tekuhuwe's version from 2015-08-31 05:45


Question Answer
RISKis the uncertainty of a loss occurring
PURE RISKrefers to situations that can only result in a loss or no change.
SPECULATIVE RISKinvolves the opportunity for either a loss or a gain.
PERILSare the causes of loss that are insured against in an insurance policy. Therefore, a peril is the actual cause of a loss.
HAZARDanything that can increase the chance or likelihood that a loss will occur. Hazards may also increase the severity of a loss that occurs. However, a hazard may not actually cause the damage.
MORALE HAZARDSare tendencies towards increased risk. Moral hazards involve evaluating the character and the reputation of the applicant for insurance. For example, a moral hazard could exist if an applicant for insurance lies on the application for coverage or when someone submits a fraudulent claim.
PHYSICAL HAZARDSare individual characteristics that increase the cause of a loss. These types of hazards exist because of a physical condition such as an illness or injury. In life insurance, a physical hazard could include a person's weight, activities (whether dangerous or not), and type of vehicle driven. Any of these aspects could lead to an individual's death
LAW OF LARGE NUMBERSmeans that the larger the number of units that are individually exposed to an event, the greater the likelihood that the actual results of that exposure will equal the expected result
IDEALLY INSURABLE RISKrefers to a risk that is financially within reason
LOSS EXPOSUREIn a life insurance situation, personal (human) and personal loss exposure are examined. A personal loss exposure presents the possibility of a financial loss to a person (or to a group of people) due to the death of a wage earner
INSURABLE EVENTs any contingent or unknown event, whether in the past or future, that could have an effect on a person having an insurable interest, or create a liability against them, and may be insured against subject to the provisions of the California Insurance Code. This means that only losses that result from events that exist, but may or may not actually occur, may be insured.
HAVING AN "INSURABLE INTEREST"refers to the fact that a policy holder must establish that he or she actually has a financial interest in the person or property that is being insured. Here, the policy holder must face the possibility of a personal risk or loss, and have a legitimate financial interest in preserving the life or property that is being insured.
ADVERSE SELECTIONis the insuring of risks that are of a poorer class than the average risk. This is the process by which consumers who have the greatest probability of loss are those who are most likely to purchase and maintain insurance coverage
CONTRACT LAWis an agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration.
TORT LAWis a body of rights, obligations, and remedies that is applied by courts in civil proceedings to provide relief for persons who have suffered harm from the wrongful acts of others
CONTRACT OF ADHESIONmeans that the insured must accept the entire insurance contract, along with all of its terms and conditions. It also means that the applicant must "adhere" to the contract's terms when they accept it.
CONDITIONAL CONTRACTis a contract that is conditional in nature will require the prior performance of another agreement or clause in order to be enforceable. For example, in order for insurance benefit to be payable, the policy holder must pay premiums.
IN A "ALEATORY CONTRACT"the parties that are involved are not required to perform particular actions until a specific event occurs. Therefore, an aleatory contract will be dependent upon the occurrence of an uncertain event. Events are typically those that are not able to be controlled by either of the involved parties in the contract. Such events could include death or natural disasters. Insurance contracts are considered to be aleatory because the insurance company is not require to pay benefits to the insured unless or until a particular stated event occurs
UNILATERAL CONTRACT..only one of the parties makes an express promise - or undertakes a performance - without first securing a reciprocal agreement. Therefore, only one of the contract parties is legally obligated to uphold the terms of the contract.
"THE DOCTRINE OF UTMOST GOOD FAITH"emphasizes the presence of a mutual faith between the insurance company and the insured. This means that there is a trust that the insured honestly disclosed his or her true health condition - including any past illnesses - on the application for coverage. Likewise, the doctrine of utmost good faith also means that the insurance company cannot hide any information with regard to the insurance coverage that is being offered to the applicant for coverage.
IMDEMNITYIn a life and health insurance situation, the concept of indemnity means that the value of a person's life is represented by their present and future earning power. Indemnification in life insurance, then, can take on the form of cash proceeds to replace a wage earners lost income. The purpose of indemnity is to prevent an insured from profiting from a loss and / or to reduce moral hazards.
INSURANCE FRAUDis considered to be any type of deliberate act of deceit, falsehood, or other type of dishonest undertaking that is perpetuated either by or against an insurer or its agents for the purpose of unwarranted financial gain.
CONCEALMENTis defined as neglecting to communicate that which a party knows and ought to communicate.
WARRANTYis defined as a justification or valid grounds for an act or a course of action. It is also defined as being a very strict definition of truth or assurance with regard to an insurance contract as it is a statement made by an applicant that is guaranteed to be true in all respects.
MATERIAL FACTSare defined as statements made that are important to the insurance contract and that could change the decision to provide either insurance or the premium that is due.
THE MATERIALITY OF CONCEALMENTis the rule used to determine the importance of a misrepresentation
REPRESENTATIONSare statements that may be either oral or written. The statement is made to the best of one's knowledge, and it may be provided either at the time of application for insurance coverage or prior to the issuance of the insurance policyA representation can be altered or withdrawn before an insurance policy is issued, but not afterwards.
RESCISSION________of a contract returns the parties to the positions that they held prior to the time that the contract was made.
PERJURYIf an insured signs a fraudulent claim form, the insured may be guilty of perjury.
AN INSURANCE POLICYis the written instrument that is known as the insurance contact or agreement between an insurer an a policy owner. The policy, inclusive of all riders, amendments, or modifications will constitute the entire contract of insurance.
THE APPLICATIONis a formal written request, sometimes referred to as an offer, by the applicant to the insurance company requesting that a policy be issued based on the information that is contained in the application.
THE TERM "RIDER"typically refers to a supplemental agreement that is attached to and made part of the insurance policy. Riders are added to a policy in order to add, modify, or delete policy provisions or coverage. (In property and casualty insurance, riders are referred to as endorsements.
CANCELLATIONof an insurance contract is the act of terminating the policy before the end of the stated policy period. This is often referred to as a "mid-term termination." In life insurance contracts, the insurance company usually cannot cancel a policy except for non-payment of policy premiums.
RENEWALis defined as the continuance of an insurance policy beyond its original term. In addition, the payment of premiums after the first year of a policy or the agent's commissions on such second and subsequent years' premium are also considered to be a renewal.
NON-RENEWALis the discontinuance of an insurance policy beyond its original term.
GRACE PERIODis the time period after the policy's due date in which a late premium payment may still be made without penalty. With life insurance policies, the grace period is typically 30 or 31 days.
THE PREMIUM (OR RATE)on an insurance policy is the cost of a given unit of insurance coverage. With regard to life insurance, it is typically the price or rate per $1,000 of coverage. The total premium due, then, is the rate multiplied by the number of units of insurance purchased, plus a policy fee (if any). Premiums are also defined as the periodic payment that is required from the insured in order to keep the policy in force and to receive the policy's benefits if needed. Policy premiums can be considered earned and unearned.
THE EARNED PREMIUMis the portion of an insurance policy's premium that has been used in paying for protection or coverage that is provided by the insurance company. In the case of a policy cancellation - and depending upon the type of cancellation - an insurer may keep the earned premium and will be required to return any of the unearned premium to the policy owner.
UNEARNED PREMIUMis the portion of the premium that an insurance company has collected but has not yet earned because the coverage had not yet been provided for the insured.