FLORIDA INSURANCE 2-14 EXAM TERMS
Insurance - Answers -Financial protection against loss or harm - An arrangement by
which company gives customers financial protection against loss or harm such as theft
or illness in return for premium payments.
Life Insurance - Answers -Is based on actuarial or mathematical principles and
guarantees a specified sum of money upon the death of the person who is insured.
Annuities - Answers -Provide a stream of income by making a series of payments to the
annuitant for the annuitant's lifetime or for a specifically designated period of time.
Risk - Answers -Uncertainty regarding loss; the probability of loss occurring for an
insured or prospect
Speculative Risks - Answers -Involve the possibility of loss and gain. (Not Insurable)
Pure Risks - Answers -Involve the possibility of loss only. (Insurable)
Peril - Answers -Cause of risk (when a building burns, fire is the peril)
Hazards - Answers -The source of danger
Physical Hazard - Answers -A hazard being of physical nature.
A person being treated of cancer, the disease is the physical endangerment. (Blindness
& deafness)
Risk Avoidance - Answers -Occurs when individuals evade risk entirely. "If you don't
drive, then you avoid getting in an auto accident."
Risk Reduction - Answers -Takes place when the chances of loss are lessened.
Changing a lifestyle to minimize a known risk.
Risk Retention - Answers -Being aware of the risks involved and taking precautions for
financial protection. Auto policy's deductible is an illustration of risk retention
Risk Transference - Answers -The act of shifting the responsibility of risk to another in
the form of an insurance contract.
Adverse Selection - Answers -Refers to the tendency for those individuals who present
less favorable insurance risk to seek or continue insurance to a great extent than other
risks.
Insuring Pure Risk - Answers -Loss must be due to chance
Loss must be definite and measurable
Risk must be predictable
,Loss must NOT be catastrophic
Exposure to loss must be large
Loss exposures must be randomly selected
Mutual Insurers - Answers -Participating policies
Owned by policyholders
Vote for directors and trustees
Directors and management have control
Typically higher rates
Assessment Mutual Insurers - Answers -Prohibited in Florida
Bad policy remplacement issues - Answers -- Most the first year's premium is consumed
by the commission
- The premium is higher due to the insured's advanced age
- Waiting periods begin anew
Misuse of Premiums - Answers -- Improper use of premiums collected by an insurance
producer
- Depositing a client's premium in own personal account
Rebating - Answers -- Florida and California are the only two states that allow rebating
- When any part of commission or anything else of value is given to the insured as a
incentive to buy a policy
- Agent must keep copies of rebating schedules for five years
NAIC - Answers -- National Association of Insurance Commissioners
- No legal power of its own
- Encourages uniformity in state insurance laws and regulations
Florida Insurance Guaranty Association - Answers -- Funded by insurance companies
through assessments
-FIGA is part of a non-profit,
- Guaranty associations protect policyholders and claimants.
- Holds three separate accounts:
- Health Insurance
- Life Insurance
- Annuity Accounts
NAIFA - Answers -- National Association of Insurance and Financial Advisors (NAIFA)
- Designed to protect agents
- Dedicated to supporting life insurance industry
A.M. Best Rating Agency - Answers -- Profitability, leverage, & liquidity
- A++ to F and S (suspended)
Standard and Poors (S&P) Rating Agency - Answers -- Claims and the ability to pay
,- AAA to C to R
Moodys Investor Services Rating Agency - Answers -- Financial strength
- Aaa to C
Fitch IBCA (formerly Duff & Phelps) - Answers -- Credit worthiness of securities
- AAA to CCC
Weiss Ratings, Inc. - Answers -- Strength and safety of financial institutions and rates
risk adjusted mutual funds and stocks
- A to F
Elements of Contract - Answers -Offer & Acceptance + Consideration + Legal Purpose
+ Competent Parties = Legally Binding Contract
Offer & Acceptance - Answers -Completed when a premium payment accompanies the
offer made by the proposed insured
Legal Purpose - Answers -The policy owner must have an insurable interest in the
insured
Competent - Answers -Just like " innocent until proven guilty"
Aleatory - Answers -(1) There is an element of chance for both parties
(2) The dollar values exchanged may not be equal
Adhesion - Answers -The contract has been prepared by one party (the insurer), rather
than by negotiation between the contracting parties.
Unilateral - Answers -Promise for Performance
Valued Contracts - Answers -Pay a predetermined amount with no way to assess loss
Indemnity Contracts - Answers -Pay the amount of the loss only (up to the policy limit)
STOLI - Answers -- Stranger-Orignated Life Insurance
- Typically target seniors
-
Brokers - Answers --Florida does not issue separate licenses for brokers
- Cannot bind the contract
Agents - Answers -- The acts of the agent are considered the acts of the company
- Can bind the contract
Entities involved in agency - Answers -The agent
, The insured
The insurance company
Express Authority - Answers -The authority that an agent has in writing in the contract
with the insurer that the agent represent
Implied Authority - Answers -Authority that is given not in writing but that is necessary
for the agent to transact insurance
Apparent Authority - Answers -A third party is led to believe and that the agent is given
due to the agent's actions.
Waiver - Answers -The voluntary giving up of a legal, given right.
Estoppel - Answers -Simply means the legal enforcement of a waiver.
Parol Evidence Rule - Answers -When parties put their agreement in writing, all
previous verbal statements come together in that writing, and a written contract cannot
be changed or modified.
Void Contract - Answers -Fraud + Prior Knowledge
- Have two years from the date of the contract purchase to dispute the validity of a
contract
Voidable - Answers -One of the parties has a legal reason to reject or cancel the
contract
Categories of Life Insurance - Answers -Ordinary
Industrial
Group
Ordinary Life Insurance - Answers -- Term, Whole Life, Universal Life, Endowment
- The most common
Industrial Life Insurance - Answers -- Sold by home service insurers
- Over the years has been used less
- Mainly, to cover funeral expense
Agent in charge - Answers -A insurance agency must have one, but the agent does not
have any specific duties or responisbilities
Term Life Insurance - Answers -- Most common. Policy premiums are based on
mortality and loading.
- Premiums stay level, and there are no cash values
Mortality - Answers -The relative incidence of death within a group.
Insurance - Answers -Financial protection against loss or harm - An arrangement by
which company gives customers financial protection against loss or harm such as theft
or illness in return for premium payments.
Life Insurance - Answers -Is based on actuarial or mathematical principles and
guarantees a specified sum of money upon the death of the person who is insured.
Annuities - Answers -Provide a stream of income by making a series of payments to the
annuitant for the annuitant's lifetime or for a specifically designated period of time.
Risk - Answers -Uncertainty regarding loss; the probability of loss occurring for an
insured or prospect
Speculative Risks - Answers -Involve the possibility of loss and gain. (Not Insurable)
Pure Risks - Answers -Involve the possibility of loss only. (Insurable)
Peril - Answers -Cause of risk (when a building burns, fire is the peril)
Hazards - Answers -The source of danger
Physical Hazard - Answers -A hazard being of physical nature.
A person being treated of cancer, the disease is the physical endangerment. (Blindness
& deafness)
Risk Avoidance - Answers -Occurs when individuals evade risk entirely. "If you don't
drive, then you avoid getting in an auto accident."
Risk Reduction - Answers -Takes place when the chances of loss are lessened.
Changing a lifestyle to minimize a known risk.
Risk Retention - Answers -Being aware of the risks involved and taking precautions for
financial protection. Auto policy's deductible is an illustration of risk retention
Risk Transference - Answers -The act of shifting the responsibility of risk to another in
the form of an insurance contract.
Adverse Selection - Answers -Refers to the tendency for those individuals who present
less favorable insurance risk to seek or continue insurance to a great extent than other
risks.
Insuring Pure Risk - Answers -Loss must be due to chance
Loss must be definite and measurable
Risk must be predictable
,Loss must NOT be catastrophic
Exposure to loss must be large
Loss exposures must be randomly selected
Mutual Insurers - Answers -Participating policies
Owned by policyholders
Vote for directors and trustees
Directors and management have control
Typically higher rates
Assessment Mutual Insurers - Answers -Prohibited in Florida
Bad policy remplacement issues - Answers -- Most the first year's premium is consumed
by the commission
- The premium is higher due to the insured's advanced age
- Waiting periods begin anew
Misuse of Premiums - Answers -- Improper use of premiums collected by an insurance
producer
- Depositing a client's premium in own personal account
Rebating - Answers -- Florida and California are the only two states that allow rebating
- When any part of commission or anything else of value is given to the insured as a
incentive to buy a policy
- Agent must keep copies of rebating schedules for five years
NAIC - Answers -- National Association of Insurance Commissioners
- No legal power of its own
- Encourages uniformity in state insurance laws and regulations
Florida Insurance Guaranty Association - Answers -- Funded by insurance companies
through assessments
-FIGA is part of a non-profit,
- Guaranty associations protect policyholders and claimants.
- Holds three separate accounts:
- Health Insurance
- Life Insurance
- Annuity Accounts
NAIFA - Answers -- National Association of Insurance and Financial Advisors (NAIFA)
- Designed to protect agents
- Dedicated to supporting life insurance industry
A.M. Best Rating Agency - Answers -- Profitability, leverage, & liquidity
- A++ to F and S (suspended)
Standard and Poors (S&P) Rating Agency - Answers -- Claims and the ability to pay
,- AAA to C to R
Moodys Investor Services Rating Agency - Answers -- Financial strength
- Aaa to C
Fitch IBCA (formerly Duff & Phelps) - Answers -- Credit worthiness of securities
- AAA to CCC
Weiss Ratings, Inc. - Answers -- Strength and safety of financial institutions and rates
risk adjusted mutual funds and stocks
- A to F
Elements of Contract - Answers -Offer & Acceptance + Consideration + Legal Purpose
+ Competent Parties = Legally Binding Contract
Offer & Acceptance - Answers -Completed when a premium payment accompanies the
offer made by the proposed insured
Legal Purpose - Answers -The policy owner must have an insurable interest in the
insured
Competent - Answers -Just like " innocent until proven guilty"
Aleatory - Answers -(1) There is an element of chance for both parties
(2) The dollar values exchanged may not be equal
Adhesion - Answers -The contract has been prepared by one party (the insurer), rather
than by negotiation between the contracting parties.
Unilateral - Answers -Promise for Performance
Valued Contracts - Answers -Pay a predetermined amount with no way to assess loss
Indemnity Contracts - Answers -Pay the amount of the loss only (up to the policy limit)
STOLI - Answers -- Stranger-Orignated Life Insurance
- Typically target seniors
-
Brokers - Answers --Florida does not issue separate licenses for brokers
- Cannot bind the contract
Agents - Answers -- The acts of the agent are considered the acts of the company
- Can bind the contract
Entities involved in agency - Answers -The agent
, The insured
The insurance company
Express Authority - Answers -The authority that an agent has in writing in the contract
with the insurer that the agent represent
Implied Authority - Answers -Authority that is given not in writing but that is necessary
for the agent to transact insurance
Apparent Authority - Answers -A third party is led to believe and that the agent is given
due to the agent's actions.
Waiver - Answers -The voluntary giving up of a legal, given right.
Estoppel - Answers -Simply means the legal enforcement of a waiver.
Parol Evidence Rule - Answers -When parties put their agreement in writing, all
previous verbal statements come together in that writing, and a written contract cannot
be changed or modified.
Void Contract - Answers -Fraud + Prior Knowledge
- Have two years from the date of the contract purchase to dispute the validity of a
contract
Voidable - Answers -One of the parties has a legal reason to reject or cancel the
contract
Categories of Life Insurance - Answers -Ordinary
Industrial
Group
Ordinary Life Insurance - Answers -- Term, Whole Life, Universal Life, Endowment
- The most common
Industrial Life Insurance - Answers -- Sold by home service insurers
- Over the years has been used less
- Mainly, to cover funeral expense
Agent in charge - Answers -A insurance agency must have one, but the agent does not
have any specific duties or responisbilities
Term Life Insurance - Answers -- Most common. Policy premiums are based on
mortality and loading.
- Premiums stay level, and there are no cash values
Mortality - Answers -The relative incidence of death within a group.
