WebCE Flash questions and answers verified

Indirect Loss CORRECT ANSWERS: A secondary loss that follows from a direct loss to insured property from a covered peril. Ex. Hotel expenses incurred by the insured while a fire-damaged home is repaired is an indirect loss that follows the direct loss of the home. Exclusive Agency System CORRECT ANSWERS: An insurance distribution system in which producers (agents) represent a single company. Ex. In the exclusive agency system, insurers use independent contractors (exclusive agents) that represent only one insurance company or, in some cases, a group of insurance companies under similar management. Five basic elements of a valid contract CORRECT ANSWERS: 1. Offer 2. Acceptance 3. Consideration 4. Competent parties 5. Legal purpose Ex. An applicant makes an insurance offer that results in a contract (policy) only if the offeree (insurer) accepts the offer (application). The applicant's consideration is the signed application and payment of the first premium. Peril and Hazard CORRECT ANSWERS: Two related general insurance terms, the first of which is the cause of a loss and the second being any condition that increases the risk or severity of a loss. - A peril is the event that is insured against and includes fire, explosion, windstorm, theft, death. - Hazards are classified into three categories: moral hazard (e.g. excessive drinking, bad credit) morale hazard (driving recklessly) physical hazard (slippery floors, unsanitary conditions, unguarded premises) Mutual Insurance Company CORRECT ANSWERS: A form of insurance company owned by policyowners. - While structured in many ways like a corporation, a mutual insurance company does not issue stock and is owned by policyowners, whose evidence of ownership is the policy. Mutual companies may distribute policy dividends (non-taxable). Stock Insurance Company CORRECT ANSWERS: A form of insurance company owned by stockholders who may or may not also be policyowners. - Like all forms of corporations, stock insurance compa