EXAM FX CHAPTER 1: GENERAL
INSURANCE
Agent/Producerg-gans--
aglegalgrepresentativegofganginsurancegcompany;gthegclassificationgofgproducergusuallygin
cludesgagentsgandgbrokers;gagentsgaregthegagentsgofgtheginsurer
Applicantsg(orgproposedginsured)g-gans--agpersongapplyinggforginsurance
Brokerg-gans--
anginsurancegproducergnotgappointedgbyganginsurergandgisgdeemedgtogrepresentgthegclien
t
InsurancegPolicyg-gans--agcontractgbetweengagpolicyownerg(and/
orginsured)gandganginsurancegcompanygwhichgagreesgtogpaygtheginsuredgorgthegbeneficiar
ygforglossgcausedgbygspecificgevents
Insuredg-gans--
thegpersongcoveredgbygtheginsurancegpolicy.gThisgpersongmaygorgmaygnotgbegthegpolicyo
wner
Insurerg(principal)g-gans--thegcompanygwhogissuesganginsurancegpolicy
Policyownerg-gans--thegpersongentitledgtogexercisegthegrightsgandgprivilegesgingthegpolicy
Premiumg-gans--thegmoneygpaidgtogtheginsurancegcompanygforgtheginsurancegpolicy
Reciprocity/Reciprocalg-gans--agmutualginterchangegofgrightsgandgprivileges
Insuranceg-gans--
transfersgthegriskgofglossgfromgangindividualgorgbusinessgentitygtoganginsurancegcompany,g
whichgingturngspreadsgthegcostsgofgunexpectedglossesgtogmanygindividuals.
4gtypesgofginsurancegtransactionsg-gans--Solicitation
Negotiationsg
Saleg(effectuationgofgagcontractgofginsurance)
g
Advisinggangindividualgconcerninggcoveragegofgclaims
, Riskg-gans--theguncertaintygorgchangegofgaglossgoccurring.
PuregRiskg-gans--
situationsgthatgcangonlygresultgingaglossgorgnogchange.gTheregisgnogopportunitygforgfinancia
lggain.gPuregriskgisgthegonlygtypegofgriskgthatginsurancegcompaniesgaregwillinggtogaccept
SpeculativegRiskg-gans--
involvesgthegopportunitygforgeitherglossgorggain.gAngexamplegwouldgbeggambling.gThesegty
pesgofgrisksgaregnotginsurable.
Hazardsg-gans--
conditionsgorgsituationsgthatgincreasegthegprobabilitygofganginsuredglossgoccurring.
Physicalghazardsg-gans--
aregindividualgcharacteristicsgthatgincreasegthegchancesgofgthegcausegofgloss.gExamplesga
regderivedgfromgphysicalgconditions,gpastgmedicalghistory,gorgagconditiongatgbirthg(blindne
ss).
MoralgHazardsg-gans--hazardsgaregtendenciesgtowardsgincreasedgrisk.
MoralegHazardsg-gans--
arisegfromgagstategofgmindgthatgcausesgindifferencegtogloss,gsuchgasgcarelessness.gAction
sgtakengwithoutgforethoughtgmaygcausegphysicalginjuries.
Perilsg-gans--thegcausesgofglossginsuredgagainstginganginsurancegpolicy
Lossg-gans--
definedgasgthegreduction,gdecreasegorgdisappearancegofgvaluegofgthegpersongorgpropertygi
nsuredgingagpolicy,gcausedgbygagnamedgperil.
Avoidanceg-gans--eliminatinggexposuregtogagloss.
Retentiong-gans--
thegplannedgassumptiongofgriskgbyganginsuredgthroughgthegusegofgdeductibles,gco-
payments,gorgself-insurance.gItgisgalsogknowngasg"self-
insurance"gwhengtheginsuredgacceptsgthegresponsibilitygforgtheglossgbeforegtheginsuranceg
companygpays.
Purposesgofgretentiong-gans--Togreducegexpensesgandgimprovegcashgflow
Togincreasegcontrolgofgclaimgreservinggandgclaimsgsettlementsg
Togfundgforglossesgthatgcannotgbeginsured
INSURANCE
Agent/Producerg-gans--
aglegalgrepresentativegofganginsurancegcompany;gthegclassificationgofgproducergusuallygin
cludesgagentsgandgbrokers;gagentsgaregthegagentsgofgtheginsurer
Applicantsg(orgproposedginsured)g-gans--agpersongapplyinggforginsurance
Brokerg-gans--
anginsurancegproducergnotgappointedgbyganginsurergandgisgdeemedgtogrepresentgthegclien
t
InsurancegPolicyg-gans--agcontractgbetweengagpolicyownerg(and/
orginsured)gandganginsurancegcompanygwhichgagreesgtogpaygtheginsuredgorgthegbeneficiar
ygforglossgcausedgbygspecificgevents
Insuredg-gans--
thegpersongcoveredgbygtheginsurancegpolicy.gThisgpersongmaygorgmaygnotgbegthegpolicyo
wner
Insurerg(principal)g-gans--thegcompanygwhogissuesganginsurancegpolicy
Policyownerg-gans--thegpersongentitledgtogexercisegthegrightsgandgprivilegesgingthegpolicy
Premiumg-gans--thegmoneygpaidgtogtheginsurancegcompanygforgtheginsurancegpolicy
Reciprocity/Reciprocalg-gans--agmutualginterchangegofgrightsgandgprivileges
Insuranceg-gans--
transfersgthegriskgofglossgfromgangindividualgorgbusinessgentitygtoganginsurancegcompany,g
whichgingturngspreadsgthegcostsgofgunexpectedglossesgtogmanygindividuals.
4gtypesgofginsurancegtransactionsg-gans--Solicitation
Negotiationsg
Saleg(effectuationgofgagcontractgofginsurance)
g
Advisinggangindividualgconcerninggcoveragegofgclaims
, Riskg-gans--theguncertaintygorgchangegofgaglossgoccurring.
PuregRiskg-gans--
situationsgthatgcangonlygresultgingaglossgorgnogchange.gTheregisgnogopportunitygforgfinancia
lggain.gPuregriskgisgthegonlygtypegofgriskgthatginsurancegcompaniesgaregwillinggtogaccept
SpeculativegRiskg-gans--
involvesgthegopportunitygforgeitherglossgorggain.gAngexamplegwouldgbeggambling.gThesegty
pesgofgrisksgaregnotginsurable.
Hazardsg-gans--
conditionsgorgsituationsgthatgincreasegthegprobabilitygofganginsuredglossgoccurring.
Physicalghazardsg-gans--
aregindividualgcharacteristicsgthatgincreasegthegchancesgofgthegcausegofgloss.gExamplesga
regderivedgfromgphysicalgconditions,gpastgmedicalghistory,gorgagconditiongatgbirthg(blindne
ss).
MoralgHazardsg-gans--hazardsgaregtendenciesgtowardsgincreasedgrisk.
MoralegHazardsg-gans--
arisegfromgagstategofgmindgthatgcausesgindifferencegtogloss,gsuchgasgcarelessness.gAction
sgtakengwithoutgforethoughtgmaygcausegphysicalginjuries.
Perilsg-gans--thegcausesgofglossginsuredgagainstginganginsurancegpolicy
Lossg-gans--
definedgasgthegreduction,gdecreasegorgdisappearancegofgvaluegofgthegpersongorgpropertygi
nsuredgingagpolicy,gcausedgbygagnamedgperil.
Avoidanceg-gans--eliminatinggexposuregtogagloss.
Retentiong-gans--
thegplannedgassumptiongofgriskgbyganginsuredgthroughgthegusegofgdeductibles,gco-
payments,gorgself-insurance.gItgisgalsogknowngasg"self-
insurance"gwhengtheginsuredgacceptsgthegresponsibilitygforgtheglossgbeforegtheginsuranceg
companygpays.
Purposesgofgretentiong-gans--Togreducegexpensesgandgimprovegcashgflow
Togincreasegcontrolgofgclaimgreservinggandgclaimsgsettlementsg
Togfundgforglossesgthatgcannotgbeginsured
