Insurance - answer✔financial tool that protects individuals and organizations from unforeseen
and extraordinary financial losses by transferring risk to another party
insured - answer✔individual or organization that pays premiums in exchange for protection
insurer - answer✔Company, group, or government agency offering financial protection
insurance policy - answer✔A legally binding contract that defines the obligations of both the
insured and the insurer.
Principle of Indemnity - answer✔Restoration to previous financial condition; no more, no less
4 qualifications of a contract - answer✔1. agreement
2. consideration
3. competent parties
4. legal purpose
indemnification - answer✔Putting the policyholder back in the same financial condition he or
she was in before a loss occurred
reserve - answer✔pool of collected premiums that the insurer sets aside to pay claims
Six special characteristics of insurance contracts - answer✔1. Personal-it protects the insured's
financial interests, not the insured item itself.
2. Adhesion-since the insurer gets to set the terms of the contract, while the insured must simply
agree
3. Utmost good faith-requires complete honesty. Policy can be voided if this principle is violated
4. aleatory-contract depends on an unknown event
5. unitlateral-only one party, the insurer, makes a promise to perform
6. conditional-it only kicks in when there is a covered loss and certain conditions are met
Declarations Page - answer✔Provides a general overview of who the policy covers. Aka the "dec
page"
definitions page - answer✔not essential, but is common to most policies. Defines the important
terms in the policy
Insuring Agreeement - answer✔summarizes what the insurer will cover and how
conditions section - answer✔qualifies or limits an insurer's promise to pay or perform
exclusions section - answer✔specifically lists people, items, events, and causes of loss that are
not covered under the policy
endorsements - answer✔optional provisions that an add, reduce, or modify the policy's coverage
characteristics of government insurers - answer✔1. non profit
2. mandatory participation
3. benefits prescribed by law
4. designed to meet needs of general public
5. government has monopoly
Characteristics of Private insurers - answer✔1. sell insurance based on consumer preferences
2. offer a wide variety of insurance products
3. typically exist to generate a profit or benefit a group
4. insured party voluntarily participates
characteristics of stock insurance companies - answer✔1. always for profit
2 .usually publicly-traded
3. stockholders provide capital and participate in profits or losses
4. "non-participating" insurers: no dividends go to policy holders
examples: aflac, all state,geico
mutual insurance companies - answer✔1. owned by policy holders (no shareholders)
2. policyholders elect board of directors
3. "participating" insurers: policyholders participate in dividends
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Thebright. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $10.49. You're not tied to anything after your purchase.
