Insurance

How many years are numbers listed on the Do Not Call list

5 Years

When does the notice to the applicant regarding the Fair Credit Reporting Act need to be given?

At the time of application

The Insurer seeking reinsurance is the ______, while the insurer assuming the risk is the ______.

ceding insurer, reinsurer

What is actual or expressed authority?

When an agent’s authority is defined in the agent’s contract

An exclusive or captive agency employs ______ agents who agree to market products of _____ insurer.

independent, one

Two basic types of reinsurance

Facultative and Automatic

Direct agents employ _____ agents

Captive

Who does a broker represent?

The consumer

Who issues participating insurance policies?

Mutual Companies

How many days must Do Not Call List numbers be removed?

31 Days

What is automatic reinsurance?

Reinsurance that does not allow the reinsurer to reject the risk.

Who manages a reciprocal?

An attorney-in-fact

An unincorporated organization in which members insure one another is known as ______

Reciprocal

If a person needs to obtain coverage for a substandard or unusual high risk, what kind of broker would he need?

Surplus Lines Broker

What is implied authority?

Authority not specifically defined in the contract but considered to be an extension of regular duties

What term describes a business that assumes the total risk of potential losses?

Self-Insured

Which type of reinsurance allows the reinsurer to reject the risk?

Facultative Reinsurance

Apparent Authority

When the public merely perceives an agent as having a type of authority

Primary duties of an underwriter

Assess risks, approve or deny applications, determine premiums, and protect the insurer against adverse selection.

Which type of insurer is owned by its policyholders?

A mutual comapny

Insurance policies are contracts of what?

Contract of adhesion

A person in a position of trust, with collected premiums, is referred to as?

Fiduciary

Risk

Uncertainty or chance of financial loss

The offer and acceptance is also known as

The agreement

Loss Exposure

A hazardous condition brought about by the nature of an insured’s activities

Estoppel

When an insurer fails to void a contract and still must accept a claim.

Error and omission

An unintentional error or honest mistake by a producer

Which two legal principles prevent an insurer from denying a claim?

Waiver and Estoppel

Who develops the language in a one-sided, unilateral contract?

Written by the insurer

Pure Risk

The only risk that can by insured

Purpose of insurance (transfer of risk)

To restore a person to the same financial position that existed prior to the loss (indemnity)

Four elements of an enforceable contract

Offer and acceptance, consideration, competent parties, and legal purpose

A conditional contract

Requires both parties to satisfy terms before it can be executed

Consideration

An exchange of values between two parties

Warrenty

A statement that is guaranteed to be absolutely true

Insurable risk

Accidental, measurable, and definable

Peril

Cause of a loss

Which type of uninsurable risk provides the chance for financial gain

Speculative Risk

Representations

Statements made by an applicant when answering questions about the application

Contract of Adhesion

An insurance policy drafted by an insurer and accepted/adhered to by an applicant

A contract that pays a large amount in return for a smaller fee

Aleatory Contract

What happens to an insurance contract if an applicant makes a material misrepresentation

Contract is voided

Adverse Selection

When an insurer approves coverage for more bad risks than good risks

What does an insurer receive in return of assuming risk

Premium

Three types of hazards

Physical, moral, morale

5 Methods of Risk management

Avoidance, retention, sharing, reduction, transfer

Combined Ratio

Is an insurer’s total loses and operating expenses, divided by earned premiums

Any endorsements must be

Attached to the policy

Substandard Risk

Higher than average risk

Preferred risk

Better than average risk

Risks that have high exposure to loss

Adverse Selection (floods)

Rate

The price paid per unit of coverage

Contents of total premium

Earned and Unearned Premium

Negligence

When an individual violates the expectations of a prudent person

The Insuring Clause

A summary of the entire contact

Insurable Interest

When an insured has a financial exposure

When does someone become liable

When they cause bodily injury or property damage to someone

6 parts of a property and casualty policy structure

Definitions, Declarations, Insuring Agreement (promises), Conditions (rights and duties), Exclusions (perils not covered), Endorsements

Actual Cash Value

A loss valuation: Replacement Cost minus Depreciation

Special Perils

Open Perils

Underwriting

Making certain that a premium is adequate for the loss exposure

Moral Hazard

When an insured Acts in a way that makes the possibility of a loss more likely

Vicarious Liability

A responsible person pays damages caused by another person

4 Elements of negligence

Duty, Breach, Proximate Cause, Damages

Unearned Premium

Premiums paid for insurance coverage that is not provided

Salvage Value

When an insurer pays a total loss, the damaged property is owned by the insurance comapany

When loss occurs, an insureds must do 3 things (CPR)

report the Claim, protect the undamaged Property, coopeRate with the company claims professionals

Pro Rate Refund

When an insurer cancels the policy

Short Rate Refund

When an insured cancels a policy

Earned Premiums

Premiums that an insurer is entitled to

Arbitrations Clause

Differences in property loss claim amounts may be settled using appraisal

Functional Replacement Cost

Pays a claim when old, obsolete, antique, or custom material or methods are no longer feasible

The higher the deductible

The lower the premium

An insurance company can settle a claim by

Repairing or replacing it

Split Limits

Separate amounts available for separate coverage for one Occurrence (per person / per occurrence)

Subrogation

The insurance company has the right to recover from the third party causing the loss

Solvent

I am financially strong

Vacant

No people No Stuff

Occupancy

No people

Bailee

Has care, custody, and control of an insureds property at time of loss

Where in the contract does it say an insurer makes its promise to pay benefits

Insuring clause

3 ways to calculate each companies portion of settlement when “other insurance” is involved in a loss.

Primary/Excess (auto owners policy is primary and operators policy is secondary), Pro Rate(% of loss is based on % of total coverage), contribution by equal shares (each company pays equally until policy limit is paid out)

Compensatory Damages

Compensation to injured party, specific billed amounts

Assignment

Transfer of ownership (prohibited in property contracts)

Deductible

First applied towards a claim

Liberalization

When the insurer amends the policy and broadens coverage at no additional premium

Duty to Defend

Pays attorney fees, court costs, and costs of investigation,no maximum dollar amount

First named insured has 5 rights an duties

Receive cancellation notice, nonrenewable notices, premium refunds, must provide notice of loss and pay premiums

Aggregate Limit

Total Amount a policy will pay for all covered loss in a policy limit, resets at policy renewal for commercial and after each loss for personal

Coinsurance Clause

Requires the insured’s policy limit must equal or exceed a minimum specified amount

Who pays the cost of the appraisal or arbitration clause

Both the insured and insurer pay for their own appraisers sharing the cost for an umpire equally

Market Value

The price at which property will sell in the regular marketplace and is unique in that land value is included

Co-insurance formula (replacement cost for loss)

************

Reason for purchasing Dwelling policy insurance

The dwelling does not meet the minimum property value required for homeowners ($25,000) or the insured dwelling is under construction or the residential dwelling is not owner-occupied

Which Dwelling policy coverages are a time element paying for indirect loss

Coverage D Fair rental value and Coverage E Living expences

Special Form DP-3 (coverage perils and payment valuation)

Open perils and replacement cost loss for payment dwelling and ACV on contents

3 Dwelling policy forms

DP1-Basic, DP-2Broad, DP-3Special

Hostile Fire

When a fire escapes from its intended location

What 3 optional coverages are available in Dwelling Policy form

Water Backup ($5,000 limit) 100% water damage coverage in Coverage A

Dwelling insurance is limited to how many units

4