Questions and Answers
A producer who is acting as an agent is representing:
In order to be valid, a contract must be between individuals considered legally able to enter into an agreement. This principle is known as:
A company that is licensed to sell insurance in a particular state is:
An insurance contract is an aleatory contract. This means:
Signup and view all the answers
Which of the following would be considered a speculative risk?
Signup and view all the answers
Which is the proper term for a company owned by its policyowners?
Signup and view all the answers
All of the following are elements of a contract, except:
Signup and view all the answers
Each of the following would be an element in the definition of fraud, except:
Signup and view all the answers
Legally speaking, a producer has a __________ duty when handling life insurance premiums and applications for an insurer.
Signup and view all the answers
_________ refers to the jurisdiction where an insurer was formed or incorporated.
Signup and view all the answers
To address adverse selection what can an insurer legally do?
Signup and view all the answers
The relationship of a person who acts on behalf of a company whereby the person's actions can bind the company is known as:
Signup and view all the answers
_____________ consists of groups of underwriters called syndicates, each of which specializes in insuring a particular type of risk.
Signup and view all the answers
The insurance industry is primarily regulated at the _________ level.
Signup and view all the answers
Which of the following is NOT considered one of the essential elements of a contract?
Signup and view all the answers
The most effective way to ensure that the applicant will accept the policy when it is issued is:
Signup and view all the answers
Which of the following is NOT a characteristic of life insurance as property?
Signup and view all the answers
Which of the following statements about the average number of people who die each year is true?
Signup and view all the answers
Study Notes
Insurance Producers and Agents
- Producers acting as agents represent the insured and the insurer, but primarily the insurer.
Contract Validity
- Valid contracts must involve parties who possess legal capacity, referred to as competent parties.
Licensed Insurance Companies
- Companies licensed to sell insurance in a state are called authorized companies.
Nature of Insurance Contracts
- Insurance contracts are aleatory, meaning unequal values are exchanged—one party pays premiums, while the insurer pays claims.
Speculative Risks
- Speculative risks involve uncertainty of profit or loss, such as purchasing a painting that might be valuable.
Ownership of Insurance Companies
- Mutual insurance companies are owned by policyholders, contrasting with other types of insurance organizations.
Elements of a Contract
- Essential elements of a contract include offer and acceptance, legal purpose, and consideration; authority is not required.
Definition of Fraud
- Fraud in insurance includes false statements on applications, withholding material facts, and intentional misrepresentation; a warranty on an application is not classified as fraud.
Producer's Duties
- Producers hold a fiduciary duty regarding handling premiums and applications for the insurer, emphasizing trust and responsibility.
Jurisdiction of Insurers
- The term domicile indicates the jurisdiction where an insurer was formed or incorporated.
Adverse Selection Mitigation
- Insurers combat adverse selection by establishing sound underwriting practices, ensuring they only accept insurable risks.
Agency Law
- The law of agency defines the relationship where a producer acts on behalf of an insurer, binding the company to the actions taken.
Lloyds of London
- Lloyds of London is an example of a syndicate organization where groups of underwriters specialize in particular risks.
Insurance Regulation
- The insurance industry is mainly regulated at the state level, ensuring compliance with local laws and standards.
Non-essential Contract Elements
- Conditions are not considered essential elements of a contract; key components include competent parties, legal purpose, and offer and acceptance.
Premium Acceptance Strategy
- Collecting the initial premium at policy delivery is an effective way to increase the likelihood of policy acceptance.
Characteristics of Life Insurance
- Life insurance does not require a fund portfolio manager, distinguishing it from other financial investments.
Mortality Rate
- The mortality rate refers to the average number of deaths in a population each year, a fundamental concept in life insurance.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your understanding of key concepts in insurance, including the roles of producers and agents, the validity of contracts, and the nature of insurance agreements. Explore topics like speculative risks and mutual insurance ownership to solidify your knowledge of insurance fundamentals.
