life unit 1

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life unit 1
2014-01-24 20:35:52
life unit

life unit 1
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  1. what is a risk retention group?
  2. A risk retention group is a corporation or other limited liability association that assumes and spreads the liability exposure for any of its group members. All members of a risk retention group have an ownership interest in the group and must be in businesses that expose them to similar liabilities.
  3. what is an independent producer?
    An independent producer is one whose agency agreement allows him or her to represent more than 1 insurer.
  4. what is a captive producer?
    A captive producer is retained by a single insurance company to solicit, sell, renew, or negotiate insurance contracts for that company.
  5. what is an insurance company?
    An insurance company is an insurer because it alone underwrites the coverage and assumes the risk
  6. what does an agent do?
    An agent is authorized in writing by an insurance company to solicit, negotiate, or effectuate insurance contracts on the company's behalf and to collect insurance premiums.

    An agent is a person or corporation authorized by an insurer to solicit business and collect money on behalf of the insurer
  7. what does a broker do?
    A broker is paid to negotiate insurance policies and place risks for his or her client, the party to be insured.
  8. What does a consultant do?
    A consultant is paid to offer advice or to counsel the public with respect to the benefits, advantages, and disadvantages of insurance policies
  9. What is self-insurance?
    Self-insurance is a form of risk retention because the individual or business entity personally retains the risk and must accept any resulting economic loss
  10. what is a stock insurance company?
    A stock insurance company is incorporated, issues stock to its shareholders and pays dividends, if declared, to its shareholders. There is no requirement that they be nonprofit corporations.
  11. who do insurance agents represent?
    Under the law of agency, insurance agents represent the insurers who appoint them
  12. What does an insurance solicitor do?
  13. An insurance solicitor is authorized by an agent or broker to solicit insurance applications and collect premiums. A solicitor's compensation is related to the volume of applications, insurance or premiums he or she generates.
  14. What is a legitimate method of insuring loss?
    Self-insurance is a legitimate method of insuring loss by establishing one's own reserve of funds.
  15. what does an adjuster do?
    An adjuster investigates claims, adjusts losses, and negotiates claim settlements.
  16. What does an insurance producer do?
    An insurance producer is appointed by an insurer to sell insurance on its behalf and is required to be licensed in order to solicit, negotiate, or sell insurance
  17. What is reinsurance?
    Reinsurance is the act of one insurer selling part of a policy to another insurer. The original insurer is called the ceding company and the second insurer is called the assuming company. Many insurers reinsure some of their larger risks because they do not want to be exposed to the exceptional losses they would incur if they had to pay claims on those policies
  18. What is a peril?
    A peril is the immediate specific event causing loss and giving rise to risk. When a building burns, fire is the peril.
  19. What type of insurance company is owned by their policyholders?
    Mutual insurance companies are owned by their policyholders. Any surplus remaining after the company pays its operating costs is distributed to policyholders in the form of dividends.
  20. When must insurable interest exist?
    Upon the issuance of a life insurance policy, the applicant must have an insurable interest in the life of the individual to be insured. While an insurable interest must exist at the time of issuance, it need not exist at the time of the insured's death.
  21. What is an insurance company?
    An insurance company is any domestic or foreign corporation, indemnity or guaranty company, partnership, fraternal order, association, or individual that transacts insurance business.
  22. who supervises & inspects insurance companies?
     Insurance companies are inspected and supervised by the Commissioner.
  23. What is the definition of moral hazard?
    Moral hazards are habits or lifestyles of applicants that could pose additional risk for the insurer. These hazards are evaluated carefully when underwriting health insurance policies.
  24. What is a participating group insurance plan?
    Most group insurance plans are participating, meaning that, in some form, the group policyowner participates in any better-than-anticipated expense or claims experience. This form may be the payment of dividends (usually through mutual companies) or experience rating premium refunds (usually through stock companies). Dividend payments are never guaranteed but they usually apply whether or not the group policy is renewed. Premium refunds are not guaranteed and may be contingent upon policy renewal, but they can be applied retroactively.
  25. What are the major risk factors in health insurance?
    The major risk factors in health insurance are physical condition, moral hazards, and occupation. Marital status is not a risk factor.
  26. Is it ok for a captive agent to represent two or more insurers selling the same policy?
    It is unethical for a captive agent to represent two or more insurers selling the same policies.
  27. What are the characteristics of a fraternal benefit society?
    To be characterized as a fraternal benefit society, the Goodwill Society must be nonprofit, have a lodge system that includes ritualistic work, and maintain a representative form of government with elected officers.
  28. What types of insurance do fraternals offer?
    While most fraternals primarily offer life insurance, they may also offer sickness and accident insurance to members as well.
  29. What is operated solely for the benefit of its memeber and their beneficiaries?
    A fraternal benefit society is an incorporated, nonprofit group, with representative government and without capital stock, operated solely for the benefit of its members and their beneficiaries.
  30. What type of company is a mutual life insurance company?
    A mutual life insurance company is a corporation, but there are no stockholders. Instead, the company is owned by its policyowners, from whom its resources are derived.
  31. Where do the assets and income from a mutual life insurance company go to?
    Its assets and income are held for the benefit of the policyowners who, as contractual creditors, have the right to vote for directors or trustees.
  32. Who does an agent represent?
    An agent represents the insurer and not the insured or his or her beneficiaries.
  33. who does the broker represent?
    A broker represents the insured or the beneficiaries and not the insurer.
  34. What is the direct selling method?
    where policies are sold directly to consumers through vending machines, advertisements, or salaried sales representatives. Insurers that operate using this method are known as direct writers or direct response insurers.
  35. Who uses the direct selling method?
    Insurers that operate using this method are known as direct writers or direct response insurers.
  36. What type of risk is a stock market venture?
    A stock market venture involves the chance of both gain and loss and is, therefore, a speculative risk.
  37. What does pure risk involve?
    Pure risk involves only the chance of loss.
  38. What is mutualization?
    Mutualization is the process whereby a stock insurance company (one owned by stockholders) becomes a mutual insurance company (one owned by policyowners) through the transfer of control from stockholders to policyowners. Conversely, demutualization occurs when control switches to stockholders from policyowners.
  39. What is franchise insurance?
    Franchise insurance is coverage issued as individual accident and health insurance policies distributed on a mass merchandising basis. It is administered by group methods with or without evidence of insurability.
  40. What does an indemnity contract do?
    An indemnity contract pays an amount equal to the loss - it attempts to return the insured to his original financial position. In contrast, a valued contract pays a stated sum, regardless of the actual loss incurred, when the contingency insured against occurs.
  41. What is considered a nonadmitted insurer?
    what an insurance compnay is not licensed to transact business in the state.
  42. What is considered an admitted insurer
    when in its state of incorporation, the insurance company will be considered an admitted insurer because it holds a certificate of authority.
  43. Do fraternal benefit societies have capital stock?
    Fraternal benefit societies do not have capital stock.
  44. What does a reinsurer do?
    A reinsurer insures part of the life insurance underwritten by another life insurance company to reduce the potentially large loss of the latter.
  45. What is an incorporated insurance company that does not have permanent capital stock?
    An incorporated insurance company that does not have permanent capital stock is a mutual insurer.
  46. what is an incorporated insurance company that has its capital divided into shares of stock owned by the stockholders?
    A stock insurer, on the other hand, is an incorporated insurance company with its capital divided into shares of stock owned by the stockholders.
  47. What incorporated insurance company is controlled by both the stockholders and policyowners?
    A combined stock and mutual insurer is also an incorporated insurance company with its capital divided into shares owned by the stockholders. However, both the stockholders and policyowners control the company.
  48. What is the main motivation for a stock insurance company?
    A stock insurance company is owned by the holders of the company's capital stock. The main motivation of this type of company is to achieve profits.