Florida Adjuster (Actual) Exam 2023

What is Insurance? - ANSWER-A financial tool that protects people from their losses. Transfers risk from one party to another: 1. Insured (people) purchases an insurance policy 2. Insurer provides financial protection to the insured How does Insurance work? - ANSWER-1. Insured pays a premium 2. Insurer promises to pay for specified losses if they occur 3. Insurer's promise gives peace of mind to insured Spreading Risk (How Insurance works) - ANSWER-1. Collected premiums (from ALL insured) go into a pool called a "reserve" 2. Policyholder can file a claim for covered losses 3. After filing a claim, the insured becomes a claimant 4. Insurer pays for claims out of the "reserved" premiums 5. Reserve should always be enough to cover losses Principle of Indemnity - ANSWER-Restoration to previous financial condition; no more, no less. Indemnification - ANSWER-Being restored to the financial condition you were in before a loss Insurance Policy (ACCL) - ANSWER-1. Contract to provide financial protection for a fee 2. Legally binding because it meets the 4 requirements of a legal contract Four Qualification (Insurance Policy-Legal Contract) - ANSWER-1. Agreement: mutual consent (signature or handshake) 2. Consideration: all parties bring something of value (money in exchange for a car) 3. Competent parties: 18 years old, sober, and sane 4. Legal purpose: no contract for money laundering (has to be legal) Insured - ANSWER-Individual or organization that pays premiums in exchange for protection Insurer - ANSWER-Company, group, or government agency offering financial protection Risk (meaning) - ANSWER-When an insurer issues an insurance policy, the actual item, person, or organization that is being insured. Personal (Six Special Characteristics of Insurance Contracts) - ANSWER-The insured person is protected from losses; not the covered property D.I.C.E. - ANSWER-1. Declarations Page (aka "Dec Page")/Definitions Section 2. Insuring Agreement 3. Conditions 4. Exclusions/Endorsements Declarations Page ("Dec Page") - ANSWER-Makes contract specific to the policyholder (names of both parties; location & description of insured item; value of insured item; dates of the policy (beginning and end); amount and limit of coverage; deductible; and premium. Definitions Section - ANSWER-1. Not technically essential, but common in policies 2. defines terms used to write policy including: - "collision," "decay," "like kind and quality." 3. includes important language for adjusters to know Insuring Agreement Section - ANSWER-Insurer agrees: - what is covered - which causes of loss are covered - any service provided - any exclusions to coverage - the maximum limit of policy coverage in dollars Conditions Section - ANSWER-The Insurer specifies any limits or qualifications the policyholder must meet (example) Requiring a security guard for a jewelry store How to file a proof of loss How to protect the property after a loss Exclusions Section - ANSWER-List what the policy DOES NOT cover: Common Exclusions (in nearly all property policies) - earthquakes - flooding - war - nuclear hazards - intentional acts Endorsements Section Synonyms: Rider Addendum Attachment - ANSWER-Are additions to the policy that can: - add or reduce insurance coverage - change policy provisions - change the premium price after the policy period ends Types of Insurers - ANSWER-Insurance Companies Other Private Groups Government Entities Government Insurers - ANSWER-Non-profit Mandatory participation Benefits prescribed by law Designed to meet needs of general public Government has monopoly (meaning government has control) Private Insurers (Company) - ANSWER-Sell insurance based on consumer preferences Offer a wide variety of insurance products Typically exist to generate a profit or benefit a group (money) Insured party voluntarily Participates Types of Private Insurers - ANSWER-Private Commercial Insurers Stock Insurance Companies Mutual Insurance Companies Re-insurer Reciprocal Insurer Private Commercial Insurers - ANSWER-Operate for profit Collect premiums from policyholders A portion of premiums is reserved to pay claims Excess premiums become profit Stock Insurance Companies - ANSWER-Always for profit Usually publicly-traded Stockholders provide capital and participate in profits or losses "Non-participating" insurers: no dividends go to policyholders Mutual Insurance Companies - ANSWER-Owned by policyholders (no shareholders) Policyholders elect board of directors "Participating" insurers: policyholders participate in dividends Re-insurer - ANSWER-An insurer that provides insurance for other insurers Reciprocal Insurer - ANSWER-A group of people or organizations that insure each other Risk Retention Group (RRG) - ANSWER-A form of commercial insurer in which the members use their own capital to issue insurance policies