists due to a persons carelessness.

A)Physical hazard

B) Moral Hazard

C) Morale Hazard

Back 6

C

Front 7

The CAUSES of loss insured against in an insurance policy.

Back 7

Perils

Front 8

The reduction, decrease, disappearance of value of the person or property insured in a policy. This is caused by a named peril.

Back 8

Loss

Front 9

_____ is a unit of measure used to determine rates charged for insurance coverage

Back 9

rates

Front 10

Large number of units having the same or similar exposure to loss is known as _____

Back 10

homogeneous

Front 11

Risk Avoidance

Back 11

A method of dealing with risk is to eliminate the exposure to loss.

Ex. to risk being killed in plane crash, don't go on planes

Front 12

Risk Retention

Back 12

Also called self-insurance.

Reduces expenses, increases control of claim reserving and claims settlements

Front 13

Risk Sharing

Back 13

Method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within the group.

Front 14

Risk Reduction

Back 14

The idea of lessening the possibility or severity of a loss. Reduction would include actions such as installing smoke detectors in our homes.

Front 15

Risk Transfer

Back 15

The most effective way to handle risk, insurance is the most common method

Front 16

Pure Risks

Back 16

Risks that are insurable. Only has the chance of loss no chance of gain

Front 17

Characteristics of insurable (pure) risks:

Back 17

Due to Chance: loss is outside of insureds control

Definite and measurable: a loss that is specific as to the cause, time, place and amount.

Statistically Predictable: Insurers must be able to estimate the average frequency and severity of future losses and set appropriate premium rates.

Not catastrophic: Insurers need to not lose more than gain.

Randomly selected and large loss exposure: there must be a sufficiently large pool of the insured that represents a random selection of risks.

Front 18

Law of large numbers

Back 18

states the larger number of people with similar exposure to loss, the more predictable the loss will be.

Front 19

Adverse Selection

Back 19

The insuring of risks that are more prone to losses than the average risk.

Front 20

Difference between government insurance companies and private insurance companies

Back 20

Government programs are funded with taxes and serve national and state social purposes.

Private policies are funded by premiums

Front 21

Stock companies

Back 21

Owned by stockholders->they provide that capital to operate the insurance company->They share in the profits/losses.

Traditionally issue nonparticipating policies.

Front 22

Nonparticipating policies

Back 22

Issued by stock companies. Policy owners do not share in profits/losses of company.

In stock companies (where they are found most) they do not pay dividends to policy owners. They do pay taxable dividends to stockholders though.

Front 23

Mutual Companies

Back 23

Owned by policy owners. Pay out dividends because they are issue Participating policies. These return of premiums(dividends) are non-taxable.

Front 24

Fraternal benefit society

Back 24

Organization formed to provide insurance benefits for members of an affiliated lodge. Sell only to their members.

ex. religious organizations

Front 25

Lloyd's associations

Back 25

deals with PROPERTY INSURANCE FIELD

Front 26

Certificate of authority

Back 26

A license granted to insurers so they can transact business in a specific state.

Front 27

Authorized/admitted vs unauthorized/nonadmitted

Back 27

A insurer who has obtained a certificate of authority for a certain state is considered to be authorized or admitted into the state as a legal insurer. Those who have not been approved are considered nonadmitted/unauthorized.

Front 28

Location of incorporation (domicile)

Back 28

the place where insurance an insurance company does business

Front 29

Domestic Insurer

Back 29

an insurance company that is incorporated in its own state

Front 30

Foreign Insurer

Back 30

An insurance company that is incorporated in another state or territorial possession

Front 31

Alien Insurer

Back 31

An insurance company that is incorporated outside of the U.S.

Front 32

Independent Agency System

Back 32

-1 independent agent, represents several companies

-commissions on personal sales

Front 33

Exclusive Agency System

Back 33

-1 agent represents 1 company

-commissions on personal sales

Front 34

General Agency System

Back 34

General agent-entrepeneur represents 1 company

-compensation and commissions

Front 35

Managerial System

Back 35

-Branch Manager (supervises agents)

-Salaried

Front 36

Direct Response Marketing System

Back 36

-NO AGENTS

-Consumers apply directly to the company (internet, phone, etc.)

Front 37

Reinsurance

Back 37

A contract under which one insurance company indemnifies another insurance company for part or all of its liabilities. Protects insurers against catastrophic losses.

Front 38

Facultative reinsurance

Back 38

when insurance is purchased on a specific policy it is called FACULTATIVE

Front 39

Reinsurance treaty

Front 40

Agent/Producer

Back 40

An individual licensed to sell, solicit or negotiate insurance contracts on behalf of the principal (insurer/company).

Front 41

Law of agency

Back 41

defines the relationship between the insurer/company/principal and the agent.

Says agent/producer acts within the scope of authority of the insurer/company.

Front 42

3 types of agent authority:

express

implied

apparent

Back 42

express- The authority written in the agents contract between the agent and the principal.

implied- Authority that is not written in the contract. Agent is assumed to have these in order to transact business.

apparent- Appearance or the assumption of authority based on the actions words or deeds of the principal.

Front 43

Fiduciary responsibility

Back 43

The agent must be trusted (fiduciary=someone in a position of trust)

Front 44

Code of ethics

Back 44

Market conduct describes the way companies and producers should conduct their business, this is the code of ethics.

Front 45

Contract

Back 45

An agreement between two or more parties enforceable by law.

Front 46

Essential elements of a legal contract:

Back 46

Agreement - offer and acceptance: Applicant makes offer when submitting the application. Acceptance occurs when insurer's underwriter approves the application and issues policy.

Consideration: Something of value each side gives each other.

Competent parties: Parties must be capable of entering contract (ex.not on drugs or alcohol)

Legal Purpose: To ensure legal purpose of life insurance policy must have both insurable interest and consent.

Front 47

Aleatory Contract

Back 47

Exchange of unequal amounts or values. Insurance contracts are aleatory

Front 48

Personal Contract

Back 48

Insurance contracts are personal, because they are between the company and an individual.

Front 49

Contract of adhesion

Back 49

Prepared by one of the parties and accepted or rejected by the other party. Insurance contracts are "take it or leave it"

Front 50

Unilateral contract

Back 50

Only one of the parties to the contract is legally bound to do anything.

Front 51

Conditional contract

Back 51

Requires that certain conditions must be met by the policy owner and the company in order of the contract to be executed.

ex. insured must pay premium and provide proof of loss in order for the insurer to cover a claim

Front 52

Any ambiguities in a contract of adhesion

Back 52

Because the insurance company has to draw up a contract and the insured has to adhere to the contract. If there is any ambiguity then the contract should be interpreted in favor of the insured.

Front 53

Indemnity (Reimbursement)

Back 53

Beneficiary is permitted to collect only to the extent of the financial loss, not allowed to gain financially.

Makes a person whole again

Front 54

Utmost good faith

Back 54

Implies there will be no fraud, misrepresentation or concealment between parties

Front 55

Representations

Back 55

Statements believe to be true to the best of ones knowledge.

Front 56

Misrepresentations

Back 56

Lies, misrepresentations are put on applications. Misrepresentations could void a contract.

Front 57

Warranty

Back 57

An absolutely true statement upon which the validity of the insurance policy depends.

Front 58

Rescission / Rescinded

Back 58

Rescission is the canceling of the policy by the insurance company due to a lack of information from the policy owner. The insurer is said to have RESCINDED the policy, from the act of RESCISSION

Front 59

Concealment

Back 59

The legal term for the intentional withholding of information of a material fact that is crucial in making a decision. May void a policy

Front 60

Fraud

Back 60

intentional misrepresentation

Front 61

Waiver and Estoppel

Back 61

Waiver is the voluntary act of relinquishing a legal right, claim or privilege. Estoppel is a legal process that can be used to prevent a party to a contract from re-asserting a right or privilege after that right or privilege has been waived.