Introduction to insurance
What are The two types of Risk Insurable and uninsurable and what are their definitions?
1.) Pure Risk - Results in either a loss or no change in status. No possible gain
2.) Speculative Risk - Result in a loss, again, or no change in status.
what are the elements of a legal contract?
- competent parties
- legal purpose
-offer
-acceptance
what are direct and indirect losses?
Direct is one that is the immediate result to a peril
indirect is also known as consequential loss, is a consequence of a direct physical loss, refers to financial losses
what does property damage cover?
Covers losses arising from physical damage to the tangible property of a third party caused by the act of an insured
what is the definition of a peril?
Cause of loss
What is a Hazard ? What are the 3 types of hazards ?
Hazard: a specific condition that increases the probability or likelihood that a loss will occur from a peril.
1. Physical - physical condition that increases the probability of a loss
2. moral - Dishonest tendencies that increase the probability of a loss
3. Morale- an attitude or indifference toward the risk of loss.
the four basic components of a property and casualty policy are?
Declaration (Limits)
insuring agreement (Coverage)
Conditions (Clauses)
Exclusion (Intentional)
A home was purchased 10 years ago for $50,000. It now cost 100,000 to rebuild and has been depreciating $2,000 per year. How Much will the insured be paid out if the loss valuation is actual cash value?
$80,000
what does the 60 represent in 30/60/30?
Bodily injury
What is a representations and a misrepresentation ?
Representation - is a statement made by that applicant on the application, which are believed to be true
Misrepresentation - is a false statement contained on an application
What are the methods of managing risk and their functions?
Risk sharing - distributing or pooling a risk among several risk-takers with similar loss exposure
transfer sharing - involves shifting a risk to another party
risk avoidance - elimination of risk by not participating in activities involving a chance of loss
risk reduction- involves minimizing the risk we cannot completely avoid
risk retention - means assuming responsibility for a loss, like with self insurance whereby an organization set aside find to pay potential losses
What are the types of cancellations ?
pro-rate cancellation- if the insurer cancels the policy, a proportionate cancellation of insurance will refund the unearned premium , and the insurer only retains the unearned premium
Short- rare cancellation - if insured cancels the policy, the insurer retains portion of the unearned premium to cover admin cost, determined by the insurer's short rate table
Flat Cancellation - the insurer must refund the entire policy premium
why is coinsurance encouraged to be purchased?
To encourage insured to purchase and maintain insurance to value
per occurrence only covers ?
Any one occurrence
what is a concurrent causation ?
when two perils simultaneously cause a loss, the insurer must pay for the loss even if the perils is excluded by policy
What are the Underwriting Factors?
- The nature of the risk
-what hazards are present
-the application claim history
- other factors that may affect the type of risk being used
what is a waiver and estoppel?
a waiver is a voluntary surrender of a known or legal right or advantage. once an insurers has waived a legal right, it cannot claim that right in the future.
Estoppel - the judicial consequence that follows a waiver: It denies a contractual right based on prior actions contrary to what the contract states
one dwelling policy of $100,000 is an example of ?
Specific limit
elements of negligence?
Legal duty of care
breach of duty
proximate cause
loss or damage
Two types of torts and their definitions
Unintentional Tort - are not deliberate, but result from the failure to act as a reasonable or prudent person would under the same circumstances.
intentional tort - are deliberate acts that are premeditated or planned and that harm another
What is the responsibility of the Fair Credit Reporting Act? What are the agents requirements when using credit report?
The FCRA protects the consumers rights to privacy of credit and financial information ensuring that all collected data is confidential, accurate, relevant, and properly used for a specific purpose.
- Must tell if there is a negative impact
What are the Characteristic of insurance contracts ?
Adhesion -the insurance company prepares the contract and presents it as a take it or leave it basis. however if there are ambiguities in the contract the court will rule in favor of the party that did not write the contract.
Aleatory - the parties have an unequal exchange of consideration, the insurer may pay more for a claim than it received from a policy premiums
Conditional- both parties must perform certain duties to make the contract enforceable
unilateral - one party is legally bound to a contractual obligation, failing to do so will breach the contract
Personal -contract is between the insurance company and the individual, and it cannot be transferred or assigned to another party
what are 3 type of deductibles ?
Straight deductible - Flat amount retained by the insured, regardless of the amount of loss
franchise deductible - states that the loss must be equal or exceed a specific amount after the loss is paid in full
percentage deductible- calculator the amount retained by the insured as a percentage of property value or a percentage of the policy limit
what does personal injury cover?
personal injury refers to certain types of harm that affects a person's reputation, or emotional wellbeing, such as libel, slander, false arrest, and invasion of policy
what is agreed value?
some policies insure covered property for an agreed- upon policy limit that is paid in the event of a tl.