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Personal lines insurance chapter 1 Questions and Answers Fully Solved
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Personal lines insurance chapter 1
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Personal lines insurance chapter 1Contract of utmost good faith - answerContract that is full fair and honest
Tort law - answerTorts (civil wrongs) not crimes or breaches in contract. Result in injury
or harm that constitutes the basis of a claim by 3rd party
4 Elements of a legal contract - answerCompetent parties, legal purpose, agreement
*offer, acceptance*, consideration *premium* void if any are missing
Waiver - answerVoluntary surrender of a known right, claim or privilege
Parole evidence rule - answerWritten contract may not be altered without written
consent of both parties
Hold harmless agreement - answerContractual agreement that transfers liability of one
party to another
Estoppel - answerSomeone reneges/contradicts previous claim/agreement
Contract law - answerPertains to the formation & enforcements of contracts
Insurable interest - answerAll polices, life & health, property, and casualty
All policies - answerExists at the time of application or loss
Life & health - answerExists at the time of application not loss
Property - answerExists at the time of the loss
Casualty - answerExists at the time of the loss
Insurable events - answerAny event past or present that may cause loss or damage
Insurability - answerAbility of applicant to meet insurers underwriting requirements
Principal of indemnity - answerRestored to same as before loss, no profit
Moral hazard - answerDishonest tendencies increase chance of loss
Elements of Insurable risk - answerPredictable, calculable, measurable, affordable,
accidental, exclusions, hardship
, Ways of managing risk - answerSharing, transfer, avoidance, reduction, retention
Managing risk - answerAnalyzing exposures that create risk & designing programs to
minimize the possibility of loss
Adverse selection - answerImbalance created when risks that are more prone to losses
than average are the only risk seeking insurance within specific marketplace
Loss exposure - answerCondition of being at risk for loss
Morale hazard - answerAttitude that increases chances of loss
Physical hazard - answerPhysical condition that increases chance of loss
Hazard - answerIncreases chances of loss from peril
Peril - answerCause of loss
Loss - answerReduction, decrease, or disappearance of value
Pure risk - answerNo chance of gain just loss or no loss
Aleatory - answerThe exchange of value is unequal. Insureds premium payment is less
than the potential benefit to be received in the event of a loss
Mutual insurance company - answerOwned by policyholders, leaders are elected by
policyholders, they receive non-taxable dividends though not guaranteed, issue
participating policies
Contract of adhesion - answer1 party writes the contract without input from the other
party & presents it to the applicant on a take it or leave it basis without negotiations
Risk retention groups - answerGroup owned insurers that assume and spread liability
related risks of their members on the policy holders and licensed and at least one state
Lapse date - answerThe date when insurance coverage ends if not cancelled prior
policy will terminate by the end of grace period If premium is not paid
Unilateral contract - answerOnly one party is legally bound to the contractual obligations
after the premium is paid to the insurer. Only insurer makes promises of future
performance and only insurer can be charged with breach of contract
A rating or judgment rating - answerIndividual rate that doesn't use lost history as a
component and that is derived largely from the underwriters evaluation and best
judgement the risk poses to the insurer. Only method wear under writer writes the policy
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