Personal Lines

Question 1

What is Insurance?

Answer 1

The Transfer of Risk

Question 2

What are the two types of risks?

Answer 2

Speculative and Pure Risks

Question 3

What are ways to handle risks?

Answer 3

Sharing - Pooling together to share expense of loss

Transfer- reassigning to another party or entity

Avoidance- avoid all together

Reduction - Reduce Chance of Loss

Retention - Retain

Question 4

Exposure

Answer 4

The unit of measurement to determine rates for an insured based on how risky they are.

Question 5

Hazards

Answer 5

Increase the chance of the risk occurring.

Question 6

Physical Hazard

Answer 6

Material and structural things you acn see and touch

Question 7

Moral Hazard

Answer 7

Lying on purpose

Question 8

Morale Hazard

Answer 8

a sense of carelessness

Question 9

Legal Hazards

Answer 9

laws that protect the injured during accidents

Question 10

Loss

Answer 10

the reduction or disappearance of value

Question 11

Peril

Answer 11

The Cause of loss like a fire or hail

Question 12

Underwriting

Answer 12

risk selection and evaluation. Acceptance is not given until underwriters approves application. It establishes terms, rates and conditions.

Question 13

Negligence

Answer 13

Failure to use reasonable and prudent care

Question 14

What are the types of damages?

Answer 14

Special + General

Question 15

What are special damages?

Answer 15

Out of Pocket - Things that you can have a receipt for. Medical, Loss of Wages, Transpo expenses

Question 16

What are General Damages

Answer 16

Compensation for pain and suffering, mental anguish or disfigurement

Question 17

What does the law of large numbers state?

Answer 17

The law of large numbers states that the more stats you have to look at, the more predictable losses will be.

Question 18

What is Reinsurance?

Answer 18

Reinsurance is when a company indemnifies another company

Question 19

What does it mean to Indemnify?

Answer 19

To make whole again after a loss

Question 20

What is a Certificate of Authority

Answer 20

It allows insurer to sell in that state making them admitted and authorized

Question 21

Vacant

Answer 21

structure in which no people have been living or working and no property stored.

Question 22

Unoccupied

Answer 22

Structure in which no people have been living or working.

Question 23

Blanket

Answer 23

A single property insurance policy that provides coverages for multiple classes of property at one or more location.

Question 24

Specific Insurance

Answer 24

A policy that covers a specific kind or unite of property for a specific amount of insurance

Question 25

Proximate cause

Answer 25

The direct cause of a loss

Question 26

Who are Stock Companies owned by?

Answer 26

Shareholders- they issue non-par policies and dividends are taxed.

Question 27

Who are mutual companies owned by?

Answer 27

Policy holders, issue participating policies and dividends are not taxes.

Question 28

Domestic

Answer 28

Insurer is in a state that they are incorporated in. (Head Quartered)

Question 29

What is Foreign insurance?

Answer 29

Insurer is in a state where they are not headquartered, but still selling in.

Question 30

What is Alien?

Answer 30

completely outside of the US. Another country

Question 31

What is the law of agency

Answer 31

Law of Agency explains the relationship between the insurance company and the agent who is selling their insurance. Agent represents the insurer and the knowledge of the agent of the insurer.

Question 32

What are the types of Agent Authority?

Answer 32

Expressed- Written in Contract Implied- is Assumed by insurer Apparent - Perceived is assumed by the customer due to business card, stationary , letterhead etc.

Question 33

Fiduciary Responsibility

Answer 33

Person of trust - an agent submits premium collected to the insurance company

Question 34

What is the co-mingling of funds?

Answer 34

mixing premium money with personal money

Question 35

What is E&O Errors in Omission

Answer 35

Insurance for agent errors- it covers agent in case they miss a payment, make a mistake.

Question 36

What are the types of liabilities?

Answer 36

Strict - Product liability Vicarious - Liable for action of another party

Question 37

What is the Financial Services Modernization Act of 1999

Answer 37

also known as Gramm-Leach-Bliley Act (GLBA) it governs the use, sharing and collection of financial information. IT requires financial institutions to take steps to protect customers non public personal information

Question 38

What are the elements of a legal contract?

Answer 38

Agreement - Known as Offer and Acceptance Consideration- both parties bring something of value.. Consideration on the side of the insured = Application + Premium Consideration on the side of the insurer = Promise to pay claim Competent Legal Purpose - cannot be illegal.

Question 39

Adhesion

Answer 39

Insurer writes the policy , customer either takes it or leaves it

Question 40

Aleatory -

Answer 40

Unequal exchange customer pays small month premium, insurance pays very large claim

Question 41

Personal

Answer 41

Between the customer and the insurer Assignment- assigning the policy to someone else.

Question 42

Unilateral

Answer 42

One Sided Promises - only the insurer is legally bound to do anything

Question 43

Conditional

Answer 43

Both parties have rules/duties they must follow or do

Question 44

Reasonable Expectations

Answer 44

A customer could expect the coverage if an agent implied to during the sale.

Question 45

Indemnity

Answer 45

Restore the insured to their previous financial condition.

Question 46

Representations

Answer 46

statements that are believed to be true but are not guaranteed to be true.

Question 47

Misrepresentations

Answer 47

An Untrue statement

Question 48

Warranty

Answer 48

absolute true statements

Question 49

Concealment

Answer 49

withholding or hiding on the application

Question 50

Fraud

Answer 50

Deceive or lying to cheat the insurance company

Question 51

Utmost Good Faith

Answer 51

Parties rely on each other for information

Question 52

Depreciation

Answer 52

Reduction in value, replacement cost value - depreciation.

Question 53

Cancellation

Answer 53

Termination of in force policy prior to expiration by either insured or insurer