RMIN Test 3

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RMIN Test 3
2010-11-18 20:16:19
RMIN risk management

test 3
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  1. Real Property
    Land, all structures permanently attached to the land, and whatever is growing on the land
  2. Personal Property
    all property other than real property; ex: cars, money, clothes, furniture, animals, airplanes, etc
  3. Direct Loss
    occurs when there is damage to property
  4. Indirect Loss
    occurs when a direct loss causes expenses to increase or revenues to decline
  5. How many parties are typically involved when dealing with property insurance?
    two; the insured and the insurer
  6. What types of property are difficult to insure?
    intangible goods, like copyrights, and raw land
  7. Liability Exposure
    loss through legal liability for harm caused to others
  8. Why are liability losses more complex than simple property losses?
    intorduction of a third party
  9. Types of Liability Damages
    bodily injury, property damage, personal injury, legal expenses
  10. Bodily Injury
    liability for losses a person may incur because his or her body and/ or mind has been harmed. ex: medical bills, pain and suffering, punitive damages, loss of services
  11. Property Damage
    indirect and direct losses; loss may be due to a loss from actual damage to the property, as well as loss of use of the property
  12. Personal Injury
    result from libel, slander, invasion of privacy, false arrest, etc
  13. Legal Expenses
    defense and legal costs up to the policy limits
  14. Economic Damages
    damages with a specific dollar amount attached to them; ex: medical bills
  15. Noneconomic Damages
    damages that are difficult to assign a dollar amount to, are typically large numbers; ex: pain and suffering
  16. Criminal Law
    wrongs against society (murder, robbery, assault)
  17. Civil Law
    wrongs against individuals or organizations (breach of contract, torts)
  18. Tort
    legal injury (when a person's rights are wrongfully invaded) or wrong to another that arises from actions other than breach of contract
  19. Negligence
    failure to exercise the degree of care required by law; conduct that a reasonable individual would exercise to prevent harm
  20. Negative Act
    failure to do something; ex: failure to use a turn signal
  21. Postive Act
    doing something
  22. Negligent Act
    an act that is unintentional, but is done voluntarily
  23. Imputed Act
    pertaining to corporations; one is liable not only for one's own actions but also for negligent acts of agents acting within the scope of employment
  24. Defenses Against Negligence Claims
    • 1. Contributory Negligence
    • 2. Assumed Risk
    • 3. Guest- Host Statutes
  25. Contributory Negligence
    both parties are to blame in a given accident; pure risk policies state that a plaintiff cannot collect from the defendant at all, even if the defendant was 90% to blame
  26. Assumed Risk
    defendant may raise the defense that the plaintiff has no cause for action because the plaintiff assumed the risk of harm from: the conduct of the defendant, the condition of the premises, or the defendant's product
  27. Guest- Host Statutes
    relate to the standard care of an automobile driver to a passenger; lower required level of care by driver
  28. Comparative Negligence
    the liability of the defendant is reduced by the extent to which the plaintiff was contributively negligent; pro rates the damages between parties
  29. Last Clear Chance Rule
    a plaintiff who was contributively negligent may still have a cause of action towards the defendant if it can be shown that the defendant had a "--term--" before the accident to avoid injuring the plaintiff but failed to do so
  30. Res Ipsa Loquitur
    • "the thing speaks for itself"
    • plaintiff may sometimes collect without actually proving negligence on the part of the defendant; defendant proves he or she did not act negligently (guilty until proven innocent)
    • common for medical malpractice claims
  31. 3 main requirements of res ipsa loquitur
    • 1. defendant is in a position to know the cause of the accident; the plaintiff is not
    • 2. defendant had exclusive control of the instrumentality that caused the accident
    • 3. the use of the instrumentality would not usually cause injuries without the existence of negligence
  32. Joint and Several Liability
    when an accident occurs and several different parties are negligent; the plaintiff may sue and collect from multiple negligent parties
  33. Superfund Legislation
    created by the Federal government to help fund cleanup cost of major pollution sites; 80% of funds are spent on overhead (legal fees, etc), 20% spent on actually cleaning up environment
  34. 7 Types of Liability Exposures
    • Contractual
    • employer-employee
    • property owner-tenant
    • consumption or use of products
    • completed operations
    • professional acts
    • principal-agent
  35. Contractual Liability
    one's liability may be imputed to another by contract
  36. Employer-employee Liability
    • employers are still subject to the law of negligence with respect to employment not covered by workers' comp laws; duties owed to employees:
    • must provide a safe place to work
    • must employ individuals reasonably competent to carry out their tasks
    • must warn of danger
    • must furnish appropriate and safe tools
    • must setup and enforce proper rules of conduct of employees as they relate to safe working procedures
  37. Property owner-tenant Liability
    the tenant or owner owes a certain degree of care to those who enter the premises (invitees, licensees, trespassers); current trend is to abolish classifications and hold the occupier of the land liable for failure to exercise due care
  38. Invitees
    individuals who are invited on the premises for their own benefit as well as the benefit of the landlord or tenant (hotel guests, customers); require a higher level of care (warning + a positive action)
  39. Licensee
    one who is on the premises for a legitimate purpose with the permission of the occupier (meter reader, mailman)
  40. Trespassers
    All those other than invitees or licensees who enter on the premises; no care is owed to trespassers, but an owner cannot deliberately injure a trespasser
  41. Assumption of liability by tenant
    generally, the tenant of a property takes on whatever duty the landlord owes to members of the public
  42. Attractive Nuisance Doctrine
    liability of the occupier of land may be changed so that a trespassing child is considered to be an invitee because society has a high duty of care to protect children
  43. Consumption or Use of Products Liability
    a manufacturer, wholesaler, or retailer is required to exercise reasonable care and to maintain certain standards in the handling and selection of the goods which it deals if the injury to person or property results from the use of a faulty product (which may be grounds for legal action)
  44. Strict Tort
    a manufacturer or distributor is held liable for the injury to a person caused by a defective product, regardless of whether the person injured is a purchaser, consumer, or a third party
  45. Completed Operations Liability
    the damage must occur after the contractor has completed the work and the work has been accepted by the owner or abandoned by the contactor; ex: a sprinkler installer is liable if water damage occurs from an improperly installed system
  46. Professional Acts Liability
    a seller of services is required to use reasonable care not to injure others in the performance of those services
  47. Eligibility Criteria for Personal Auto Plans (PAPs)
    • Car owned or leased by an individual or jointly by a married couple
    • Private passenger car used for pleasure or business
    • Pickup truck or van used in farming or transportation of goods
  48. Parts of a PAP
    • A: Liability
    • B: Medical Payments
    • C: Uninsured Motorists
    • D: Physical Damage- collision and other than collison
    • E: Duties After Loss
    • F: General Provisions
  49. Exclusions to Liability Coverage
    • Intentional injury
    • Damage to own property (covered elsewhere)
    • Damage caused while using your car as a taxi
    • Using vehicles without permission
    • Damage caused if a driver in auto business is using car (covered elsewhere)
    • Damage caused while using a motorcycle
    • Other vehicles (owned and regularly used) not listed in Declarations
  50. Who is covered under the Medical Payments Coverage section of a PAP?
    you (the policyholder) as well as occupants of the car, but not those you hit; you are also covered as a pedestrian if struck by a car
  51. Uninsured Motor Vehicle Requirements
    • No policy applies at the time of accident or inadequate limits
    • Hit-and-run vehicle
    • Tort-feasor insured by insolvent (bankrupt) insurer
    • Tort-feasor violates the conditions of their contract
  52. Collision Loss
    when your car hits another car or object; paid regardless of fault
  53. Other-than-collision Loss
    • Loss from any of the following perils:
    • Missiles or falling objects
    • Fire
    • Theft or larceny
    • Explosion or earthquake
    • Windstorm
    • Hail, water, or flood
    • Malicious mischief or vandalism
    • Riot or civil commotion
    • Contact with a bird or animal
    • Glass breakage
  54. Outstanding/ "Gap" Insurance
    pays off a financed car if it is totaled
  55. No-Fault Model
    hypothetical model that is similar to homeowners' insurancel no fault is determined in an accident; each party's insurance company pays for his or her own damages; no litigation is necessary
  56. How much would a no-fault policy save policyholders?
    19 cents per dollar because of the elimination of lawyer fees and pain and suffering
  57. Modified No-Fault System
    right to sue is restricted, not eliminated; some states set a certain dollar threshold that must be reached before one can be taken to court.
  58. Choice No-Fault
    coverage that restricts the right to sue in exchange for lower premiums; only available in KY, NJ, and PA
  59. The probability of dying increases _________ as age increases, according to the CSO Morality Table.
  60. What are the 2 main ways to approach the amount of life insurance one should own?
    • Human Life Approach
    • Needs Approach
  61. Human Life Approach
    replaces the present value of a person's income stream
  62. Needs Approach
    looks at other factors in policyholder's life and pays accordingly; depends more on lifestyle than income, so it requires more information
  63. Who gets Social Security after a person dies?
    • Spouse- only after retirement
    • Dependents- receive 'survivor's benefits until they turn 18
  64. How are pension plans and Social Security similar?
    in the case of premature death, a pension plan pays survivor's benefits in the same fashion as Social Security
  65. Parties to the Life Insurance Contract
    • Insurance Company
    • Insured
    • Beneficiary
  66. Face amount
    amount on a life insurance policy that is paid to the beneficiaries
  67. Beneficiary
    person who receives benefits upon insured's death; primary and secondary
  68. Primary Beneficiary
    receives the face amount of a policy upon the insured's death
  69. Secondary Beneficiary
    receives face amount if the primary beneficiary is also deceased
  70. Revocable Beneficiary
    beneficiary that can be changed at any time be the policyholder
  71. Irrevocable Beneficiary
    beneficiary that cannot be changed by the policyholder without the consent of the beneficiary
  72. 2 Major Types of Life Insurance Policies
    • Term Life
    • Whole Life
  73. Term Life Insurance Policy
    provides coverage for a certain period of time; a pure risk protection policy; can be renwable, convertible, and varies in structure
  74. Whole Life Insurance Policy
    has a pure risk and a savings component; permanent insurance with a cash value
  75. Ordinary Whole Life Policy
    policyholder makes consisten payments and beneficiaries receive face amount
  76. Limited Payment Whole Life Policy
    policyholder only pays a certain amount for a certain time and the money basically sits until death
  77. What does the Level Premium Concept basically illustrate?
    people tend to overpay for life insurance at younger ages, and underpay ot older ages
  78. What pay structures have the biggest cash value?
    less frequent pay structures
  79. How are premiums treated with respect to tax liability?
    individuals cannot deduct life insurance premiums from tax liability; they come out of after tax income
  80. How are death benefits taxed?
    depends on how benefits are paid; lump sum death benefits do not have to be reported as taxable income. some portion of annuities/ periodic payments of benefits generally are added to taxable income.
  81. Is cash value that is built up within a policy taxed?
    no; not until the policy is surrendered for its cash value
  82. Variable Life Insurance
    permanent insurance with a fixed premium that pays upon the insured's death; however, the payout amount of the death benefit is not fixed; it is linked to investment portfolios and thus varies with the market
  83. Type A Universal Life Insurance
    stable death benefit; only pays face amount of policy (cash value plus whatever amount is necessary to bring the total to the specified amount); only exists on paper
  84. Type B Universal Life Insurance
    fluctuating death benefits (cash value of policy plus face value of policy); as cash value of the policy increases over time, so does the death benefit
  85. Universal Life Insurance (in general)
    allows for more flexibility of premium payments by the policyholder; benefits are also fleixble and can vary with the markets to benefit the policyholder
  86. Credit Life Insurance
    offered in connection with installment sales of consumer durables (e.g. automobiles;) decreasing term insurance issued without medical examination that lasts for the life of the loan
  87. Endowment
    hybrid of term and whole life insurance; lasts for a certain term (typically 10-20 years), if insured dies, beneficiaries receive face amount of policy and if insured lives he or she receives the face amount
  88. How are endowments taxed?
    they are treated as investments and taxed as usual, but if a beneficiary receives a lump sum amount, it isnt taxed
  89. Factors that contribute to increased medical care expenses
    • lower mortality rates
    • improved technology
    • higher malpractice liability insurance premiums
  90. 2 Types of Health Insurance Plans
    • 1. Fee-for-service
    • 2. Managed Care
  91. Types of Managed Care Plans
    • HMO
    • PPO
    • POS
    • PSO
  92. Fee-for-service Plan
    policyholder pays a premium and insurer covers majority or all od medical bills/expenses
  93. What are the 2 main goals of managed care plans?
    • 1. Prevention: to keep costs down
    • 2. Provide contracts to specific health care providers
  94. PSO
    an HMO set up by health care providers/ hospitals
  95. HMO (Health Maintenance Organization)
    focuses on keeping costs low to members and is designed to provide members comprehensive health services withi; each member has a PCP that he or she sees primarily and he or she must be referred to specialists
  96. POS (Point of Service) Plan
    'open-ended HMO' that will cover majority of treatments from physicians within a network and part of payments for treatments outside network; also has PCP 'gatekeeper' to specialists
  97. PPO (Preferred Provider Organization)
    will cover treatments within network and part of treatments outside network; no PCP so members can see a specialist without a referral; make up over 50% of market
  98. Why don't private companies offer unemployment insurance?
    because of the randomness of the event that make probability difficult to calculate; no large pool of similar exposure units so therefor no diversification
  99. Defined Benefit Retirement Plan
    offered through employer; employer commits to pay a certain amount of benefits, which is usually tied to years with company or rank; employer assumes wisj of having enough cash on hand to pay out policy
  100. Defined Contribution Retirement Plan
    employer doesnt guarantee benefit amountss; employer puts a certain amount into an account every year until retirement and benefits are received from this pension fund; employer has no investment risk
  101. Tax-advantaged Savings
    pre-tax money is put into a savings account which cannot be accessed until retirement; money in account can be put into any investment vehicle and isnt taxed
  102. Annuity
    certain amount is paid in monthly and retirement benefits are guaranteed to be paid on a regular basis until death (hedge on outliving assets); risk of outliving assets is transferred to insurance company, but death stops stream of benefits (no beneficiaries)