Module 1

Question 1

Static Risk

Answer 1

Result from factors other than changes in the economy (earthquakes, floods, etc.)

Question 2

Dynamic Risks

Answer 2

Changes in the economy, insurance does not typically cover dynamic risks

Question 3

Fundamental Risks

Answer 3

Affects large groups of people

Question 4

Particular Risk

Answer 4

individuals or small groups of people at risk

Question 5

Pure risk

Answer 5

only risk of loss, no chance of gain (insurable risk)

Question 6

Speculative Risk

Answer 6

chance of loss or chance of gain (uninsurable)

Question 7

Risk

Answer 7

Possibility of a loss

Question 8

Peril

Answer 8

Cause of the loss

Question 9

Hazard

Answer 9

increases potential for loss

Question 10

Seven steps of the risk management process (7 steps)

Answer 10

1. Identify and Establish Risk Management Goals
2. Gather Pertinent Data to Determine Risk Exposures
3. Analyze and Evaluate the Info to Identify Risk Exposures
4. Develop a Risk Management Plan
5. Communicate Recommendations
6. Implement Recommendations
7. Monitor the Recommendations for Needed Changes

Question 11

Step 1: Identify and Establish Risk Management Goals

Answer 11

• How much loss could be tolerated in the current financial situation?
• What general and specific risks does this client face?
• Compare the potential financial loss and consequences to the probability of the risk
• Determine the amount of income to be used for risk mitigation

Question 12

Step 2: Gather Pertinent Data to Determine Risk Exposures

Answer 12

• Property at Risk
• Personal Illness and Injury
• Liability

Question 13

Step 3: Analyze and Evaluate the Info to ID Risk Exposures

Answer 13

1) Asset Related Risk
2) Risk of Liability on Contract Law
3) Risk of Liability on Tort Law

Question 14

What are the four Risk Management Strategies?

Answer 14

1) Risk Avoidance (Risk Control)
2) Risk Reduction (Risk Control)
3) Risk Retention (Risk Financing)
4) Risk Transfer (Risk Financing)

Question 15

Insurable Risk Elements

Answer 15

• Law of Large Numbers
• Is the loss from risk definite and Measurable
• The loss must be accidental
• The loss must not be catastrophic to the company

Question 16

Liability of the Insurer

Answer 16

1) Insurable Interest
2) Actual Cash Value of Loss
3) Policy Limits (or FV)
4) Other Insurance
5) Coinsurance
6) Deductibles
7) Subrogation

Question 17

Insurable Interest

Answer 17

when the insured party will suffer a financial loss if the loss occurs

Question 18

Actual Cash Value

Answer 18

The replacement value minus the depreciation

Question 19

Coinsurance

Answer 19

Splitting the cost of insurance

Question 20

Deductible

Answer 20

A retained risk, the amount that the insured is willing to pay before the insurance pays

Question 21

Subrogation

Answer 21

the right of the insurance company to get it’s money back if it’s found that another company paid for the same thing, so that someone cannot profit off of the insurance payback

Question 22

Social Insurance

Answer 22

Mandatory insurance administered by the government (medicare, medicaid, etc)

Question 23

Public Insurance

Answer 23

Designed to enhance public trust in financial institutions (FDIC, SIPC, etc.)

Question 24

Private Insurance

Answer 24

Insurance sold in the private sector (disability, health, long-term care, P+C, Liability and Life Insurance)

Question 25

Self Insurance

Answer 25

Larger companies will self insure their own health care insurance or will combine their self-insurance with other insuracne above a certain level of claims

Question 26

Independent Agent

Answer 26

represent several insurance companies doing business under the American or Independent Agency insurance system

Question 27

Captive Agents

Answer 27

sell property and liability insurance for companies that are known as "direct writers." Represents only 1 company

Question 28

Career Agents

Answer 28

usually Life Insurance agents in a general agency or a company owned office under the agencies management

Question 29

Producing General Agents

Answer 29

* Produce majority income selling insurance personally * No specified territories * Can hire agents to work for them

Question 30

Broker

Answer 30

Agent for the insurance buyer, generally cannot bind the prospective insured to a contract. Insurer is not bound by brokers actions.

Question 31

Surplus-Line, Excess-Line Broker/Agent

Answer 31

handle any insurance that cannot be purchased using normal distribution chance. P+C mostly

Question 32

Principal

Answer 32

Give an agent the authority to solicit and bind insurance contracts, subject to the limitations of the agency agreement

Question 33

Agent

Answer 33

Represents the insurer

Question 34

Types of Authority

Answer 34

1. Express Authority 2. Implied Authority 3. Apparent Authority

Question 35

Express Authority

Answer 35

specific contract authority

Question 36

Implied Authority

Answer 36

Authority the agent is assumed to have to transact the business. Between the insurer and agent

Question 37

Apparent Authority

Answer 37

the appearance of authority based on the actions, words, or deeds the agent/insurer. this is between the client/agent

Question 38

NAIC

Answer 38

National Association of Insurance Commissioners: * Composed of the state insurance commissioners of all 50 states * Set models as recommendations for states to abide by * Accreddidation program to increase oversight reliability in various states

Question 39

Aleatory Contract

Answer 39

the outcome is controlled by chance, and the dollars that change hands are often of equal amounts

Question 40

Contract of Adhesion

Answer 40

Prepared by one party and either accepted or rejected by the other

Question 41

Conditional Insurance

Answer 41

the insurance company pays on the condition that a covered loss occurs

Question 42

Indemnity

Answer 42

the insureds are restored to the financial positions they were before they suffered their losses

Question 43

Collateral Source Rule

Answer 43

If others cause you to suffer a loss, they are still required to pay the full loss even if the insurance covers it.

Question 44

Bilateral Contract

Answer 44

When either party can enforce the contract in a court of law

Question 45

Utmost Good Faith

Answer 45

The insurance company doesn't have to do all the research for every thing.

Question 46

Misrepresentation

Answer 46

A false statement is made that at least partially induces the company to issue the contract

Question 47

Warranty

Answer 47

a statement by the applicant that all of the info on the app is absolutely true

Question 48

Concealment

Answer 48

intentional withholding of material information

Question 49

Elements of a legally enforceable contract (5)

Answer 49

1. Offer and Acceptance 2. Consideration 3. Legal Object 4. Competent Parties 5. Legal Form

Question 50

Void Contract

Answer 50

is not enforceable and lacks one or more of the requirements of an enforceable contract

Question 51

Voidable Contract

Answer 51

one party has the option of voiding the contract, the other party is bound

Question 52

Parts of Insurance (4)

Answer 52

1) Declarations 2) Insuring Agreement 3) Exclusions 4) Conditions

Question 53

Declarations

Answer 53

includes applicant information

Question 54

Insuring Agreement

Answer 54

ID's what is insured, for how much and under what conditions

Question 55

Exclusions

Answer 55

ID's circumstances or situations that would exclude the company from paying a claim

Question 56

Conditions

Answer 56

rights and duties of both parties

Question 57

Parol Evidence Law

Answer 57

Nothing previous to the written contract will be used when determining disputes

Question 58

Doctrine of Waiver

Answer 58

A party, by her own actions, has voluntarily relinquished a known right.

Question 59

Doctrine of Estoppel

Answer 59

prevents a party from going back on their word to, for example, pay a claim. Works together with the Doctrine of Waiver

Question 60

Recission

Answer 60

OG Contract is deemed null from the beginning

Question 61

Reformation

Answer 61

change contract language to conform with what was originally intended in the contract

Question 62

Tort

Answer 62

When someone causes physical, emotional or financial harm to another

Question 63

Tortfeasor

Answer 63

The person who commits a tort

Question 64

Unintentional Tort

Answer 64

Involved Negligence

Question 65

Negligence Parts (4)

Answer 65

1) Duty is Owed 2) Duty was Breached 3) Actual Damages 4) Proximate Cause

Question 66

Proximate Cause

Answer 66

an uninterrupted sequence of events that brought about the damage of a negligent act

Question 67

Attractive Nuisance

Answer 67

refers to something about a property that is likely to attract and possibly injure children

Question 68

Negligence Per Se

Answer 68

Duty of care owed is determined by reference to a stature

Question 69

Absolute Liability (Strict Liability)

Answer 69

The Standard Imposed when a person is held responsible for damages, even when there has been no negligence

Question 70

Vicarious Liability

Answer 70

When someone is held liable for the actions of another (parent-child)

Question 71

Contributory Negligence

Answer 71

if neglegence on the part of the injured party contributes to the injury it absolves the other party of liability

Question 72

Comparative Negligence

Answer 72

has replaced Contributory negligence, in which is just reduces the defendants liability by the amount of fault thaey had

Question 73

Last Clear Chance

Answer 73

modifies Comparitve negligence if the other party, immediately prior to the accident, had a last clear chance to prevent the accidents but failed to seize the chance.