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Questions and Answers
What is it called when an applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage?
Concealment
Which of the following insurance options would be considered a risk-sharing arrangement?
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
What is it called when an insurer meets the state's financial requirements and is approved to transact business in the state?
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Which of the following is NOT an essential element of an insurance contract?
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Not all losses are insurable. These requirements include all of the following EXCEPT:
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Which of the following is an example of apparent authority of an agent appointed by an insurer?
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Which of the following is an example of a producer's fiduciary duty?
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Which of the following is NOT a characteristic of an insurable risk?
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Which of the following are the authorities that an agent can hold?
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What is considered to be a morale hazard in insurance?
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What may happen if it can be proven that an applicant was not capable of making a buying decision at the time of insurance application?
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When is an offer usually made in insurance?
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Study Notes
Key Concepts in Insurance
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Concealment
- Withholding information from an underwriter that could influence coverage decisions.
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Reciprocal Insurance
- A risk-sharing arrangement where insured parties share the risk of loss.
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Consideration
- Involves the insured making truthful statements and paying premiums in exchange for coverage.
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Authorized Insurers
- Insurers that meet state financial requirements and are legally allowed to operate in that state.
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Essential Elements of an Insurance Contract
- Four mandatory elements: agreement (offer and acceptance), consideration, competent parties, and legal purpose. A counteroffer is not required.
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Insurability Criteria
- Not all losses are insurable; intentional losses are not covered based on public policy.
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Apparent Authority of Agents
- Perceived authority where an agent acts outside their actual power, such as accepting premiums after a grace period.
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Fiduciary Duty of Producers
- Duty of trust and integrity in handling client premiums and servicing their policies.
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Characteristics of Insurable Risks
- An insurable risk should be due to chance, definite, measurable, and predictable, and not catastrophic.
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Types of Agent Authority
- Agents can hold express authority (explicitly stated) and implied authority (inferred from circumstances). Apparent authority is based on appearances created by the principal.
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Morale Hazard
- Risks arising from a careless or indifferent attitude, such as reckless driving.
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Policy Void Due to Incompetence
- A policy can potentially be voided if the applicant was not capable of making informed decisions due to confusion or medical influence at the time of application.
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Offer in Insurance
- An insurance offer is typically made by submitting a completed application, with acceptance confirmed through policy issuance by the insurer.
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Description
Test your knowledge on key terms and definitions from Chapter 1 of insurance concepts. This quiz covers important terminology such as concealment and different insurance arrangements. Perfect for students wanting to deepen their understanding of insurance fundamentals.
