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Insurance Basics

Arizona Independent Insurance Adjusters Exam

The process of selecting "profitable” risks is called ____. Underwriting
_____ is an economic device utilized by individuals and organizations to protect themselves against the risk of realizing unforeseen and extraordinary financial losses. Insurance
A _____ is defined as a legally enforceable agreement between two or more persons or parties. contract
all parties to a contract must agree to the terms of a contract. This is usually specified by a signature to the terms of a contract. Agreement
each party must contribute something of value to the contract (for example, Bob transfers ownership of his car to Kate and in exchange she gives Bob $5,600). Consideration
both parties must have the legal capacity to enter into a contract (for example, both parties must be 18 years of age for a contract to be enforceable, and both parties must be of proper mental capacity when they sign the contract). Competent parties
the subject / subjects of a contract must be of legal purpose (for example, there can be no legally-binding contract to enforce the terms of a drug deal!). Legal Purpose
_____ are written provisions that add to, delete, or modify the provisions in the original insurance contract. Endorsements
The ___ ____ specifically lists what occurrences and perils are not covered under the insurance policy. exclusions page
____ ____ generally refers to stock or mutual insurance providers who sell an array of insurance products to consumers based on their individual buying preferences. Private insurance
___ ____, commonly referred to as social insurance, is a program (usually mandatory) where risks are transferred to and pooled by a governmental entity that is then legally required to provide certain benefits. Government insurance
Some examples of ___ ____ include Social Security, Medicare, Medicaid, and the Federal Deposit Insurance Corporation. government insurance
___ ___ ___ are insurance companies that operate in order to return a profit. ___ ___ ___ are required to keep a defined amount of the collected policyholder premiums in reserve to pay for claims against their insurance policies. Private commercial insurers
___ ___ ____ operate on a non-profit basis, and return profits to their policyholders through reduced premiums or expanded benefits. Examples include Blue Cross and Blue Shield. Private Non-Commercial Insurers
The ___ ___ is considered a special non-profit provider, and provides many types of insurance. Examples include Medicare, Medicaid, and the Federal Deposit Insurance Corporation. Federal Government
___ ___ ___ operate like any other publicly traded company. Examples would include any insurance company traded on the New York Stock Exchange, such as AFLAC, Allstate, Fidelity, Progressive to name a few. Stock insurance companies
Stock insurance companies are sometimes referred to as ___-____ insurance companies, because the policyholders do not receive any dividends from the operation of the company. non-participating
___ ___ companies are owned by the policyholders of the company. The capital is not provided by stockholders. Mutual insurance
Because the policyholders get the benefits of dividends, mutual insurance companies are known as ___ ___ ___. participating insurance companies
A ___-____ group refers to a number of parties with similar insurance needs coming together to form an organization for the sole purpose of purchasing commercial liability insurance on a group basis. risk-purchasing
___ ___ ___ or Fraternal Associations are non-profit, mutual aid organizations that offer insurance to members and their families against death, disease and disability. Fraternal Benefit Societies
A ___ ___ group does not offer insurance in and of itself; rather it facilitates a group of its member individuals and/ or organizations who wish to offer insurance by providing their own capital. risk retention
An insurance contract is considered a ____ contract. personal It follows you as a person.
An insurance contract is classified as a ___ ___ __. Contract of adhesion
A contract of adhesion is a contract between two parties that offers the consumer little to no leeway to negotiate the terms of the contract. A ___ ____ ____ implies an unequal balance of power in the creation of the contract. contract of adhesion
Insurance contracts are agreed upon assuming the ___ ___ ___ of each participating party. utmost good faith
Insurance contracts are considered ___ ____ because the amounts exchanged over the course of the contract are usually unequal and depend upon the timing of the occurrence of unforeseen events. aleatory contracts
An insurance contract is considered a ___ ___. unilateral contract It is a contract where only one of the participating parties makes a promise to perform.
To an insurance company, the ___ pertains to the actual item, person, or organization that has been insured. Risk
____ refers to the amount of money an insurance company will have to pay to an individual to meet the promises outlined in the insurance contract. loss
A ____ refers to an instance, behavior or environment that increases the likelihood of a loss on an insured item. hazard
For an insurance company, ____ refers to the state of being subject to the realization of a loss. exposure
A ____ refers to the actual cause or source of an incidence of destruction, injury or loss. peril
The remaining part of an insured item. This becomes the property of the insurance company after they paid a loss on behalf of the insured. Salvage
This clause states that if part of a pair or set is lost or damaged, the loss will be valued as a proportion of the total value of the set considering the importance that the damaged item has to the set. Pair and Set Clause
_______ is a pre-defined monetary portion of an insurance claim paid by a policyholder. ______'s were originally established to avoid processing minor and easily affordable claims through an insurance company. Deductible
____ ____are binding contracts where an insurance company promises to reimburse an insured party for financial losses if certain defined events occur. Insurance Contracts
In turn the insured party, or policyholder, agrees to pay a fee called a ____ to the insurance company. premium
The concept of indemnification is the basis of all insurance contracts. To indemnify means to “___ ___," or to restore the insured party, in part or in whole, to the condition he/ she enjoyed just prior to a specified loss. make whole
In insurance, an _____ is the actual sum paid by the insurance company to the insured party for damage, and is synonymous with the word compensation or reparation. indemnity
The principle of indemnity is an insurance principle stating that an insured party may not be compensated by the insurance company in an amount _____ the insured party's economic loss. exceeding An insured party cannot EVER profit or realize any type of financial gain from an insurance contract!
The ____ ____ refers to the inception and expiration date of an insurance policy. The policy will always be listed on the declarations page, and also in the insuring agreement. By state law, all policies begin and end at 12:01 am. policy period
By state law, an insured party has exactly ___ ____ and one day from the date of filing an insurance claim to file a lawsuit against an insurer regarding that claim. two years
_____ are the factual statements upon which an insurance policy is based. Representations
______ include any deceptive, distorted, factually incorrect or plain false statements provided by an insurance applicant regarding any materially relevant information to the insurance contract. Misrepresentations
A ______ is an ongoing assurance made by one party to another that certain facts and/or conditions in an insurance contract are promised and guaranteed to be true, to be met, or to occur. warranty
_____ occurs when an insured party intentionally perverts, alters, or misrepresents the truth, or willfully utilizes any manner of deception or misrepresentation in order to wrongfully realize a financial gain from an insurance company. Fraud
An ___ ____ occurs when an insured or an insurer knowingly gives up a known right under the insurance contract. express waiver
An ___ ____ can occur when an insurer takes no action upon realizing material changes in a contract. implied waiver
A ____ is an oral or written statement providing immediate insurance protection, valid for a specified period only. binder
_____ occurs when an action or practice of the insured party is permitted to continue because any defense against a continuation of said action or practice has been effectively waived by the insurer. Estoppel
___ ___is a risk undertaken that results in an unknown degree of gain or loss. ___ ___ are conscious choices made by an individual. Speculative risk
Insurance companies do not insure ! speculative risks
___ ___ is a risk where a loss is the only possible outcome. ___ ___ is related to events that are completely out of the risk-takers control. You do not choose to participate in a ___ ____. Pure risk
Insurance companies only insure __ ___! pure risks
Insurance companies utilize ___ ___ to determine whether or not to write an insurance policy. risk management
___ ____ is a risk management tactic that completely eliminates risk Risk avoidance
___ ____ is a risk management practice that mitigates, or reduces, the financial risk of the insurance company in providing insurance for an item. Risk reduction
____ ____ is a risk management technique that transfers risk to another party. Risk transference
____ ____ is a risk management technique whereby an insurance company agrees to assume the financial risk of an insured item. Risk retention
A ___ ____ states that an insurer will not cover any losses unless the losses exceed a pre-determined amount. When a loss equals or exceeds the pre-determined amount, the insurer pays in full. franchise deductible
A _____ refers to an instance, behavior or environment that increases the likelihood of a loss to an insured item. hazard
Three different types of hazards: Moral hazards Morale hazards Physical hazards
A ____ _____ is a hazard that results from a conscious decision made by an insured party to participate in a manner or behavior more likely to result in a loss because they have insurance. moral hazard
A _____ ______is a hazard that results from an unconscious decision made by an insured party to participate in a manner or behavior more likely to result in a loss because they have insurance. morale hazard
A _____ ______is a physical condition that increases the chance of a loss. A physical condition can include the environmental, material, operational, or occupational threats to an insured item. physical hazard
The doctrine of ____ _____in the insurance industry states that when there is an unbroken chain of events between an occurrence and a loss, then the loss is said to be part of the original occurrence. proximate cause
An occurrence can cause initial damage, which in turn can directly cause or lead to a number of other subsequent damages (or losses). The original occurrence is the ____ _____of all the subsequent damages. proximate cause
____ _____ represent a lender's financial stake in an insured item. Lender interests
A ____ is the official notification issued to an insurance company requesting the payment of an amount due under the terms of a policy. claim
A __ __ __, is legally defined as, "a claim that is made by an insured or policyholder under an insurance policy or contract or by a beneficiary named in the policy or contract; and must be paid by the insurer directly to the insured or beneficiary." first party claim
A ___ ___ ___is a claim made against your insurance policy by a third party who alleges that you caused them damages. Third Party Claim
If the insurer accepts a claim and agrees to payment, the insurer shall pay the claim not later than the ___ business day after the date notice is made that the claim will be paid. Fifth
Most States require an insurance company to accept or reject payment on an insurance claim "not later than the __ business day after the date the insurer receives all items, statements, and forms required by the insurer to secure proof of loss." 15th
Liability insurance always indemnifies a ___ ___! Liability insurance only provides indemnification when the insured is legally liable for a loss. Third Party
Three types of Liability: Public liability Product Liability Employer Liability
______is defined as the failure to use a reasonable degree of care in a particular situation, or the failure of a person to do what a reasonably prudent person would have done under like circumstances. Negligence
a person who has suffered damages as the result of a negligent act of an individual can also lay blame upon the person or organization responsible for the person that committed the negligent act. Vicarious Liability
Legal experts suggest over __% of liability cases involve unintentional negligence. As an adjuster, nearly all your liability cases will involve some element of negligence. 90
An ___ ____ is a planned or premeditated act, which may result in unintended consequences. intentional tort
A ___ ____is an act, or an act of omission, that reflects a refusal to comply with the duty of exercising care in a manner that a reasonably prudent person would, which results in damages or injury to a third party. negligent tort
The person or entity that commits an act of wrongdoing or negligence, leading to property damages or bodily injury to a third party. Tortfeasor
Tort law suggests three degrees of legal liability: Full Liability Partial Liability No Liability
The ____ _____defense suggests that because the claimant was partially responsible for their damages, they shall receive no indemnification for their damages. contributory negligence
___ ___ - refers to law and the corresponding legal system developed through decisions of courts and similar tribunals (called case law), rather than through legislative statutes or executive action. Common law
____ ____ - is any written law set forth by a governing authority, including federal laws, state laws, and city laws. Statutory laws are often known as statutes or ordinances. Statutory law
____ and excess liability insurance policies are designed to provide additional liability protection over and above what their standard liability policy offers. Umbrella
A __ __ __ allows an insurer to investigate further whether coverage applies in the lawsuit without waiving its right to later deny coverage, and provides notification to the policyholder that they might need to start preparing their own defense. reservation of rights
a ___ ___ ____ allows the insurer to make one immediate lump sum payment to the claimant to settle all claims and damages brought forth by the claimant. full release settlement
In the payment of ___ ____, ____ ___settlement option, the insurer agrees to indemnify the claimant for all property damages in lieu of settling the claim in full until damages for bodily injury can be negotiated. property damage, bodily injury pending
A _____settlement, also known as a "walk-away" settlement, means the insurer simply pays the bills submitted by the claimant. no-release
Created by: ajramirez1969
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