What are the methods of managing risk
Avoidance, transfer, sharing, retention, and reduction
What are the five characteristics of an ideally insurable risk
Loss must be 1) due to chance, 2) definite and measurable, 3) statistically predictable, 4) not catastrophic, and 5) Coverage cannot be mandatory.
What is it called when risks with a higher probability of loss are seeking insurance more often than other risks
adverse selection
How do the courts treat ambiguous insurance contracts?
Any ambiguity in an insurance contract is interpreted in favor of the insured.
An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?
mutual
What is the name of the process insurers use to determine whether or not a policy should be issued and on what terms and conditions?
Underwriting
The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?
loss
What is consideration on the part of the insurer?
A promise to pay in the event of a loss
What type of authority is based on the agent's actions, or words?
Apparent
What does the term unilateral contract mean?
A unilateral contract is a one-sided contract. This means only one party makes an enforceable promise
A state-issued document empowering an insurance company to become an admitted insurer is called what?
Certificate of Authority
What are the three types of agent authority?
express, implied, apparent
What is a warranty in an insurance contract?
An absolutely true statement upon which the validity of the policy depends
What document is required for an insurance company to transact insurance?
Certificate of Authority
In property insurance when must insurable interest exist?
At the time of loss
For the purpose of insurance, what is risk?
Uncertainty of loss
What are the four elements of an insurance contract
Agreement (offer and acceptance), consideration, competent parties, and legal purpose
Insurance contracts are aleatory in nature. What does that mean
Unequal values are exchanged between the parties to a contract
The type of insurance company organized to return any profits to its stockholders is known as what
Stock company
According to the Law of Agency, who represents the principal?
Agent or producer
What is consideration in an insurance contract
Consideration is something of value that each party gives to the other. Consideration on the part of the insurer is binding.
What is the term for the causes of loss insured against in an insurance policy
peril
An insurance company is domiciled in California and transacts insurance in Nevada. What is this insurers classification in Nevada?
Foreign
What does the principal of utmost good faith imply?
There is no fraud, misrepresentation, or concealment between the parties to a contract.
What are the three types of hazards
Physical, Moral, Morale
Self-insuring is typically used for what type of insurance?
Workers compensation
In insurance contracts when does acceptance usually occur?
When the insurer approves a prepaid application
What does the term reasonable expectations mean in insurance
Certain expectations for coverage that a reasonable person would have based on sources other than just the policy language
What law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
law of large numbers
The type of insurance company organized to return any surplus money to its policyholders is known as what?
Mutual company