Exam (elaborations)
WebCE Exam Questions with correct Answers
- Course
- Institution
WebCE Exam Questions with correct Answers
[Show more]
Content preview
WebCE Exam Questions with correct AnswersIndirect Loss - Answer- A secondary loss that follows from a direct loss to insured property from a covered peril.
Ex. Hotel expenses incurred by the insured while a fire-damaged home is repaired is an
indirect loss that follows the direct loss of the home.
Exclusive Agency System - Answer- An insurance distribution system in which producers (agents) represent a single company.
Ex. In the exclusive agency system, insurers use independent contractors (exclusive agents) that represent only one insurance company or, in some cases, a group of insurance companies under similar management.
Five basic elements of a valid contract - Answer- 1. Offer
2. Acceptance
3. Consideration
4. Competent parties
5. Legal purpose
Ex. An applicant makes an insurance offer that results in a contract (policy) only if the offeree (insurer) accepts the offer (application). The applicant's consideration is the signed application and payment of the first premium.
Peril and Hazard - Answer- Two related general insurance terms, the first of which is the
cause of a loss and the second being any condition that increases the risk or severity of a loss.
- A peril is the event that is insured against and includes fire, explosion, windstorm, theft, death.
- Hazards are classified into three categories:
moral hazard (e.g. excessive drinking, bad credit)
morale hazard (driving recklessly)
physical hazard (slippery floors, unsanitary conditions, unguarded premises)
Mutual Insurance Company - Answer- A form of insurance company owned by policyowners.
- While structured in many ways like a corporation, a mutual insurance company does not issue stock and is owned by policyowners, whose evidence of ownership is the policy. Mutual companies may distribute policy dividends (non-taxable).
Stock Insurance Company - Answer- A form of insurance company owned by stockholders who may or may not also be policyowners. - Like all forms of corporations, stock insurance companies may be privately held or publicly traded and may distribute stock dividends (taxable).
Law of Large Numbers - Answer- An actuarial principle that is the basis for predicting the odds of a loss occurring in a certain population in any given year.
- The law of large numbers does not predict who will suffer a loss, only the odds of a loss. The larger the number of units independently exposed to a certain type of loss, the
greater the probability that actual loss experience will equal predicted loss experience.
Lloyd's Association - Answer- An association of individuals and companies that provide insurance to customers with complex, unique, and very large risks.
- Lloyd's Associations in the United States are not related to Lloyd's of London. Based mostly in Texas, they are groups of insurers that mainly write fire insurance and auto physical damage insurance. Lloyd's associations play a relatively small role in the U.S. insurance market.
Errors & Omissions (E&O) Insurance - Answer- A type of insurance coverage, purchased by insurance producers, that covers losses resulting from the producer rendering (or not rendering) professional service.
- The purchase of E&O insurance does not excuse a producer from the duty to act exclusively in the client's best interest. It covers losses that occur despite the producer's
best intentions (e.g., a producer simply forgets to process a customer's change of beneficiary request, resulting in a claim paid to the unintended beneficiary). This coverage includes a large deductible.
Contract of Adhesion - Answer- A type of contract (including insurance contracts) in which one party (the offeror) drafts the terms that must be accepted as-is by the offeree.
- Because applicants for insurance have no input in the drafting of the insurance contract's language, courts generally interpret any ambiguities in a way that favors the policyowner, not the insurer.
Rescission - Answer- An insurer's act of declaring that an insurance policy was never in effect. An insurance company that rescinds a policy states that it provides no coverage for a claim.
- Rescission usually occurs when the applicant knew of a potential claim and intentionally concealed it from the insurer, or an important document attached to an application contains information that is materially false, so that if the insurer knew the truth, the insurer would not agree to insure the risk.
Social Security Insurance (OASDI) - Answer- A federal insurance program that provides
disability, death, and retirement benefits to covered workers and their qualifying beneficiaries.
- Social Security benefits are available to covered workers, who earn rights to these benefits by paying a payroll tax.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller mereka. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
82871 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now