WGU C215 Adjuster Pro - Insurance Adjuster Test

1. What is insurance? 2. what is a premium 3. What are premiums used for 4. how can insurance companies afford to pay for an individuals catastrophic loss? 5. what is Indemnity 6. principle of idemnity 7. indemnification may also include 8. 4 Parts of Legal Contract 9. legal contract - agreement 10. six special characteristics of insurance contracts WGU C215 Adjuster Pro - Insurance Adjuster Test protection against financial loss a scheduled amount to be paid for an insurance policy. premiums are collected into a "pool" or "reserve to pay out claimants when needed. the insurer collects premiums from all policy holders and uses them to pay out the claims of a few. payment for damages, that is not more or less than the amount caused by the damage. insurance will pay no more or less than the actual financial loss suffered repairs to property reimbursement for additional living expenses rental cars and hotels costs directly associated with a loss 1. Agreement 2. Consideration 3. Competent Parties 4. Legal Purpose mutual intent by offeror and offeree 1. Personal 2. adhesion 3. utmost good faith 4. aleatory 2 / 16 11. what kind of contract is an insurance policy? 12. what is a contract of adhesion 13. Utmost Good Faith 14. Aleatory Contract 15. Unilateral Contract 16. Conditional Contract 17. Acronym for the four sections of an Insurance policy 18. Decelerations section 19. 19. 5. unilateral 6. conditional Personal contract the insured must accept the entire contract with all of its terms and conditions An obligation to act in complete honesty and to disclose all relevant facts. a contract where the values exchanged may not be equal but depend on an uncertain event insurance agrees that they must pay in event of a claim. the insured can stop paying premiums at any point. only the insurer has promised to perform an action. A type of an agreement in which both parties must perform certain duties and follow rules of conduct to make the contract enforceable. DICE D - declarations page I - Insuring Agreement C- Conditions E - Exclusions Always the first section - establishes the following Names of both parties Policy number Location and description of insured item Dates of the policy Amount and limit of coverage Deductible Premium 3 / 16 Definitions section 20. Insuring agreement section 21. Conditions section 22. Exclusions section Defines terms used to write policy including "collusion" "decay" "like kind and quality" Includes important language for adjusters to know What is covered and how Which causes of loss are covered Any services provided Any exclusions to coverage The maximum limit of policy coverage in dollars Insurer specifies any limits or qualifications the policy holder must meet losses for which the insured is not covered for 23. Endorsements Provision that modifies the coverage of the original contract Add or subtract coverage Synonyms - rider, addendum, attachment 24. Certificate of Insurance 25. Characteristics of social insurance A legal document that indicates that an insurance policy has been issued, and that states both the amounts and types of insurance provided. Non profit Mandatory participation Benefits prescribed by law Designed to meet needs of public Government has monopoly 26. Private Insurers Sell insurance based on needs and preferences Wide variety of products Exist to generate a profit Insured party voluntarily participate 27. Stock Insurance Companies Always for profit Publicly traded Stockholder provide capital and participate in profit or losses 4 / 16 28. Mutual Insurance Company "Non participation" insurers - no dividends go to policy holders No shareholders Policy holders elect board of directors "Participating" insurers - policy holders participate in dividends 29. Re-insurer Provides insurance for insurers to reduce exposure to loss Pays percentage of insurers loss or any loss over a certain amount 30. Reciprocal Insurers 31. Fraternal Benefit Societies 32. Fraternal Benefit Societies insurance Unincorporated Non profit Operated by attorney in fact Members pay into individual accounts Cost of claims shared by whole groups Also called fraternal associations Non profit mutual aid organizations Engage in charitable activities Provide some type of insurance to members Typically consist of people with similar religion, ethnicity or occupation Used to fund altruistic activities Must be assessable by law Members are both providers and recipients If claims payment ability is impaired, members help pay the difference 33. captive insurers Created by businesses in order to retain risk Exist to provide insurance for their "parent" All profit belongs to parent company Permitted in some states 34. Risk retention groups Authorized by the federal liability risk retention act of 1986 Owned by their members Provide commercial liability 5 / 16 35. RRG Requirements Members must be involved in similar business endeavors Don't need to be licensed in multiple states 36. Classification based on location Domestic Insurer - adhere to law of a state, located in that state Foreign insurer - adhere to laws in the US but can be located elsewhere Alien insurer - obey laws of another country all together 37. Risk Potential for financial loss An insured item 38. Two types of risk Pure and Speculative 39. Speculative risk No certainty of gain or loss Made knowingly, by conscious choice Cannot be insured 40. Pure risk Risk with no chance of gain Can only result in either loss or no loss Can be insured 41. Exposure Extent to which an item, person, or organization is open to damage or loss 42. Evaluating exposure Expressed in dollars or units Determining factor in issuing a policy and setting a premium 43. Hazard A condition increasing the likelihood or severity of a loss 44. Peril The actual cause of loss or damage 45. Insurable risk Adequate premiums Definable risk Unexpected losses Substantial loss 6 / 16 46. Adequate Premiums Exclusions Law of large numbers Potential loss can't be too much for insurer to pay Insurer must b able to cover claims and expenses If premiums must be set too high, the risk is not insurable 47. Difneable risk Insurer can define exact conditions under which the item is covered by the policy Item it's self is defineable Item has precise value 48. Unexpected loss Unforeseeable Unexpected Reasonably unpreventable Random in nature 49. Substantial loss Must cause substantial economic hardship 50. Exclusions Insurer must be able to exclude large scale disasters and catastrophic events 51. Law of large numbers 52. Adverse Selection 53. 4 risk management techniques Insurer must be able to cover large numbers of similar risks Spreads risk across more policies Helps insurers predict losses more accurately Similar risks can mean, cars houses, persons lives, similar business etc when someone buys health insurance because they know they will probably file a claim Avoidance Reduction Transference Retention 54. Risk avoidance Eliminates risk by not taking action that involves risk 55. Risk reduction Adjuster Pro - Insurance adjuster test Study online at 7 / 16 Taking measures to reduce risk that is involved Also called risk mitigation 56. Risk Transference Management of sever risk by transferring risk to someone else Most common example is Insurance 57. Risk retention Acknowledging the risks and preparing to handle the unexpected losses as they occur 58. Policy Period The time frame, beginning with the inception date to the expiration date, during which insurance coverage applies. 59. Binder Providing temporary coverage until the policy is issued 60. Blanket coverage vs specific coverage Blankets cover more than one property, type of property, or coverage under a single limit Specific limits - limits that apply to on specific type of property 61. Representation Statement of fact 62. Missrepresentation A false, distorted or deceptive statements 63. Warranty Promise or garuntee certain conditions are met Warranties are found on the conditions page If policy holder breaks up warranty the insurer can deny coverage 64. Concealment Concealment is hiding the truth Deliberately withholding information 65. Waiver Voluntarily surrender of a right, claim, or privilege 66. Expressed waiver In writing or signed 67. Implied waiver assumed based on actions