Primerica Insurance Exam: General
Insurance Already Passed
Insurance ✔✔A contract in which one party agrees to indemnify the insured party against loss,
damage or liability from an unknown event.
Insurance transfers
...
Primerica Insurance Exam: General
Insurance Already Passed
Insurance ✔✔A contract in which one party agrees to indemnify the insured party against loss,
damage or liability from an unknown event.
Insurance transfers ✔✔The reduction, decrease, or disappearance of value of the person or
property insured in a policy, caused by a named peril.
Risk ✔✔The uncertainty or chance of a loss occurring.
Pure risk ✔✔Situations that can only result in a loss or no change
Speculative risk ✔✔The opportunity for either loss loss or gain.
Hazards ✔✔Conditions or situations that increase the probability of an insured loss occurring.
Physical hazards ✔✔Individual characteristics that increase the chances of the cause of loss.
Moral hazards ✔✔Tendencies towards increased risk.
Morale hazards ✔✔Arises from a state of mind that causes indifference to loss, such as
carlessness
Perils ✔✔The causes of loss against in an insurance policy
Exposure ✔✔The unit of measure used to determine rates charged for insurance coverage.
Factors: The age of the insured, insured medical history, occupation, and sex
Avoidance ✔✔Eliminating exposure to a loss.
Retention ✔✔The planned assumption of risk by an insured through the use of deductibles, copayments, or self-insurance.
Purpose: To reduce expenses and improve cash flow, to increase control of claim reserving and
claims settlement, to fund for losses that cannot be insured.
Sharing ✔✔Method of dealing with risk for a group of individual persons or businesses with the
same or similar exposure to loss to share share the losses that occur within that group.
Reduction ✔✔Attempt to lessen the possibility or severity of a loss.
Transfer ✔✔The risk of financial loss us assigned to another party.
Law of large number ✔✔The larger the number of people with a similar exposure to loss, the
more predictable actual losses will be.
Adverse selection ✔✔The insuring of risks that are more prone to losses than the average risk.
Stock companies ✔✔Owned by the stockholders who provide the capital necessary to establish
and operate the insurance company and who share in any profits or losses.
Nonparticipating ✔✔Policy does not pay dividends dividends to policyowners.
Mutual companies ✔✔Owned by the policyowners and issue nontaxable dividends
Authorized insurers ✔✔Insurers who meet the state's financial requirements and are approved to
transact business in the state
Unauthorized Insurers ✔✔Insurers who have not been approved to do business in the state
Surplus Lines ✔✔Insurance that is not available in the regular market place from admitted
insurers
Domestic ✔✔Insurance company that is incorporated in the state
Foreign ✔✔Insurance company that is incorporated in another state or territorial possession.
Alien ✔✔Insurance company that is incorporated outside the United States
Law of agency ✔✔The relationship between the principal and the agent/principal.
Express authority ✔✔The authority a principal intends to grant to an agent by means of the
agent's contract
Implied authority ✔✔Authority not expressed or written into the contract, but which the agent is
assumed to have in order to transact business of insurance for the principal
Apparent authority ✔✔The appearance or assumption of authority based on the actions, words,
or deeds of the principal or because of circumstances the principal created
Fiduciary responsibility ✔✔An agent that handles the funds of the insured and the insurer
Contract ✔✔An agreement between two or more parties enforceable by law
Elements of a Legal Contract ✔✔1. Agreement
2. Consideration
3. Competent parties
4. Legal Purpose
Acceptance ✔✔When an insurer's underwriter approves the application and issues a policy
Consideration ✔✔The binding force in any contract
Competent parties ✔✔1. Both parties are legal age.
2. Mentally competent to understand the contract.
3. Not under the influence of alcohol and drugs.
Legal ✔✔Insurable interest and consent
Aleatory ✔✔An exchange of unequal amounts or values.
"Ypu are not going to pay what you collect."
Contact of Adhesion ✔✔Prepared by one of the parties (insurer) and accepted by rejected by the
other party (insured)
"Take-it-or-leave-it" basis.
Unilateral contract ✔✔Only one of the parties to the contract is legal bound to do anything
Conditional Contract ✔✔Certain conditions must be met by the policyowner and the company in
order for the contract to be executed, and before each party fulfills it's obligations.
Representations ✔✔Statements believed to be true to the best of one's knowledge
Material misrepresentation ✔✔A statement that if discovered, would alter the underwriting
decision of the insurance company.
Warranty ✔✔Absolutely true statement upon which the validity of the insurance policy depends.
Concealment ✔✔Intentional withholding of information of a material fact that is crucial in
making a decision.
Fraud ✔✔The intentional misrepresentation or intentional concealment of a material used to
induce another party to make or refrain from making a contract, or to deceive or cheat a party.
Waiver ✔✔The voluntary act of relinquishing a legal right, claim or privilege
Estoppel ✔✔
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