ADJUSTER PRO - INSURANCE ADJUSTER TEST(QUESTIONS AND REVIEWED ANSWERS)

ADJUSTER PRO - INSURANCE ADJUSTER TEST(QUESTIONS AND REVIEWED ANSWERS) What is insurance? - CORRECT ANSWER-protection against financial loss what is a premium - CORRECT ANSWER-a scheduled amount to be paid for an insurance policy. What are premiums used for - CORRECT ANSWER-premiums are collected into a "pool" or "reserve to pay out claimants when needed. how can insurance companies afford to pay for an individuals catastrophic loss? - CORRECT ANSWER-the insurer collects premiums from all policy holders and uses them to pay out the claims of a few. what is Indemnity - CORRECT ANSWER-payment for damages, that is not more or less than the amount caused by the damage. principle of idemnity - CORRECT ANSWER-insurance will pay no more or less than the actual financial loss suffered indemnification may also include - CORRECT ANSWER-repairs to property reimbursement for additional living expenses rental cars and hotels costs directly associated with a loss 4 Parts of Legal Contract - CORRECT ANSWER-1. Agreement 2. Consideration 3. Competent Parties 4. Legal Purpose legal contract - agreement - CORRECT ANSWER-mutual intent by offeror and offeree six special characteristics of insurance contracts - CORRECT ANSWER-1. Personal 2. adhesion 3. utmost good faith 4. aleatory 5. unilateral 6. conditional what kind of contract is an insurance policy? - CORRECT ANSWER-Personal contract what is a contract of adhesion - CORRECT ANSWER-the insured must accept the entire contract with all of its terms and conditions Utmost Good Faith - CORRECT ANSWER-An obligation to act in complete honesty and to disclose all relevant facts. Aleatory Contract - CORRECT ANSWER-a contract where the values exchanged may not be equal but depend on an uncertain event Unilateral Contract - CORRECT ANSWER-insurance agrees that they must pay in event of a claim. the insured can stop paying premiums at any point. only the insurer has promised to perform an action. Conditional Contract - CORRECT ANSWER-A type of an agreement in which both parties must perform certain duties and follow rules of conduct to make the contract enforceable. Acronym for the four sections of an Insurance policy - CORRECT ANSWER-DICE D - declarations page I - Insuring Agreement C- Conditions E - Exclusions Decelerations section - CORRECT ANSWER-Always the first section - establishes the following Names of both parties Policy number Location and description of insured item Dates of the policy Amount and limit of coverage Deductible Premium Definitions section - CORRECT ANSWER-Defines terms used to write policy including "collusion" "decay" "like kind and quality" Includes important language for adjusters to know Insuring agreement section - CORRECT ANSWER-What is covered and how Which causes of loss are covered Any services provided Any exclusions to coverage The maximum limit of policy coverage in dollars Conditions section - CORRECT ANSWER-Insurer specifies any limits or qualifications the policy holder must meet Exclusions section - CORRECT ANSWER-losses for which the insured is not covered for Endorsements - CORRECT ANSWER-Provision that modifies the coverage of the original contract Add or subtract coverage Synonyms - rider, addendum, attachment Certificate of Insurance - CORRECT ANSWER-A legal document that indicates that an insurance policy has been issued, and that states both the amounts and types of insurance provided. Characteristics of social insurance - CORRECT ANSWER-Non profit Mandatory participation Benefits prescribed by law Designed to meet needs of public Government has monopoly Private Insurers - CORRECT ANSWER-Sell insurance based on needs and preferences Wide variety of products Exist to generate a profit Insured party voluntarily participate Stock Insurance Companies - CORRECT ANSWER-Always for profit Publicly traded Stockholder provide capital and participate in profit or losses "Non participation" insurers - no dividends go to policy holders Mutual Insurance Company - CORRECT ANSWER-No shareholders Policy holders elect board of directors "Participating" insurers - policy holders participate in dividends Re-insurer - CORRECT ANSWER-Provides insurance for insurers to reduce exposure to loss Pays percentage of insurers loss or any loss over a certain amount Reciprocal Insurers - CORRECT ANSWER-Unincorporated Non profit Operated by attorney in fact Members pay into individual accounts Cost of claims shared by whole groups Fraternal Benefit Societies - CORRECT ANSWER-Also called fraternal associations Non profit mutual aid organizations Engage in charitable activities Provide some type of insurance to members Typically consist of people with similar religion, ethnicity or occupation Fraternal Benefit Societies insurance - CORRECT ANSWER-Used to fund altruistic activities Must be assessable by law Members are both providers and recipients If claims payment ability is impaired, members help pay the difference captive insurers - CORRECT ANSWER-Created by businesses in order to retain risk Exist to provide insurance for their "parent" All profit belongs to parent company Permitted in some states Risk retention groups - CORRECT ANSWER-Authorized by the federal liability risk retention act of 1986 Owned by their members Provide commercial liability RRG Requirements - CORRECT ANSWER-Members must be involved in similar business endeavors Don't need to be licensed in multiple states Classification based on location - CORRECT ANSWER-Domestic Insurer - adhere to law of a state, located in that state Foreign insurer - adhere to laws in the US but can be located elsewhere Alien insurer - obey laws of another country all together Risk - CORRECT ANSWER-Potential for financial loss An insured item Two types of risk - CORRECT ANSWER-Pure and Speculative Speculative risk - CORRECT ANSWER-No certainty of gain or loss Made knowingly, by conscious choice Cannot be insured Pure risk - CORRECT ANSWER-Risk with no chance of gain Can only result in either loss or no loss Can be insured Exposure - CORRECT ANSWER-Extent to which an item, person, or organization is open to damage or loss Evaluating exposure - CORRECT ANSWER-Expressed in dollars or units Determining factor in issuing a policy and setting a premium Hazard - CORRECT ANSWER-A condition increasing the likelihood or severity of a loss Peril - CORRECT ANSWER-The actual cause of loss or damage Insurable risk - CORRECT ANSWER-Adequate premiums Definable risk Unexpected losses Substantial loss Exclusions Law of large numbers Adequate Premiums - CORRECT ANSWER-Potential loss can't be too much for insurer to pay Insurer must b able to cover claims and expenses If premiums must be set too high, the risk is not insurable Difneable risk - CORRECT ANSWER-Insurer can define exact conditions under which the item is covered by the policy Item it's self is defineable Item has precise value Unexpected loss - CORRECT ANSWER-Unforeseeable Unexpected Reasonably unpreventable Random in nature Substantial loss - CORRECT ANSWER-Must cause substantial economic hardship Exclusions - CORRECT ANSWER-Insurer must be able to exclude large scale disasters and catastrophic events Law of large numbers - CORRECT ANSWER-Insurer must be able to cover large numbers of similar risks Spreads risk across more policies Helps insurers predict losses more accurately Similar risks can mean, cars houses, persons lives, similar business etc Adverse Selection - CORRECT ANSWER-when someone buys health insurance because they know they will probably file a claim 4 risk management techniques - CORRECT ANSWER-Avoidance Reduction Transference Retention Risk avoidance - CORRECT ANSWER-Eliminates risk by not taking action that involves risk Risk reduction - CORRECT ANSWER-Taking measures to reduce risk that is involved Also called risk mitigation Risk Transference - CORRECT ANSWER-Management of sever risk by transferring risk to someone else Most common example is Insurance Risk retention - CORRECT ANSWER-Acknowledging the risks and preparing to handle the unexpected losses as they occur Policy Period - CORRECT ANSWER-The time frame, beginning with the inception date to the expiration date, during which insurance coverage applies. Binder - CORRECT ANSWER-Providing temporary coverage until the policy is issued Blanket coverage vs specific coverage - CORRECT ANSWER-Blankets cover more than one property, type of property, or coverage under a single limit Specific limits - limits that apply to on specific type of property Representation - CORRECT ANSWER-Statement of fact Missrepresentation - CORRECT ANSWER-A false, distorted or deceptive statements Warranty - CORRECT ANSWER-Promise or garuntee certain conditions are met Warranties are found on the conditions page If policy holder breaks up warranty the insurer can deny coverage Concealment - CORRECT ANSWER-Concealment is hiding the truth Deliberately withholding information Waiver - CORRECT ANSWER-Voluntarily surrender of a right, claim, or privilege Expressed waiver - CORRECT ANSWER-In writing or signed Implied waiver - CORRECT ANSWER-assumed based on actions Estoppel - CORRECT ANSWER-Legal principle that prevents an insurer from denying coverage if the insured has reasonably come to believe that he has such coverage based on insurers practices Types of hazards - CORRECT ANSWER-Physical, Moral, Morale, legal Moral hazard - CORRECT ANSWER-Results from the policy holders deliberate decision Involves reckless behavior because of the financial security offered by insurance Is a type of behavioral hazard Morale hazard - CORRECT ANSWER-Occur when someone exhibits risky behavior because of having insurance. Physical hazard - CORRECT ANSWER-Physical conditions that increase the chance of loss. Types of physical hazards - CORRECT ANSWER-Environmental - pot holes in road Material - asbestos in a old house Operational - poorly managed engine Occupant - working in a coal mine Legal hazard - CORRECT ANSWER-Increased chance of loss because of legal action fraud - CORRECT ANSWER-Deceiving an insurer to profit from an insurance policy Hard and soft fraud - CORRECT ANSWER-Hard fraud - planning or faking a loss Soft fraud - exaggerating a claim to inflate the indemnity proximate cause - CORRECT ANSWER-Unbroken chain of events between an occurrence and a loss - then that occurrence is the proximate cause of the loss occurrence - CORRECT ANSWER-An event, incident, or condition that causes damage Occurrence as proximate cause - CORRECT ANSWER-The original occurrence causes damage that leads to more damage Direct loss - CORRECT ANSWER-Physical harm to tangible property Indirect loss - CORRECT ANSWER-Economic loss that results from the direct or physical loss Insurance claims - CORRECT ANSWER-Demand for payment in accordance with terms of the policy