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42 Cards in this Set

  • Front
  • Back
What is the uncertainty or chance of a loss occurring
Risk
Two types of risk
Pure and speculative
It refers to situations that can only result in a loss or no change
Pure risk
It involves the opportunity for either loss or gain
speculatiove risk
a unit of measure used to determine rates cahred for insurance coverage
exposure
a large number of units having the same or similar exposure to loss are referred to as
homogeneous
What are conditions or situations that increase the probability of an insured loss occurring
hazard
3 types of hazards
--physical
--moral
--morale
the causes of loss insured against in an insurance policy
Perils (cause)
what is defined as the reduction, decrease or disappearance of value of the person or property insured in a policy
loss
5 methods of handling risk
-share
-transfer
-avoidance
-retention
-reduction
method of handling risk that means accepting the risk and confronting it if and when it occurs
retention
what 6 elements must be present to create an insurable risk
--loss must be due to chance
--loss must be definite and measurable
--loss must be predictable
--loss exposure to be insured must be large
--insurance must not be mandatory
--loss cannot be catastrophic
an insurable risk involve a loss that is definite as to what 4 things
cause
time
place
amount
the insuring of risks that are of poorer class than the average risk
adverse selection
Underwriters protect the insurer against adverse selection by what 3 methods
--restriction of coverage
--acceptance only at higher rate
--refusal to accept risk
the principle stating that the larger the number of similar exposure units considered, the more closely the loss reported
law of large numbers
a form of insurance whereby one insurance company (reinsurer) in consideration of a premium paid to it, agrees to indemnify another insurance company (ceding co.) for part or all of its liabilities from insurance policies it has issued
reinsurance
what does reinsurance protect against
catastrophic losses
when reinsurance is purchased on a specific policy, it is classified as what
facultative reinsurance
when an insurer has an automatic reinsurance agreement between itself and the reinsurer in which the reinsurer is bound to accept all risks ceded to it is classified as
reinsurance treaty
types of insurers
--stock companies
--mutual companies
--fraternal benefit societies
--reciprocals
--lloyd's associates
Insurance companies owned by the stockholders that share in any profits and losses.
stock companies
insurance companies owned by the policyholders and profits are returned to the policyholders as non-taxable dividends(refund of premuim)
MUTUAL COMPANIES
insurance company formed to provide insurance for members of an affiliated lodge, religious org. or fraternal org. with a representative form of goverment
fraternal benefit societies
an insurance that results from an interchange of reciprocal agreements of indemnity among person known as subscribers.Company put ino effec through and attorney-in-fact
reciprocal insurance company or exchange
an insurance company that has qualified and received a Certificate of Authority from the Department of Insurance
Admitted insurer
an insurance company that has not received a Certificate of Authority from the state
nonadmitted
What does an insurance company receive from the Department of Insurance allowing it to conduct business in the state
Certificate of Authority
when must a policyholder have an insurable interest in the insured
at time of application
an insurance company that is incoporated in this state
domestic insurer
an insurance company that is incorporated in another state
foreign insurer
an insurance company that is incorporated outside the US>
alien insurer
an independent entrepreneur, empowered by the insurer that he represents to sell life insurance in a specified territory and appoint subagents
general agent
a sales force is supervised by a branch manager and is a salaried employee of insurer
branch office system
an arrangement between the insurer and selected agents to produce business for the insurer
person producing general agents
an agent will always be deemed to represent who in a transaction
insurer
3 types of agent authority
--expressed
--implied
--apparent
the responsibility tha an agents has for the applicant is called
fiduciary
an agreement between two or more parties enforceable by law
contracts
what is the consideration on the part of the applicant
payment of premuim and health representation made in application
what is the consideration of the part of the insurer
the promise to pay in the event of loss