Adjusterpro: Chapter 1 All Sections Questions & Answers
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Course
Adjusterpro: Chapter 1 All Sections
Institution
Adjusterpro: Chapter 1 All Sections
Insurance - ANSWERSfinancial tool that protects individuals and organizations from unforeseen and extraordinary financial losses by transferring risk to another party
insured - ANSWERSindividual or organization that pays premiums in exchange for protection
insurer - ANSWERSCompany, group, or ...
Adjusterpro: Chapter 1 All Sections
Questions & Answers
Insurance - ANSWERSfinancial tool that protects individuals and organizations from
unforeseen and extraordinary financial losses by transferring risk to another party
insured - ANSWERSindividual or organization that pays premiums in exchange for
protection
insurer - ANSWERSCompany, group, or government agency offering financial
protection
insurance policy - ANSWERSA legally binding contract that defines the obligations of
both the insured and the insurer.
Principle of Indemnity - ANSWERSRestoration to previous financial condition; no more,
no less
4 qualifications of a contract - ANSWERS1. agreement
2. consideration
3. competent parties
4. legal purpose
indemnification - ANSWERSPutting the policyholder back in the same financial
condition he or she was in before a loss occurred
reserve - ANSWERSpool of collected premiums that the insurer sets aside to pay
claims
Six special characteristics of insurance contracts - ANSWERS1. Personal-it protects the
insured's financial interests, not the insured item itself.
2. Adhesion-since the insurer gets to set the terms of the contract, while the insured
must simply agree
3. Utmost good faith-requires complete honesty. Policy can be voided if this principle is
violated
4. aleatory-contract depends on an unknown event
5. unitlateral-only one party, the insurer, makes a promise to perform
6. conditional-it only kicks in when there is a covered loss and certain conditions are
met
Declarations Page - ANSWERSProvides a general overview of who the policy covers.
Aka the "dec page"
, definitions page - ANSWERSnot essential, but is common to most policies. Defines the
important terms in the policy
Insuring Agreeement - ANSWERSsummarizes what the insurer will cover and how
conditions section - ANSWERSqualifies or limits an insurer's promise to pay or perform
exclusions section - ANSWERSspecifically lists people, items, events, and causes of
loss that are not covered under the policy
endorsements - ANSWERSoptional provisions that an add, reduce, or modify the
policy's coverage
characteristics of government insurers - ANSWERS1. non profit
2. mandatory participation
3. benefits prescribed by law
4. designed to meet needs of general public
5. government has monopoly
Characteristics of Private insurers - ANSWERS1. sell insurance based on consumer
preferences
2. offer a wide variety of insurance products
3. typically exist to generate a profit or benefit a group
4. insured party voluntarily participates
characteristics of stock insurance companies - ANSWERS1. always for profit
2 .usually publicly-traded
3. stockholders provide capital and participate in profits or losses
4. "non-participating" insurers: no dividends go to policy holders
examples: aflac, all state,geico
mutual insurance companies - ANSWERS1. owned by policy holders (no shareholders)
2. policyholders elect board of directors
3. "participating" insurers: policyholders participate in dividends
examples: nationwide, new york life, state farm
re-insurer - ANSWERSan insurer that provides insurance for other insurers
- insurer buys insurance to reduce its exposure to loss
- the reinsurer pays a percentage of the insurer's losses, or any losses over a certain
amount
reciprocal insurers - ANSWERSa group of people or organizations that insure each
other
1. unincorporated
2. non-profit
3. operated by an attorney-in-fact
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