AccFP 102

The increased tendency of higher-than-average risks (people who need insurance the most) purchasing or renewing insurance policies. People with the highest risk of loss will also be the most likely to purchase insurance.

A characteristic of insurance meaning that monetary values exchanged by each party in an insurance agreement are unequal.

The insured is led to believe that the agent has authority, either express or implied, where no such authority actually exists.

Personal risk that involves a possible loss for an individual or a small group.

The period of time beginning when Social Security benefits to the surviving spouse are discontinued (usually when the last child reaches age 16) and ending when the spouse begins to receive Social Security retirement benefits at age 60 or later.

The proximate, or actual, cause of a financail loss.

A risk in which the results are either a loss or no loss at all.

The chance of loss, possibilityof loss, uncertainty, or a variation of actual form expected results.

The avoidance of any chance of loss.

A risk that results from changes in society or the economy (e.g., inflation)

The actual authority an insurance company gives representatives (agents) via the agent's written contract.

Evaluates the income replacement needs of one's survivors in the event of untimely death.

An impersonal risk that involves a possible loss for a large group.

• -Physical hazards, build in a flood zone
• -Moral hazards, dishonesty of emplyees
• -Morale hazards, failure to lock doors, increasing the probablity of theft

A condition that creates or increases the likelihood of a loss, (or peril) occurring.

Uses projected future earnings as the basis for measuring life insurance needs.

The authority that the public reasonably percieves the agent to possess, even without express authority.

The chance that predicted results will reflect true results increases as the number of exposures increases.

Owned by policyowners and distrubutes profit in the form of policy dividends.

Tort caused by acting without reasonable care.

Shifting the probability of loss to another party, such as an insurance company.

A risk where a potential for profit as well as loss or no loss exists.

A risk dependent on factors other than a change in society or the economy (e.g., natural disaster)

Liability resulting from law; strict liability allows for defense, and absolute liability does not.

States that the insured cannot indemnify oneself from both the insurance company and a negligent third party for the same claim.

Private wrong; an infringement on the rights of another.

Only one party, the insurer, agrees to a legally enforceable promise.

One person may become legally liable for the torts of another (e.g., parent/child, employer/employee acting in the scope of employment)

Involves an event that is not certain to occuror not reliable with respect to a predictable outcome.

Involves insuring individuals or entities by setting aside money to cover potential future losses rather then purchasing an insurance policy.

• 1. Clarify objectives
• 2. Identify the risk
• 3. Measure the risk
• 4. Manage the risk
• 5. Monitor the risk

Manditory insurance administered by the government, with benefits mandated by law. Its purpose is to protect people from large fundamental risks. Examples: Social Security, Medicare, Medicaid, workers' compensation

Designed to enhance public trust in financial institutions. Usually mandatory & administered by the government. Examples: FDIC, PBGC, SIPC.

Voluntary insurance marketied by private companies. Examples: Life and health insurance, property insurance, and liability insurance.

Damages assessed against a negligent party should not be reduced simply because the injured party also has insurance protecting against the specific peril.

Both parties of the contract must disclose all facts truthfully or the contract may either be reformed or rescinded.

• Assumption of risk
• Contributory negligence
• Comparative negligence

Applies when the victim fully understood and recognized the dangers that were involved in an activity and voluntary chose to proceed anyway. Fans at a baseball game assume the risk of being hit by a foul ball.

A person cannot recover damages if his own negligence contributed in any way to his injuries. This rule sometimes causes a harsh result. Even if the injured driver is 1% at fault, he cannot recover anything from the other driver.

Damages are adjusted to reflect the extent to which the injured party's own negligence contributed to his injuries. i.e. If an injured party suffers 100k in damages, but was 40% at fault, the damages would be reduced to 60k

Damages designed to compensate the injured person for measurable losses, such as doctor bills and automobile repairs.

To compensate the injured party for intangible losses, such as pain and suffering, that cannot be measured in dollars and cents.

Damages which are not designed to compensate the victim, but to punish the wrongdoer. Punitive damages are typically imposed when the wrongdoer acted intentionally or in a way that recklessly disregarded the rights of others.

The indexed-linked interest for some EIA's is determined by subtracting a percentage from any gain in the index. This percentage is sometimes referred to as the spread or admin fee and can range as high as 3%.

Determines how much of the increase in the value of the underlying index will be used to compute the interest rate that is credited to the owner.

Some EIA's establish a maximum rate of interest that the annuity can earn. Even if the appropriate index earned 8%, but the interest rate cap was only 6%. 6% is what the EIA would be credited.

This indexing method credits index-linked interest on the basis of any increase in index value from the index level at the beginning of the annuity's term to the highest index value at various points during the annuity's term, usually an annual anniversary from when the owner first purchased the annuity.

Dividends are used to purchase one-year term insurance equal to the policy's current cash value.

Deductibles, coinsurance, self-insurance

Offer & Acceptance, Consideration, Legal object, Legal capacity, Legal form

Life Insurance policy whereby premiums are lower for the 1st 3-5 years, then increase

Life Insurance policy whereby it has flexible premiums, adjustable death benefit (face amount of the policy)

Life Insurance policy whereby it has flexible premiums, adjustable death benefit (face amount of the policy + cash value)