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35 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Adverse Selection |
Those with high-risk situations attempt to purchase insurance before those with average or below-average risks. |
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Insurance |
A transfer of risk from one to many. |
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Law of Large Numbers |
As the number of similar risk exposures increases, the accuracy of the insurance company's loss projections will increase. |
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Binder |
Used prior to a policy being issued. Provide the insured with the immediate protection, valid for a specified time, until the actual policy is issued. May be oral or written. If oral, must be followed up in writing within five business days. |
Binder = Before |
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Transfer of Risk |
Shifting the financial burden of a loss from the insured to another party. This is the purpose of insurance. Using a hold harmless agreement is an example of transferring risk. |
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Indemnity |
Restoring the insured to approximately the same position the insured was in before a loss. |
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Pro-rata Liability |
Used with health and property/casualty insurance. If more than one policy covers the same loss, each insurer will pay a proportional share of the loss.
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Insurable Interest |
The policy holder must incur a financial loss or some other type of harm should a loss occur. The insurable interest must exist at the time of the loss (with property & casualty). |
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Subrogation |
Gives the insurer the right to collect from a negligent third party after making a loss payment to the insured. Prevents the insured from collecting twice for the same loss. When an insurer subrogates against a negligent party, it holds that party responsible for the loss. |
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Utmost Good Faith: Representations |
Statements in the application are believed to be entirely true. |
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Utmost Good Faith: Misrepresentations |
Incorrect statements in the application that do not affect the applicant's insurability. |
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Parts of an Insurance Contract |
Declarations
Insurance Agreement Conditions Exclusions & Endorsements Riders |
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Declarations |
Includes: Period of coverage - lists the date and time coverage takes effect and terminates Policy limits - the maximum amount the insurer will pay for losses Premium - the amount the insured must pay to keep the policy in force |
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Insuring Agreement |
The insurance company's promise to pay for covered perils Life insurance policies are all-risk policies that cover all causes of death, with few exceptions. |
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Open peril/all-risk |
Cover all losses except those listed in the policy. |
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Named Peril |
Only cover losses from perils that are specifically listed in the policy. |
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Conditions |
Duties and responsibilities of the insured and the insurer |
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Exclusions |
The perils/losses that are not covered by the policy |
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Endorsements |
Modifications to a property or casualty policy; must be in writing, and are attached to the insurance policy. Floater: can add to the policy, same as endorsement, but is separate and stands alone |
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Rider |
Modifications to a life or health policy; must be in writing and attached to the insurance policy |
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Non-Assessable |
Insurance company is required to set money aside to reserve in case their claims experience is higher than anticipated. Sometimes referred to as legal reserve companies |
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PAR (participating) Policies |
Pay dividends to policyholders if the insurer's revenue exceeds operating expenses and reserve requirements These dividends are considered a refund of overpaid premium and are not taxable |
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Non-PAR (non-participating) Policies |
Policyholders are not eligible to receive dividends If the company is profitable, shareholders may receive taxable dividends |
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Mutual Insurers |
Not-for-profit corporations that sell insurance to the general public
Owned: policy holders Managed: board of directors Non-assessable PAR |
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Stock Insurers |
For-profit corporations that sell insurance to the general public Owned: Shareholders Managed: Board of Directors Non-Assessable Non-PAR |
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Fraternal Insurers |
not-for-profit organizations that sell insurance to individuals who meet membership criteria Owned: Policyholders Managed: Lodge System (more representative form of government) Assessable PAR |
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Township Mutual |
Non-Assessable, but must maintain a minimum reserve of $500,000 Twenty-five or more members living in adjoining counties Must have $50,000 worth of collectively owned property |
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Reciprocal Exchange |
Individuals insuring each other Managed by an attorney-in-fact |
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Surplus Lines Insurer |
Write policies that cover unique, one-of-a-kind risks that other insurers will not If an insurance product is unavailable through licensed carriers, consumers may work through surplus lines insurers and purchase the product from a non-admitted carrier (an insurer not licensed to sell in their state) |
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Classifications of Private Insurers |
Domestic Company - incorporated, organized, or domiciled under the laws of Minnesota Foreign Company - incorporated, organized, or domiciled under the laws of another state Alien Company - incorporated organized, or domiciled under the laws of another country |
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Government Insurers |
State or federal government agencies that provide insurance to the general public (e.g., Medicare, Social Security, Minnesota Comprehensive Health Association, and National Flood Insurance Program [NFIP]*) *Flood insurance can be assumed by new buyer (no underwriting) at day of closing. |
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Adjuster |
Investigates, evaluates, and settles claims on behalf of the insured or insurer |
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Independant Adjuster |
Settles losses on behalf of more than one insurer |
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Public Adjuster |
Acts solely to represent the interests of the insured |
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Staff Adjuster |
An employee of the insurance company adjusting losses solely for that company |
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