FIN 341 EXAM 2 HARTWIG STUDY GUIDE
Waiver - Answers -the voluntary relinquishment of a known legal right
Estoppel - Answers -the loss of a legal defense because of previous actions that are
now inconsistent with that defense
Principle of Reasonable Expectations - Answers -states that an insured is entitled to
coverage under a policy that he or she reasonably expects it to provide, regardless of
policy provisions.
Insurance Contracts ARE... - Answers -Aleatory - values exchanged are not equal
Unilateral - only the insurer makes a legally enforceable promise
Conditional - policy owner must comply with all policy provisions to collect on a loss
Personal - insurance policy cannot be assigned to another party without the insurer's
consent
Contract of Adhesion - Answers -the insured must accept the entire contract with all of
its terms and conditions
Legally Enforceable Contracts must have (4 things) - Answers -1. Offer and
Acceptance
2. Exchange of Consideration
3. Competent Parties
4. Legal Purpose
Reinsurance - Answers -Insurance for insurance companies.
- an arrangement where the primary insurer that initially writes the insurance transfers to
another insurer(the reinsurer) part or all of the potential losses
Ceding Company - Answers -primary insurer
Reinsurer - Answers -insurer that accepts the insurance from the ceding company
Retention Limit - Answers -the amount of insurance retained by the ceding company
Retrocession - Answers -when a reinsurer insures part or all of a risk with yet another
insurer (reinsurer of the reinsurer)
Uses of Reinsurance - Answers --increase underwriting capacity
-stabilize profits
Waiver - Answers -the voluntary relinquishment of a known legal right
Estoppel - Answers -the loss of a legal defense because of previous actions that are
now inconsistent with that defense
Principle of Reasonable Expectations - Answers -states that an insured is entitled to
coverage under a policy that he or she reasonably expects it to provide, regardless of
policy provisions.
Insurance Contracts ARE... - Answers -Aleatory - values exchanged are not equal
Unilateral - only the insurer makes a legally enforceable promise
Conditional - policy owner must comply with all policy provisions to collect on a loss
Personal - insurance policy cannot be assigned to another party without the insurer's
consent
Contract of Adhesion - Answers -the insured must accept the entire contract with all of
its terms and conditions
Legally Enforceable Contracts must have (4 things) - Answers -1. Offer and
Acceptance
2. Exchange of Consideration
3. Competent Parties
4. Legal Purpose
Reinsurance - Answers -Insurance for insurance companies.
- an arrangement where the primary insurer that initially writes the insurance transfers to
another insurer(the reinsurer) part or all of the potential losses
Ceding Company - Answers -primary insurer
Reinsurer - Answers -insurer that accepts the insurance from the ceding company
Retention Limit - Answers -the amount of insurance retained by the ceding company
Retrocession - Answers -when a reinsurer insures part or all of a risk with yet another
insurer (reinsurer of the reinsurer)
Uses of Reinsurance - Answers --increase underwriting capacity
-stabilize profits
