WEBCE Flash Questions and Correct answers rated A+ 2023/2024

WEBCE Flash Questions and Correct answers rated A+ 2023/2024 Indirect Loss - correct answer 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 answer 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 answer 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 answer 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 answer 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 answer A form of insurance company owned by stockholders who may or may not also be policyowners. - Like all forms of corporations, stock insurance companies may be privately held or publicly traded and may distribute stock dividends (taxable). Law of Large Numbers - correct answer An actuarial principle that is the basis for predicting the odds of a loss occurring in a certain population in any given year. - The law of large numbers does not predict who will suffer a loss, only the odds of a loss. The larger the number of units independently exposed to a certain type of loss, the greater the probability that actual loss experience will equal predicted loss experience. Lloyd's Association - correct answer An association of individuals and companies that provide insurance to customers with complex, unique, and very large risks. - Lloyd's Associations in the United States are not related to Lloyd's of London. Based mostly in Texas, they are groups of insurers that mainly write fire insurance and auto physical damage insurance. Lloyd's associations play a relatively small role in the U.S. insurance market.