Idaho Life Insurance final exam questions and answers verified 100%

Idaho Life Insurance final exam questions and answers verified 100% What is insurance? - Insurance is a contract in which one party (the insurance company) agrees to indemnify (make whole) the insured party against loss, damage or liability arising from an unknown event. It transfers the risk of loss from an individual or business to an insurance company. Insurance transaction - Solicitation, Negotiations, Sale, Advising an individual concerning coverage or claims. Two kinds of risk - Pure risk (situation that can only result in a loss or stay the same) & Speculative risk (gambiling) **Pure risk is the only type that insurance companies will accept What is the definition of hazard? What are the three kinds? - -Conditions or situations that increase the probability of an insured loss occurring. -Physical, moral, morale Physical hazard - Individual characteristics that increase the chances of the cause of loss (they exist because of a physical conditions, past medical history, or a condition at birth). Moral hazards - Tendencies towards increased risk. They involve evaluating the character and reputation of the proposed insured (they refer to those applicants who may lie on an insurance application or have previously submitted fraudulent claims against an insurer. Morale hazards - Similar to moral hazards, but arise from a state of mind that causes indifference to loss, such as carelessness. Actions taken without forethought may cause physical injuries. What is a peril? - **Perils are the CAUSES of loss insured against in an insurance policy -Life insurance insures against the financial loss caused by the premature death of the insured -Health insurance insures against the medical expenses and/or loss of income caused by the insured's sickness or accidental injury -Property insurance insures against the loss of physical property or the loss of its income-producing abilities -Casualty insurance insures against the loss and/or damage of property and resulting liabilities. What is loss? - Loss is the reduction, decrease or disappearance of value of the person or property insured in a policy, caused by a named peril. Insurance provides a means to transfer loss. What are the methods of handling risk? - -Sharing (a group of individuals or a business with the same or similar exposure to loss shares the losses that occur within the group) -Transfer (transfer the loss so it is borne by another party, like an insurance company) **most effective way to handle risk -Avoidance (eliminate exposure to loss; i.e. don't walk on highways) -Retention (planned assumption of risk by an insured through the use of deductibles, co-payments or self-insurance) aka pays the loss themselves -Reduction (attempt to lessen the possibility or severity of a loss; ex. annual doc check-up to detect health problems early). What are the elements of insurable risks? - -Due to chance (a loss that is outside the insured's control) -Definite and measurable (a loss that is specific as to the cause, time, place and amount.) -Statistically predictable (insurers must be able to estimate the average frequency and severity of future losses and set appropriate premium rates) -Not catastrophic (insurers need to be reasonably certain their loss will not exceed specific limits)--loss caused by war or nuclear events do not qualify. -Randomly selected and large loss exposure (must be a sufficiently large pool of the insured that represents a random selection of risks in terms of age, gender, occupation, health and economic status, and geographic location). What is an agent/producer? - An individual licensed to sell, solicit, or negotiate insurance contracts on behalf of the principal (insurer). What is the law of agency? - It defines the relationship between the principal and the agent/producer. How many types of agency authority are there? - Three What are the three types of agent authority? - 1) Express: the authority a principal intends to grant to an agent by means of contract. It is the authority that is written in the contract. 2) Implied: is authority that is not expressed or written into the contract but which the agent is assumed to have in order to transact the business of insurance for the principal. 3) Apparent: is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances that the principal has created. What is fiduciary responsibility? - A fiduciary is someone in a position of trust (in this case it is the agent). What is market conduct? - It is a code of ethics for producers What is a contract? - A contract is an agreement between two or more parties enforceable by law. What are the elements of a legal contract? - -Agreement (offer and acceptance) -Consideration (binding force of contract; something of value each party gives to the other) -Competent parties (both parties must be of legal age, mentally competent, not under influence of drugs or alcohol) -Legal purpose (purpose of contract must be legal and not against public policy) Indemnity - Reimbursement in the event of financial loss, BUT it only permits collecting to the extent of the loss (i.e. they won't gain more money than what they lost). Utmost good faith - Principle that implies there will be no fraud, misrepresentation, or concealment between the parties. Representations - Statements believed to be true to the best of one's knowledge, but they are not gu