Risk Management And Insurance

Front 1

Principle of Indemnity

Back 1

states the insurer agrees to pay no more than the actual amount of the loss. The insured should not profit from a covered loss but be restored to previous financial position

Front 2

The price a willing buyer would pay a willing seller in a free market is an example of_____

Back 2

FAIR MARKET VALUE

Front 3

Fair Market Value

Back 3

The price a willing buyer would pay a willing seller in a free market is an example of_____

Front 4

A rule outlining the guidelines insurers must go about determining the value of lost, stolen or damaged property.

Back 4

Broad Evidence RULE

Front 5

RETENTION

Back 5

is not a major risk-control technique

Front 6

Risk Control Techniques

Back 6

avoidance, loss reduction, and loss preventions

Front 7

Illegal Practice of inducing a policyowner to drop an existing policy in one company to take out a new one in another through misrepresentation or imcomplete information

Back 7

TWISTING

Front 8

I drink and drive and I can be arrested for DUI if I drive home but I drive home anyway,,this is what kind of risk

Back 8

subjective risk

Front 9

what does a CHIEF Risk Officer do?

Back 9

Manages firms financial risk via hedging techniques, financial derivatives, futures contracts, options and other financial instruments

Front 10

Bad/high risk driver seeking a standard rate

Back 10

Adverse selection

Front 11

transferring risk from insured to the insurer

Back 11

risk transfer

Front 12

this type of risk affects the entire economy or large numbers of person or groups within the economy

Back 12

NON-diversifiable risk

Front 13

affects a small group of people

Back 13

diversifiable risk

Front 14

a corporation owned by policy owners: NEW YORK LIFE

Back 14

Mutual Insurer

Front 15

Corporation owned by stock holder

Back 15

stock insurer

Front 16

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

Back 16

deductible

Front 17

the number of insurers who have become insolvent since 1976

Back 17

600

Front 18

principle of indemnity states that the insured should be able to profit from a loss

Back 18

FALSE

Front 19

Pure risk is a situation in which either profit or loss is possible

Back 19

False

Front 20

THe principle of insurable interest states that the insured must be in a position to lose financially if a covered loss occurs

Back 20

TRUE

Front 21

Siblings usually are not deemed to have an insurable interest life or lives of brothers and sisters

Back 21

false

Front 22

Production refers to the process of selecting, classifying , and pricing applicants for insurance

Back 22

FALSE

Front 23

Provisions that are required by state law to safeguard the interests of the policy owner and the beneficiary for life insurance contracts

Back 23

incontestable clause, dividend clause, one month grace period for premium payments, suicide clause, policy lapse and reinstatement clause, extended term and paid up insurance clause, misstatement of age adjusmant clause

Front 24

six requirements for an Ideal insurable risk include

Back 24

large number of exposure units,loss must be accidental and unintentional, loss must be determinable and measurable, loss should not be catastrophic, chance of loss must be calculable, premium must be economically feasible

Front 25

Law of Large Numbers

Back 25

the more units exposed the more closely the actual chance of loss canbe predicted.

Front 26

What is Risk Management

Back 26

a process that identifies loss exposures faced by an organization and selects the most appropriate techniques for treating such exposures.

Front 27

The steps in risk managment

Back 27

identify potential risks and loss exposures, measure and analyze these exposures, select appropriate combination of techniques for treating loss exposures, implement and monitor the risk management program

Front 28

What is the McCarran-Ferguson Act?

Back 28

1944 the Supreme Court rules that insurance is an interstate commerce.

Front 29

Pros of McCarran-Ferguson ACT

Back 29

Promotes capitalism by allowing smaller firms access to to the insurance industry, alllows companies to pool data, prevents price fixing and monopolies

Front 30

cons of MCCarran-Fergusson ACT

Back 30

Some State Regulations Are Insufficient, Agents need multiple licenses to practice in multiple states.

Front 31

Difference betweern Per Capita and Per Stirpes

Back 31

Both are common terms used in estate planning.
PER capita: I 2 kids, Mary and JOhn, Mary has five children, John has none, My will states I want my estate divied up per capita when i die. I die and Marys family becomes rich while John gets a small share,
PER STIRPES: My surviving descendantes get my estate per stirpes,,then My kids get there fair share

Front 32

Legal doctrine that prevents twisting or bending of fact

Back 32

Estoppel

EXAMPLE: I say that my clients can be a few days late for payment of premium and then the policy lapses when they are a couple of days late,,,this would be estopped

Front 33

Describe Insolvency

Back 33

an insurer is unable to pay claims

Front 34

Key Employee Valuation Includes:

Back 34

financial loss based on wht the employee would have contributed to the future success of firm
2. adjust financial consequences for the timing of those lost contributions
3. Account for trends in the employee's contributions
4. Realize in every case a key employees contributions to the firm will terminate at some point via death disability resignation and retirement
5. calue can be replaced by rehiring or training a replacement

Front 35

Dividend Options

Back 35

1. Cash, 2. Reduced Premiums, 3. Dividend Accumulations at interest, and additional paid up insurance,,,or purchase term insurance

Front 36

Joint Life Insurance

Back 36

also called multi-life insurance,,,is first to die coverage on two or more insureds,,the joint life plan is often a better alternative than two single plans

Front 37

What does MEC stand for

Back 37

Modified Endowment Contracts

Front 38

MEC EXPLAINED

Back 38

The federal tax law definition of "life insurance" limits your ability to pay certain high levels of premiums. In addition, if your cumulative premium payments exceed certain amounts specified under the Internal Revenue Code, your policy will become a Modified Endowment Contract (MEC). If your policy is a MEC, the tax treatment of any death benefit provided under the contract will still qualify for income tax free treatment but you may be subject to additional taxes and penalties on any distributions from your policy during the life of the insured.

Front 39

The Seven Pay Test

Back 39

it is a limitation on the total amount you can pay into your policy in the first seven years of its existence. The test is designed to discourage premium schedules that would result in a paid-up policy before the end of a seven-year period.

Front 40

Single Premium Insurance

Back 40

Lump Sum Premium

Front 41

Buy-Sell Agreements

Back 41

a legal contract restricting the right to dispose of a business interest to specified parties according to specified terms. Typically, this arrangement requires a sale of the business interest, at a formula-determined price, upon one or more of the following trigering events