Insurance Exam

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Iinsurance - transfer of risk = contract to indemnify from a contingent or unknown event; or substitution/exchange of a small certain loss for a large undertain loss insurance contract = policy= written instrument

Risk = uncertainty/ chance/ possibility of loss occuring. 2 types of risk - pure and speculative. pure= not a chance of gain, speculative = loss or gain, uninsurable STARR - methods of handling risk= sharing, transferring(insurance), avoidance , reduction, retention(self-insurance) Peril = cause of loss, reason for loss

Hazard - increases likelihood and/or severity of loss
Moral= dishonesty,liar,fraud
Morale = irresponsibility or carelessness (reckless driving) Physical = location, materials,age, calue
Legal = court decision
Risk = chance. Peril = cause. Hazard = insurance chance
Law of large numbers = the greater the number of exposure, the more predictable the loss, used to establish appropriate rates, benefits the insured. Exposure unit - measure used to establish rate
Loss exposure = possibility of loss - Property loss exposure = damage to insureds property, liability loss exposure, personnel loss exposure ( key employee). Financial loss is NOT a loss exposure its a consequence of all of them. Insurable interest = in property/casualty it is proved twice: at application and again at claim. in life and disability its only proven once: at application. Lack of insurable interest voids contract. in property insurance, insureds recovery is limited to their insurable interest, policy limit and indemnification provision. Principle of indemnity - to restore someone to the same financial condition with no intent of loss or gain. should not profit 2 types of insurers- private / government

Stock insurer(non-participating) - owned by stock holders
Mutual insurer (participating) - owned by policy holders
Reciprocal (inter-insurance exchange) - subscribers exchange insurance on one another. managed by an attorney. Fraternal organizations- organized on the basis of a lodge, society, or order. sells to members only self-finding = requires a large amount of assets, loss must be known and predictable. Reinsurance - an insurer transfer(cedes) all or part of the risk to another insurer. the original insurer is now known as the primary insurer. reinsurance spreads the risk, lessens catastophic losses, lessens problems with unearned premiums, avoids capacity problems, and safely insures large risk. There are 22 classes of insurance. classes are also known as lines of insurance the class of fire includes homeowners, commercial property, and basically and property policies. Miscellaneious insurance includes : insurance against loss from damage done directly or indirectly by lightning, windstorm, tornado, eathquake. insurance that indemnifies media producers against loss. insurance that is not included in a specific class of insurance. Contract law= formation and enforcement of contracts. example: breach of contract, which entitles the injured party to damages, attorney fees, and costs. Tort law = establishes who did the ham and therefore obligated to pay. excludes : breach of contract and criminal acts. intentional tort = assualt, libel, slander, false arrest. unintentional tort= negligence elements of an enforceable contract - ACCL= agreement, consideration, competent parties, legal purpose. Agreement = offer and acceptance.

applicant makes an offer by completing an application and sumbitting it with the premium. consideration - exchange of values
competent parties - legal capacity
legal purpose - activity must be legal
characteristics of insurance contract
adhesion - take it or leave it
unilateral - only one side is legally bound to promise - insurer conditional - contract conditions must be met b4 insurers promise is fulfilled Personal - between insred and insureer
aleatory - performance depends upon an uncertain future claim, unequal exchange of money indemnity - to restore
Materiality =...
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