Term
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Definition
| An insured transfers the risk of dying prematurely to the insurer by paying a premium and entering into a legal contract. |
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Term
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Definition
| An insured transfers the risk of falling ill or suffering injury to the insurer by paying a premium and entering into a legal contract. |
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Definition
| Involves the chance for loss only. |
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Definition
| Cannot be insured because it involves that chance for loss or gain. |
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Term
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Definition
A. Avoidance: An individual may avoid the risk of a loss by not engaging in an activity.
B. Retention: Most common and should only be be those that lead to small losses.
C. Transfer: Transfer to another party. I.e. purchase of insurance
D. Sharing: Distributes risk among a number of persons.
E. Reduction: Accomplished through loss prevention of loss control. (Control - Sprinkler system in building, Prevention - Security guard) |
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Term
| Risk Management (4 step process) |
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Definition
1. Identifying the possible risks present (exposure)
2. determining what action to take in order to reduce or control risk
3. implementing specific action
4. Monitoring the action take in order to make changes as needed |
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Term
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Definition
A condition that increases the change of a loss occuring:
A. Physical -
B. Moral - |
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Term
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Definition
| Perils are the direct happenings or events that cause loss. |
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Term
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Definition
Decrease or disappearance of economic value.
A. Direct Loss - Loss from an insured peril must be a direct physical loss to the property insured.
B. Indirect Loss - Is removed from the cause of direct loss but is related to it. AKA consequential loss. |
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Term
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Definition
| The ability to assume risks with the reasonable assurance of experiencing a certain number of losses. As the number of exposures increase, the more actual results will approach the results expected for the event. |
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Term
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Definition
Price per unit of exposure
A. Manual Rates: Listed in a manual or rate book
B. Class Rates: Rates that apply to a large group of homogeneous loss exposures.
C. Individual (Specific) Rates: Used when large groups of homogeneous exposures do not exist. Involve an individual rate for each subject of insurance. |
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Term
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Definition
| Entire (total) cost of coverage for a group of exposure units. |
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Term
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Definition
| An organization owned by member insurance companies with a purpose to accumulate and analyze statistical data to develop rates, calculate rates for lines of insurance, and file rates with state regulatory authorities for approval. |
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Term
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Definition
| Rates filed by an insurer independent of a bureau. |
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Term
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Definition
| Tendency of persons whose exposure to loss is higher than average to purchase or continue insurance to a greater extent that those with less exposure. |
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Term
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Definition
| If an insured would suffer a financial loss if property were destroyed. May be a business relationship or one of love and affection. With life insurance it must exist at the time on insurance. |
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Term
| Elements of Insurance Risks |
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Definition
A. Economic Feasibility: The premium charged must be affordable to the insured.
B. Calculation of Probability: The potential loss incurred must be calculable in order to be insured,
C. Sufficiently Large Numbers: For a risk to be insurable, there must be a sufficient number of insureds available with similar potential loss who desire protection.
D. Definite and Measurable: Risk of loss must be definite and measurable in both time and place. Loss must also be difficult to falsify.
E. Fortuitous and Accidental: Risk must be unexpected and unintended.
F. Less that Catastrophic: Insurers do not desire to cover individuals who may all suffer losses at the same time because the insurer would suffer catastrophic losses. |
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Term
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Definition
1. Domestic Insurance Company
2. Foreign Insurance Company
3. Alien Insurance Company
4. Stock Insurance Company
5. Mutual Insurance Company
6. Reciprocals
7. Fraternal Insurers
8. Private vs Government Insurers
9. Authorized (admitted) Insurance Company
10. Unauthorized (Nonadmitted) Insurance Company
11. Surplus Lines Company
12. Purchasing Group
13. Risk Retention Group
14. Lloyd's of London |
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Term
| Domestic Insurance Company |
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Definition
| Incorporated, domiciled and organized within a given state. |
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Term
| Foreign Insurance Company |
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Definition
| Not incorporated, domiciled and organized within a given state but is licensed to practice in that state. |
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Term
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Definition
| Not incorporated, domiciled and organized within the US but licensed to practice in the US or a given state. |
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Term
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Definition
| Owned by the holders of the Company's capital stock. |
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Term
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Definition
| Owned by its policy holders who share in company profits. |
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Term
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Definition
Under this form of insurance, each policy owner is insured by all others. Each insured is also an insurer, as contract are exchanged on a reciprocal basis.
-Not a mutual insurer because individual subscribers assume their liability as individuals, not as a group
-Managed by an attorney-in-fact |
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Term
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Definition
| Special type of insurer providing benefits, particularly life insurance, for its members. Operations are closely related to and controlled by the bylaws of a large nonprofit social organization (Elks Club) -Afforded tax exemptions -May assess a policyholder in case of financial difficulty |
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Term
| Authorized (Admitted) Insurance Company |
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Definition
| An insurer that has received a certificate of authority from a state and thereby licensed or authorized to transact insurance business in that state. |
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Term
| Unauthorized (Nonadmitted) Insurance Company |
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Definition
| An insurer that has NOT received a certificate of authority from a state and thereby licensed or authorized to transact insurance business in that state. |
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Term
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Definition
| Common form of unauthorized carriers that are used when insurance cannot be supplied by authorized insurers us used. |
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Term
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Definition
| Composed of members whose business or activities are similar and has as its purpose the purchase of insurance on a group basis to cover the member' similar exposures. |
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Term
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Definition
| Composed of members who are engaged in similar business or activities. The groups primary activity consists of assuming and spreading all, or any portion, of the liability exposures of its members - may only provide liability insurance. |
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Term
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Definition
| Not an insurance company. Voluntary association of persons who agree to share in insurance contracts. All individuals are responsible for the amount of coverage they write. |
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Term
| Insurance as Legal Contract (Elements) |
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Definition
A. Offer and acceptance (agreement): One party must make an offer and the other party accepts, rejects or counters.
B. Competent Parties: Are no insane, under the influence of drugs, under duress or force, enemy aliens, and minors. Minors can enter into contracts for food, clothing and other necessities.
C. Legal Object of Purpose: Contract cannot be against public policy. E.g cannot contract to purchase a stolen good.
D. Consideration: Something of value must be given in consideration of the coverage provided by the insurer.E.g premium is the consideration given |
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Term
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Definition
| Contract based on uncertain events where the value given is not equal to that given by the other party in the contract. |
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Term
| Insurance Contract and the Courts |
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Definition
| Insurance contracts are legal documents, and their performance will be upheld in the courts. Because of their adhesion characteristics, and ambiguities that arise will be ruled in favor of a policyowner by the courts. |
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Term
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Definition
Involves the intentional or voluntary relinquishment (or abandonment) of a known right in an insurance contract. Insurers have the right to deny coverage for various reasons.
A. May be expressed or implied
B. Does not apply to perils that are not covered under the policy
C. Contractual in nature |
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Term
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Definition
Utilized to protect an innocent injured party. An insured may use in certain situations when an insurer attempts to deny a claim. Requirements:
A. Must be a false representation of a material fact
B. There is reasonable reliance on the representation
C. Harm will result |
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Term
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Definition
| Prevents the introduction into evidence of oral arguments made before the execution of a written agreement. According to this rule, when parties place their contract in writing, all previous oral agreements merge into the written contract. Life insurance is subject to this rule. |
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Term
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Definition
| Contract in which one party creates the contract terms and the other party must adhere to them. No bargaining is permitted. |
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Term
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Definition
| Contracts must be entered into in good faith. If party A enters not under good faith, party B may void the contract. Each party must rely on the fact that information supplied is true. |
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Term
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Definition
| A contract where one aspect remains to be performed by one or more parties. |
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Term
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Definition
| One party promises to perform at the occurring of an event. |
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Term
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Definition
| A contract where the individual that enters is must fulfill the stipulated obligation. Life insurance is not personal because the owner does not have any personal performance requirements, these can be fulfilled by another person. |
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Term
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Definition
| The obligation to perform depends on certain acts. |
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Term
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Definition
| Placing an insured in the same financial position following a loss that existed before the loss. Some insurance policies (casualty) state that they will indemnify an insured in the event of a covered loss. |
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