Busy. Please wait.
Log in with Clever

show password
Forgot Password?

Don't have an account?  Sign up 
Sign up using Clever

Username is available taken
show password

Make sure to remember your password. If you forget it there is no way for StudyStack to send you a reset link. You would need to create a new account.
Your email address is only used to allow you to reset your password. See our Privacy Policy and Terms of Service.

Already a StudyStack user? Log In

Reset Password
Enter the associated with your account, and we'll email you a link to reset your password.
Didn't know it?
click below
Knew it?
click below
Don't Know
Remaining cards (0)
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.

  Normal Size     Small Size show me how

Intro to Insurance


Insurance definition Transfer of risk from a person or business to an insurance company
Risk definition Uncertainty/possibility of loss
(2) Types of Risks (1) Speculative Risk (2) Pure Risk
Speculative Risk definition Chance of loss OR gain; no insurable
Pure Risk definition Chance of loss ONLY; is insurable
Exposure definition Risks for which the insurance company would be liable
Peril definition (and example) A CAUSE of loss If a house burned down, the peril is the FIRE that occured
Direct Loss definition (and example) Physical loss to property with no intervening cause Ex. A lightning struck a house or an automobile hitting a tree
Indirect Loss definition (and example) Consequential loss as the result of a direct loss Ex. If you had a fire, the loss of your home would be the indirect loss
Hazard definition Something that increases the chance of a loss
Physical Hazard definition A hazard that can be seen Ex. A wet floor sign alerting guests - the wet floor is the hazard
Moral Hazard definition Dishonesty - increased risk that the insured will lie on an applicant or fakes a loss
Morale Hazard definition Carelessness Ex. you ran into the store with the keys in the running car
STARR Accronym Sharing Transfer Avoidance Retention Reduction
Sharing in STARR definition (and example) 2+ individuals or businesses agreeing to pay a portion of any loss incurred by a member of the group Ex. Stockholders
Transfer in STARR definition The insurance company agrees to pay a claim in a customer has a loss Customer must pay the premium
Avoidance in STARR definition (and example) Eliminating a particular risk by not engaging in a certain activity Ex. Someone who does not drive to avoid the risk of injuring someone else in an accident and being reliable for the damage
Retention in STARR definition (and example) The individual or business will pay for the loss if it occurs Ex. If you don't have car insurance to pay for the damages you caused to a person, you have retained that risk
Reduction in STARR definition (and example) Lessening the chance or extent that a loss will occur Ex. A business installs a sprinkler system to reduce the amount of damage a fire may cause
Contract definition An agreement between the insured and the insurer
Who is the 1st party in a contract? The customer - insured
Who is the 2nd party in a contract? The insurance company - insurer
Law of Large Numbers definition The principal that makes insurance possible A calculation of accurate losses that may happen in a specific group. The larger the group, the more statistics a loss can be predicted
CANHAM Accronym Calculable Affordable Non-Catastrophic Homogeneous Accidental Measurable
Calculable in CANHAM definition A premium must be calculable based on prior loss statistics for a particular risk to predict future losses
Affordable in CANHAM definition The premium should be affordable for an average consumer
Non-Catastrophic in CANHAM definition The risk must be non-catastrophic. Catastrophic risks could be detrimental to the insurance company
Homogenous in CANHAM definition The risk must be similar so the same factors affect the chance of loss A wood frame catching on fire is different than a brick house catching on fire
Accidental in CANHAM definition The loss must have been accidental. Intentional losses from the insured are not covered by insurance
Measurable in CANHAM definition Proof of loss must be proven by numbers and dollar amounts
Adverse Selection definition Risks that have a high-than-normal chance off loss This is why insurance companies do underwriting processes
Are Adverse Selections covered by insurance? No
Reinsurance definition An insurance company paying for another insurance company to take some risk off the insurer This spread the insurers risk across the board
Facultative definition The reinsurer evaluates each risk before allowing the transfer (agreement from the insurance company)
Treaty definition An agreement
Stock Insurer definition A business formed as a corporation and owned by its stockholders or shareholders issues non-participating policies
Dividends related to a Stock Insurer is... (3 things) (1) Not guaranteed (2) Paid to the stockholder (3) Taxable to stockholder
Mutual Insurer definition A business owned by its policyholders (aka customers) Issues to Participating policies
Mutual companies are referred to as... Participating companies because they sell par policies
Dividends related to a Mutual Insurer is... (3 things) (1) Not guaranteed (2) Paid to policyholders (customers) (3) Not taxable
Fraternal Insurer definition Provides/Offers insurance only to members Can provide social events and typically engages in charitable causes
Reciprocal Insurer definition Unincorporate groups that agree to insurer each other's losses under a contract
Who is a reciprocal Insurer handled by? (and definition) An Attorney-in-fact (controlled and overseen by an advisory committee of subscribers
Lloyds Association definition Insurance provided by individual underwritters (aka not companies)
What are the Lloyds Association unusual risks? (3 examples) (1) Hole-in-one Contest (2) Athlete's Arm (3) Celebrities Hair
Risk Retention Group definition (and example) Insurance companies owned by their members creating a liability insurance for customers from the same industry (a car dealers risk retention group would be only the car dealers can be policy holders
Risk Purchasing Group definition Purchasing liability insurance for its policyholders (members) Ex. A group of businesses from the dealership join together to buy liability insurance from an insurance company
Self-Insurance definition (and example) A business that pays its own claims (someone reserves specific funds to pay for any losses) Also retains more risk than transfers
Federal Government provides what types of insurance? (6 things) (1) War Risk (2) Nuclear Energy (3) Flood (4) Federal Crop (5) Unemployment (6) Workers Compensation
Domestic Insurance Location definition An insurance company incorporated in the state is resides in (typically where headquarters are located)
Foreign Insurance Location definition An insurance company incorporated in one state but does business in another state
Alien Insurance Location definition An insurance company incorporated outside the USA and its territories
Certificate of Authority definition A state license for an insurance company
Admitted (also known as Authorized) definition When a company is licensed and has a certificate of authority to sell insurance
Nonadmitted (also known as unauthorized) definition Allow insurers to sell insurance to certain types of risk without a license an no certificate of authority
Surplus Lines definition Insurance sold by nonadmitted insurance companies unless on the states approved list of insurers
Who can/cannot Surplus Lines be sold to? (Can) be sold to certain high-risk customers (Cannot) by sold only to get a insured a cheaper rate than admitted insurers
Financial Strength Rating definition A report card of the company
What are the (4) Methods of Marketing (1) Independent Marketing (2) Exclusive or Captive Marketing (3) Managing General Agents (4) Direct Writing Companies
Independent Marketing Agents definition Individuals that sell several companies insurance and are not direct employees of the insurance company These agents own the policies they sell
Exclusive or Captive Marketing Agents definition Individuals that represent ONE insurance company The insurance company owns the policy they sell
Managing General Agents (MGAs or GAs) definition Individuals that hire, train, and supervise other agents within a specific geographical area
Direct Writing Companies definition A company whose products are sold by employees who are salaried, compensated, or both. There is NO Agent or producer involved The insurance company owns the policy Ex. Magazines, television, internet, radio
Agency definition The relationship a person is authorized to represent The person authorized to represent the Agency is an Agent
What are the (3) types of Agent Authorities? (1) Express Authority (2) Implied Authority (3) Apparent Authority
Express Authority definition What the agents written contract with the company says
Implies Authority definition Not written; Activities an agent normally does to sell insurance (business cards, advertising)
Apparent Authority definition Authorities a normal person would *believe* the agent has based on the agents actions and statements
Fiduciary Trust definition A person in a position of financial trust
Commingling definition The illegal act of mixing personal funds with the insured or insurance insurers funds
Suitability Considerations definition To make purchase recommendations that are appropriate in light of a clients needs
CLOAC Acronym Consideration Legal Purpose Offer Acceptance Competent Parties
Consideration (in CLOAC) definition Money and statements made on an application
Insured Consideration definition Statements made on the application and premium
Insurer Consideration definition Promises to pay claim based on the policy
Legal Purpose (in CLOAC) definition The risk transfer (insurance) doesn't violate the law
Offer (in CLOAC) definition A proposal made by one of the potential parties in the contract
Counteroffer (in CLOAC) definition When an insurance company issues a policy with a higher premium than the insured applied for
Acceptance (in CLOAC) definition *Agrees* to pay the premium
Competent Parties (in CLOAC) definition Must be 18 or older, mentally sane, and sober to make an insurance contract
Adhesion definition Policies written in place by the insurer with absolutely no wiggle room. It's *glued*
Aleatory Contracts definition The value received from the contract by each party is *unequal* Ex. Pay a small premium and have a large claim OR pay premiums for many years with zero claims
Utmost Good Faith definition Must be honest and have good intentions
Unilateral Contracts definition *One-sided) contracts due to only one party being legally bound to preform under the contract Insured may cancel at *any* time Insurer must pay covered losses
Personal Contracts definition Contracts between the insurance company and applicant; usually nontransferable to another party
Conditional Contracts definition Insured must pay the premium for coverage and file a claim if a loss occurs
Indemnity definition The contract is intended to restore the insured to the financial state he or she was in prior to the loss - no more, no loss
Representation definition A statement the applicant believes is true
Misrepresentation definition A false statement that does not void contracts but may alter the premium
Material misrepresentation definition A false statement that would void the premium offer
Warranty definition A statement guaranteed to be true - a promise
Breach definition Void
Concealment definition A failure to disclose named facts - hiding information
Fraud definition An intentional act to deceive another party to part with something of value - cheating, could be criminal
Waiver definition Voluntarily giving up a right
Estoppel definition Once a right has been waived, it cannot be changed
Real Property definition (and example) Insured property Ex. A house, TV, *my stuff*
DICEE Acronym Declarations Insuring Agreements Conditions Endorsements & Additional Coverage Exclusions
Declaration (in DICEE) definition The first page of the policy which goes over who, what, when, where, and how much
Insuring Agreements (in DICEE) definition Describes covered perils or risks assumed by the insurer and makes reference to a contractual agreement between the insurance company
Conditions (in DICEE) definition States the rules for the policy
Endorsements (in DICEE) definition Changes to the original policy
Exclusions (in DICEE) definition Item(s) that are not covered by the insurance company
Named Insured definition A person, business, or other entity named in the declaration page to who the policy is insured
First-Named Insured definition The first listed person on the declaration page when there is more than one person insred (not commercially)
Additional Insured definition In certain circumstances, another person or business is added by endorsement
Policy Period definition The duration of a policy - when it starts and when it ends
Policy Territory defintion When a loss will not be covered unless it occurs within the geographical territory (USA, Canada, Puerto Rico)
Unearned Premium definition When the insured paid for premiums in advance and must be return if the insured cancels the policy
Cancellation definition Occurs *before* the expiration date
Nonrenewal definition Occurs at the time of the expiration
Prorated Basis definition When the insured will receive a portion of the premium back dependent on when the policy is cancelled Full refund of the unearned premium
Short-rated Basis definition When an insured cancel a policy before the expiration date, they are entitled to retain a larger percentage of the unearned premium
Flat Cancellation definition When a policy is cancelled on the effective date (can be done be insurer or insured)
Deductible definition An amount paid out of pocket by the insured before an insurer pays any expenses
Other Insurance definition When more than one policy covers the same loss or claim
Nonconcurrency definition When more than one policy covers the same loss or claim but providing different coverage
Contribution of Equal Shares definition All insurers pay equal amounts, up to the limits policy with the smallest limit
Pro Rata definition When each insurance company is liable for a portion of the loss
Duties After Loss (PPC-MSC) Acronym Prompt Protect Complete Make Submit Cooperate
Named Insured Duties After Loss definition Lists the named insured's (who's on the dec page) responsibilities after a property insurance loss
What does the first P in Named Insured Duties After Loss (PPC-MSC) mean? Promptly notify the insurance company of the claim
What does the second P in Named Insured Duties After Loss (PPC-MSC) mean? Protect the property from further damage
What does the first C in Named Insured Duties After Loss (PPC-MSC) mean? Complete detailed proof of loss (an official list of inventory)
What does the M in Named Insured Duties After Loss (PPC-MSC) mean? Make the property available for inspection
What does the S in Named Insured Duties After Loss (PPC-MSC) mean? Submit examination under oath if required
What does the second C in Named Insured Duties After Loss (PPC-MSC) mean? Cooperate with the insurance company during the claim investigation proceedure
Assignment Condition definition A policy may not be transferred to anyone else without *written consent* from the insurance company
Transfer of Right definition When the named insured dies and the rights & duties under the policy are transferred to the insured legal representative who kept the policy until the expiration date
Abandonment Condition definition A condition that states the insured may not abandon property to the insurance company for profit or reimbursement
Salvage Condition definition A condition that states that the insurance company can take possession of damaged property after insurance company pays a total loss
Liberalization Condition definition A condition that states that if the insurer broadens coverage under an endorsement without an added premium, all the other coverages will be broadened as well
Subrogation definition Insurance company has a right to sue an at-fault party for damages they had to pay to the insured
Insurance Interest definition A legitimate risk of financial loss
Underwriting definition The process (preformed by an agent or producer) of evaluating a risk and if the company should issue a policy
Application definition Contains information that will help the underwriter decide to accept the risk and/or what the premium rate will be
Binder definition A *temporary* statement made by the agent that gives the insured immediate coverage for 30, 60, or 90 days (when no cancellation notice is sent) The middle man of Agent and underwriter - does not guarantee a policy
Loss Ratio Formula Calculated by dividing (incurred losses) by the (earned premiums)
Loss Ratio definiton To compare the companys operation from year to year
Earned Premium definiton An amoutn the company actually earned by providing insurance to a customer during a time period
Expense Ratio definition The cost of doing business
Expense Ratio Formula Calculated by dividing (underwriting expenses) by (written premium)
Underwriting Expenses definition (and example) The cost to acquire/promote business and keep current customers Ex. Advertising, commission or salaries to employees, taxes/fees
Written Premium defintion The gross amount (before tax) of premium income received from insureds
Combined Ratio definition The sum of loss ratio and expense ratio You want this to be at 100% (same number) or par <100 = underwriting profit >100 = underwriting loss
Combined Ratio Formula (loss ratio) + (expense ratio)
Judgement Rating definition Deciding an premium based on the individual risk Made by careful consideration by underwriter - no books are used
Manual (or class) Rating definition Rates calculated by a formular in a manual rate per unit of insurance X the number of units of insurance being purchased
Experience rating Experience Rating definition Based on insured (3 year) claim history
Retrospective Rating definition Insured premium on losses incurred during a policy period
Schedule Rating definition A system of debits or credit to reflect characteristics of a particular customer
Loss Costs Based on pure claims data No profits are included No operating expesnse are included
Rate Components definition Factors that determine premium rates; Loss costs costs of handling claims operating expenses profits
Fair Credit Reporting Act definition Requires agentcies to adopt procedures for pulling credit info - credit, personnel, insurance other subjects
Consumer Rights definition Consumers who feel that information in their files in inaccurate They may dispute the information If disputed, insurers are required to investigate
Commissioner of Insurance definition The head of the Department of Insurance in Wisconsin
Promissory Warranty definition A warranty that certain things will be done or not done AFTER the policy has taken effect.
Affirmatory Warranty definition A warranty that certain things will be done or not done AT or BEFORE the policy has taken effect.
Compulsive Forfeiture definition A court-ordered fine for failing to comply with the Commissioner
Agreed Value Policy definition A policy in which the insured and insurer agree on a property value and list it in the policy
WIP stands for... Wisconsin Insurance Plan
Insurance Security Fund definition protects insured against loses from unpaid claims if an insurer is *liquidated*
Short-rate cancellation definition A method used when a policy is canceled by the policyholder before expiration date - the insured receives a less pro rata return of premium
The Gramm-Leach Bliley Act definition To protect the privacy of customers financial information
Coinsurance definition A requirement stating the insured must carry a minimum about of insurance typically 80% coverage Does not cover total losses - that would be policy limit
Blanket Policy Defintion Allowing an insured to move inventory from one location to another without notifying insurance company
Specific Policy definition When a business does not move inventory from one location to another
Remit definition Cancels
Standard Mortgage Clause defintion A policy specifying the rights and duties of the mortgagee under the policy- A mortgaee may have to pay the premium if the insured fails to do so
Bailee definition Someone who has temporary custody of someones property for s special occasion
Actual Cash Value definition Replacement cost minus depreciation
Aggregate Limit definition the maximum amount the policy will pay per policy period regardless of the amount of claims
Vicarious Liability definition when a person may be responsible for the negligent acts of another person who has direct liability
Supplemental Payments definition Payments paid in addition to a policy's regular limits of liability Include defense costs, claim investigation, lawyers, other related court costs)
Absolute/Strict Liability definition When someone is doing something so dangerous that it doesn't matter what you did to prevent the claim, you will be responsible (you ABSOLUTELY did it)
Negligent definition
Appurtenant definition Other
Slander definition A false statement that damages a reputation
Libel definition A false statement that damages a reputation
Liable definition legally responsible for
Remit definition Cancels
Personal Property Replacement Cost Endorsement definition An endorsement that modifies basis of loss settlement from actual cost value to replacement cost
Scheduled Personal Property Endorsement definition Provides coverage for specific items of property Ex. Watches
Business Pursuit Endorsement definition Provides Homeowners liability coverage for personal damage or injury while conducting business
Permitted Incidental Endorsement definition Deletes Exclusions in the policy relating to doing business on the residents premises Ex. 20 students coming over for weekly piano lessons
Created by: marerickson
Popular Insurance sets




Use these flashcards to help memorize information. Look at the large card and try to recall what is on the other side. Then click the card to flip it. If you knew the answer, click the green Know box. Otherwise, click the red Don't know box.

When you've placed seven or more cards in the Don't know box, click "retry" to try those cards again.

If you've accidentally put the card in the wrong box, just click on the card to take it out of the box.

You can also use your keyboard to move the cards as follows:

If you are logged in to your account, this website will remember which cards you know and don't know so that they are in the same box the next time you log in.

When you need a break, try one of the other activities listed below the flashcards like Matching, Snowman, or Hungry Bug. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out.

To see how well you know the information, try the Quiz or Test activity.

Pass complete!
"Know" box contains:
Time elapsed:
restart all cards