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37 Cards in this Set
- Front
- Back
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Insurer |
Insurance company Example: American Family Insurance |
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Insured |
The person covered by the policy Example: Family members under the insurance |
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Producer |
The person who represent the Insurance company in the sales Example: You |
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Agent |
The person who manages the office or department of the sales Example: Manager |
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Insurance Policy |
The agreement between the insurer and insured is established in a contract of insurance or policy |
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Insurance (Legal Definition) |
A social device used for spreading financial loss among a large group of people |
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Insurance |
The transfer of risk to the insurance company |
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Risk
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Chance of loss
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2 types of Risk
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1) Speculative Risk
2) Pure |
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Speculative Risk |
A chance for gain and loss Ex: Gambling (might get money might not) |
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Pure |
A chance of loss only Ex: Death and Sickness ( lose money) |
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Which type of Risk is insurable? Speculative Risk? or Pure Risk? |
Pure Risk is insurable because it is a type of loss (Defines the legal term for Insurance) |
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Which type of Risk is not insurable? |
Speculative Risk |
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How insurance works |
The insurance company or insurer receives small amount of money called premium from each of the large amount of people buying insurance. A large uncertain lost is traded for a small uncertain lost
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Large certain lost |
The $1 million life insurance policy |
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Small uncertain lost |
The monthly premium paid by the people who bought the insurance |
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Loss |
Reduction of a value of a assent |
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Claim |
To be paid for a loss the insured must file Example: When you lose someone you, to obtain the money you file a death certificate to receive the money. |
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Reason why people buy insurance |
Because there is risk - uncertainty |
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Risk Management |
1) Retain Risk by self insure or deductible 2) Avoid Risk
3) Reduce Risk 4) Transfer Risk by buying insurance |
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Self Insured |
Don't buy insurance. To post a statement that you have a certain amount of money in the bank |
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Deductible |
Dollar amount the insured pays - The higher the deductible the lower the risk |
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Avoid the risk |
Sell the car and buy a bike to avoid risks |
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Reduce the risk |
1) Take a defensive driving class. 2) Get physical exams. |
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Transfer the risk |
Most important: Buy insurance or Sue |
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When someone buys insurance what are they doing? |
They are transferring the risk to the insurance company for a premium. |
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Negligence |
Someone who fails to act as a reasonable person. You have the right to sue them and you win, they are bound to pay you for the loss. |
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Who creates these products |
Insurance Company
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Who sales the insurance |
You (Agent) |
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The law of large numbers |
Statistics: The more people you insure the better your statistic (guess) numbers become. Example: you have 10,000 people insured in group A and you have 10 people insured in group B. Group A would have a higher chance of having more clams during different time periods because Group A has more people and better statistics data. |
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Predictable loss |
The larger the number of separate risks combined into one group the more predictable of future loss of that group |
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Life Insurance |
2 party contract: 1) Insurer - Insurance company 2) Insured - The member who is in the policy - Sometimes - 3) Owner - The person who purchase the insurance |
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Who can you can buy insurance on? |
Those you have insurable interest |
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Who falls in the category of insurable interest? |
Self, immediate family, kin, parents, spouses, partners in the business. |
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When is insurable interest applied? |
During the time of application |
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Will the insured know if the owner bought insurance policy for the insured? |
Yes, the insurer will call the insured to evaluate the insured and test their health. |
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Does the owner have to reproof of insurable interest at the time of loss? |
No |
