Insurance Exam #2

Front 1

Reasons for Insurance Regulation

Back 1

*Maintain insurer solvency

*Compensate for inadequate consumer knowledge

*Ensure reasonable rates

*Make insurance available

Front 2

The three principal methods used to regulate insurers

Back 2

* Legislation, through both state and federal laws

* Court decisions, e.g., interpreting policy provisions

*State insurance departments

Front 3

domestic insurer

Back 3

domiciled in the state

Front 4

foreign insurer

Back 4

an out-of-state insurer that is chartered by another state, but licensed to operate in the state

Front 5

alien insurer

Back 5

an insurer that is chartered by a foreign country, but is licensed to operate in the state

Front 6

Admitted assets

Back 6

assets that an insurer can show on its statutory balance sheet in determining its financial condition

Front 7

Twisting

Back 7

the inducement of a policy owner to drop an existing policy and replace it with a new one that provides little or no economic benefit to the client

Front 8

Rebating

Back 8

the practice of giving an individual a premium reduction or some other financial advantage not stated in the policy as an inducement to purchase the policy

Front 9

Principle of Indemnity

Back 9

The insurer agrees to pay no more than the actual amount of the loss

Front 10

Purpose of Indemnity

Back 10

To prevent the insured from profiting from a loss

* To reduce moral hazard

Front 11

three main methods to determine actual cash value

Back 11

* Replacement cost less depreciation

* Fair market value

* Broad evidence rule

Front 12

Fair Market Value

Back 12

the price a willing buyer would pay a willing seller in a free market

Front 13

Broad evidence rule

Back 13

that the determination of ACV should include all relevant factors an expert would use to determine the value of the property.

Front 14

Valued policy

Back 14

pays the face amount of insurance if a total loss occurs

Front 15

values policy law

Back 15

requires payment of the face amount of insurance to the insured if a total loss to real property occurs from a peril specified in the law

Front 16

replacement cost insurance

Back 16

there is no deduction for depreciation in determining the amount paid for a loss

Front 17

Principle of insurable interest

Back 17

the insured must be in a position to lose financially if a covered loss occurs

Front 18

purposes of insurable interest

Back 18

* to prevent gambling

* to reduce moral hazard

* to measure the amount of the insured's loss

Front 19

the principle of subrogation

Back 19

substitution of the insurer in place of the insured for the purpose of claiming indemnity from a third party for a loss covered by insurance.

Front 20

purpose of subrogation

Back 20

* to prevent the insured from collecting twice for the same loss

* to hold down insurance rates

Front 21

principle of utmost good faith

Back 21

a higher degree of honesty is imposed on both parties to an insurance contract than is imposed on parties to other contracts

Front 22

Representation

Back 22

statements made by the applicant for insurance

Front 23

Concealment

Back 23

intentional failure of the applicant to reveal a material fact to the insurer

Front 24

warranty

Back 24

a statement that becomes part of the insurance contract and is guaranteed by the maker to be true.

Front 25

declarations

Back 25

statements that provide information about the particular property or activity to be insured

Front 26

three major types of exclusions

Back 26

* excluded perils

* excluded losses

* excluded property

Front 27

conditions

Back 27

provisions in the policy that qualify or place limitations on the insurer's promise to perform

Front 28

named insured

Back 28

the person/s named in the declarations sections of the policy

Front 29

first named insured

Back 29

certain additional rights and responsibilities that do not apply to other named insurers

Front 30

endorsements

Back 30

a written provision that adds to, deletes from or modifies the provisions in the original contract

Front 31

rider

Back 31

a provision tha amends or changes the original policy

Front 32

deductible

Back 32

a provision by which a specified amount is subtracted from the total loss payment that otherwise would be payable

Front 33

other insurance provisions

Back 33

to prevent profiling from insurance and violation of the principle of indemnity

Front 34

individual medical expense insurance

Back 34

protects an individual or family for covered medical expenses because of sickness or injury

Front 35

major medical insurance

Back 35

designed to pay a high percentage of covered medical expenses incurred by an insured who has a catastrophic illness/ injury

Front 36

Health savings account (HSA)

Back 36

a tax-exempt account established exclusively for the purpose of paying qualified medical expenses

Front 37

advantages/ disadvantages of employee benefits

Back 37

Advantages:

* group discounts

* tax advantages

Disadvantages

* high expense

* employees don't appreciate

Front 38

total compensation

Back 38

total compensation equal direct wages plus employee benefits plus social insurance

Front 39

Financing: Noncontributory

Back 39

employer pays all

Front 40

Financing: contributory

Back 40

employee pays part of the cost

Front 41

master contract

Back 41

formed between the group and insurer

Front 42

group term life insurance

Back 42

provides low-cost protection to employees

coverage is yearly renewable term

Front 43

group accidental death and dismemberment insurance

Back 43

pays additional benefits if the employee dies in an accident or incurs certain types of bodily injuries

Front 44

cafeteria plans

Back 44

allows employees to select those benefits that meet their specific needs

Front 45

vesting

Back 45

the employees right to the employer's contribution or benefits attributable to the contributions if employment terminates prior to retirement

Front 46

defined- benefit plan

Back 46

the retirement benefit is known, but the contributions will vary depending on the amount needed

Front 47

pension benefit guaranty corporation

Back 47

a federal corp that guarantees the payment of vested benefits to certain limits if a private pension plan is terminated

Front 48

cash-balance plan

Back 48

a defined benefit plan in which the benefits are defined in terms of a hypothetical account balance

Front 49

defined- contribution plan

Back 49

the contribution rate is fixed but the actual retirement benefit is variable.