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P&C Insurance Exam Preview terms and meaning, 100% coverage, rated A

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P&C Insurance Exam Preview terms and meaning, 100% coverage, rated A Reinsurance - -Insurance for the insurance company. Reinsurance Department is responsible for helping to cover the insurer's exposure to loss. Captive (Exclusive) Agents - -Represent only one company Risk - -A cha...

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  • February 3, 2023
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  • 2022/2023
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P&C Insurance Exam Preview terms and
meaning, 100% coverage, rated A


Reinsurance - ✔✔-Insurance for the insurance company.



Reinsurance Department is responsible for helping to cover the insurer's exposure to loss.



Captive (Exclusive) Agents - ✔✔-Represent only one company



Risk - ✔✔-A chance, possibility, or uncertainty of loss.



Uncertainty of financial loss.



Apparent Authority - ✔✔-The assumption that an agent has authority based on the actions or words of
the principal.



Pure Risk - ✔✔-Chance of only risk.



Only type of insurable risk.



Risk Retention Groups - ✔✔-Insurance companies that are owned by their members



The only coverage these groups may write is liability insurance.



Members of a group are in the same industry and require liability, insurance, which would otherwise be
prohibitive in premium if obtained elsewhere.

,Stock Companies - ✔✔-Owned by stockholders.



Main purpose is to earn a profit for its stockholders.



Speculative Risk - ✔✔-Involves the chance of both loss and gain (gambling).



Exposure - ✔✔-A condition or situation that presents a possibility of loss.



Agent - ✔✔-The person authorized to act on behalf of the other.



Responsibilities of the Agent - ✔✔-Collecting the initial premium.



Delivering the policy.



Explaining the coverage.



Field underwriting each risk.



Periodically reviewing the insured's coverage.



Explaining coverage.



Moral Hazard - ✔✔-Involves dishonesty on the part of the insured.



Peril - ✔✔-The actual cause of a loss (Fire).



Morale Hazards - ✔✔-Relating to the attitude of the insured (driving too fast and not wearing a seat
belt).

,Needs Analysis - ✔✔-Necessary to identify the family exposures and insurance needs, and to estimate
and find the funds necessary to pay for those needs.



Express Authority - ✔✔-What the insurer intends to give to its agent through means of the agent's
contract.



Who does the agent represent? - ✔✔-Under the law of agency, agents represent insurers.



Fiduciary - ✔✔-A person in a position of special trust and confidence charged with handling or
supervising the affairs and funds of another.



Reciprocal Company - ✔✔-A group of individuals who agree to share each other's losses



Foreign Company - ✔✔-Operates within a state in which it is not centered and in which its home office is
not located.



Lloyd's Association - ✔✔-Voluntary organizations of individuals who agree to share in insurance
contracts. They are not insurance companies. Each individual is responsible for the amounts of
insurance they agree to write.



Hazard - ✔✔-A condition that increases the chance of a loss.



Implied Authority - ✔✔-Allows the agent to perform all of the usual and necessary tasks to sell and
service insurance contracts. Implied authority may be established by custom or prior experience.



Morale - ✔✔-A careless attitude or general indifference on the part of the insured toward the
occurrence of loss.



Domestic - ✔✔-A domestic insurer is incorporated in the same state where it sells insurance.



Principal - ✔✔-The insurance company.

, Alien - ✔✔-A company that is incorporated or organized under the laws of any foreign nation, province,
or territory.



Purpose of Insurance - ✔✔-To transfer risk.



Control (reduction) - ✔✔-Accomplished through loss prevention and loss control (burglar alarm).



Captive Agency System - ✔✔-The agent represents only one company.



Insurable Risk - ✔✔-The loss must be accidental from the insured's perspective.



The loss must have a determinable value.



The loss must be due to chance.



Reinsurer - ✔✔-Insurers part of the insurance underwritten by another insurance company to reduce
the possible large loss of the latter.



Hazard - ✔✔-A situation or factor that increases the possibility of a loss.



Mutual Company - ✔✔-Policyholders receive a return of unused premiums in the form of policy
dividends. Dividends are not guaranteed.



An insurance agent - ✔✔-The agent is the direct link between the insurance company and its insured's.



The Law of Large Numbers - ✔✔-Operates under the principle that the larger the number of similar risks
combined into one group, the less uncertainty there will be as to the amount of loss that group will
incur.

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