Michigan property

When would a misrepresentation on an insurance application be considered fraud?

When the misrepresentation is intentional and leads to a loss.

Wagering at a sporting event is known as what type of risk?

Speculative risk.

What are the three types of agent authority?

Express, implied, and apparent authority.

What type of insurer is formed under the laws of another state?

Foreign insurer.

What are the methods of managing risk?

Avoidance, reduction, retention, and transfer.

A tornado that destroys a property would be an example of what?

A peril.

What type of authority is based on the agent’s actions, or words?

Apparent authority.

What are the five characteristics of an ideally insurable risk?

Due to chance, measurable, affordable, limited to a large number of exposure units, and subject to loss.

What is the term for the causes of loss insured against in an insurance policy?

Named perils.

What is consideration on the part of the insurer?

The promise to pay for covered losses.

Insurance contracts are aleatory in nature. What does that mean?

The outcome is uncertain and depends on chance.

What does the term reasonable expectations mean in insurance?

Insured parties are entitled to coverage based on the policy language and purpose.

What does indemnify mean in insurance?

To restore the insured to the financial position held before the loss.

What document is required for an insurance company to transact insurance?

Certificate of Authority.

In insurance contracts, when does acceptance usually occur?

When the insurer issues a policy.

What does the term unilateral contract mean?

Only one party makes a legally enforceable promise.

What do individuals use to transfer their risk of loss to a larger group?

Insurance.

A situation in which a person can experience only a loss and no gain presents what type of risk?

Pure risk.

What is consideration in an insurance contract?

Something of value exchanged between parties, typically the payment of premiums.

What is a warranty in an insurance contract?

A statement that is guaranteed to be true and becomes part of the contract.

What are the four elements of an insurance contract?

Offer, acceptance, consideration, and legal purpose.

Insurers are classified according to their domicile. What are the three types of insurers?

Domestic, foreign, and alien insurers.

In insurance contracts, when is the offer usually made?

When the applicant submits an application.

Conditions that increase the chance of a loss are known as what?

Hazards.

What are the three types of hazards?

Physical, moral, and morale hazards.

In the agent/insurer relationship, who is considered the principal?

The insurance company.

According to the Law of Agency, who represents the principal?

The insurance agent.

What provision states that if a policy allows for greater benefits than the financial loss incurred, only the financial loss is covered?

The principle of indemnity.

If an insurer holds a Certificate of Authority, it is known as what type of insurer?

Authorized or admitted insurer.

What is a risk?

The uncertainty regarding loss.

ABC insurance company receives an incomplete application and issues the policy anyway. Six months later ABC realizes the missing information. What term is used that prevents ABC from forcing the policyowner to answer further questions?

The principle of estoppel.

A situation in which a person can only lose or have no change represents

a pure risk.

Which of the following types of insurers is owned by stockholders?

A stock insurer.

An agent is acting ethically in all of the following situations EXCEPT

keeping customers best interests in mind

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe?

The characteristic of "conditionality."

What is a material misrepresentation?

A false statement made by an applicant that affects the insurer's decision to provide coverage.

Which of the following produces evaluations of insurers' financial status often used by state departments of insurance?

Am best

Insurance is a contract by which one seeks to protect another from

Hazards

What is reinsurance?

an agreement between and originating insurer and a ceding insurer (current insuerer and a future)

The risk of loss may be classified as

pure risk and speculative risk

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

contracts of adhesion

An insured purchased an insurance policy 5 years ago. Last year, the insured received a dividend check from the insurance company that was not taxable. This year, the insurer did not send a check. From what type of insurer did the insured purchase the policy?

mutual

Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT

the loss may be intentional

An insurance company assures its new policyholders that their premium costs will not increase for a period of at least 5 years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next 2 years. What term best describes this act?

fraud

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?

aleatory