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72 Cards in this Set
- Front
- Back
independent insurance agents |
sell the insurance products of several companies and work for themselves or other agents. The independent agent owns the expirations of the policies he sells, meaning the individual may place that business with another insurer upon renewal if in the best interest of the client |
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exclusive or captive agents |
represent only one company. These agents are sometimes referred to as career agents working from career agencies. Most often, these captive or career agents are compensated by commissions
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General agents or managing general agents (MGAs)
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hire, train, and supervise other career agents within a specific geographical area. The MGA is compensated by commissions earned on business sold by herself as well as an overriding commission (overrides) on the business produced by the other agents managed by the general agent. An MGA has field underwriting and binding authority only in property and casualty insurance
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Direct-writing companies |
usually pay salaries to employees whose job function is to sell the company’s insurance products. Technically, these salaried employees do not function as agents. Commissions are usually not paid and the insurer owns all of the business produced
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direct-response marketing |
conducted through the mail, by advertisements in newspapers and magazines, and on television and radio. Policies sold using this method have limited benefits and low premiums, such as disability only
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franchise marketing |
provides coverage to employees of small firms or to members of associations. Unlike group policies where benefits are standard for classes of individuals, persons insured under the franchise method receive individual policies that vary according to the individuals’ needs. Franchise plans are attractive to employers who do not, according to the laws of their state, meet the qualifications for a true group. These plans allow the employers to offer individual insurance to their employees at a lower premium than for insurance purchased on an individual basis. Premiums may be deducted from the individual’s paycheck. |
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producer |
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life and health insurance agents |
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property and casualty agents |
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brokers |
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solicitors |
a salesperson who works for an agent or a broker. This working relationship is most common in the property and casualty insurance field.
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insurance consultants |
A very small group of insurance professionals call themselves insurance consultants. Consultants are not paid by commission for the sales of insurance policies. Instead, they work strictly for the benefit of insureds and are paid a fee by the insureds they represent.
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insurance |
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indemnify |
to make a person whole by restoring that person to the same financial position that existed before the loss |
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premium |
the insured (policyowner) pays a set amount of money (premium) to the insurer. In return, the insurer agrees to pay the other party (insured beneficiary) a set sum (benefit) upon occurrence of the event |
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policy |
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loss |
reduction in the value of an asset |
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claim |
demand for part of the insurance benefit to the person named in the policy |
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risk |
involves 2 things: a possibility of loss and an uncertainty about whether it will occur |
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2 types of risk |
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factors that cause or give rise to risk |
perils and hazards |
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peril |
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hazard |
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physical hazards |
arise from material, structural, or operational features of a risk situation (ex: slippery floors or unsanitary conditions)
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moral hazards |
arise from people's habits and values (ex: filing a false claim) |
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morale hazards |
arise out of human carelessness or irresponsibility (texting while driving) |
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STARR |
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sharing risk |
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transfer of risk |
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avoidance of risk |
avoid risk in the first place! If you don't fly, you won't get in a plane crash |
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reduction of risk |
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retention of risk |
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law of large numbers |
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exposure unit |
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insurable interest |
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characteristics of insurable risks |
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catastrophic perils |
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indemnity |
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subrogation |
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limit of liability |
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deductible |
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elimination period |
number of days an insured must be disabled before disability income benefits become payable |
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purpose of a deductible |
minimize small nuisance claims and keep premiums down (you can purchase higher deductibles that come with lower premiums) |
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coinsurance |
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A policy has a $500 deductible and 20%/80% coinsurance on the next $10k. How much will the insured and insurer pay on a $5500 medical bill? |
Insured pays $1500 ($500 deductible + $1000 (20% of $5000)) Insurer pays $4000 (80% of $5000) |
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property insurance |
covers the risk of damage or loss to property, which is defined as a building, equipment, stock, or contents |
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casualty insurance |
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life insurance |
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annuity |
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accident and health or sickness insurance |
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variable life and variable annuity products |
carry investment risk (you can lose or gain money depending on the market), people who sell them must have and insurance license and a securities license |
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credit |
a limited line of insurance protecting the insured, who is usually a creditor, against the financial consequences should a debtor be unable to pay debts as a result of illness or death |
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other types of insurance |
title insurance, crop insurance |
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3 major types of insurers |
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nonprofit insurers |
profits are returned to subscribers in the form of reduced premiums or expanded benefits (Blue Cross Blue Shield) |
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stock insurers |
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mutual insurers |
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reciprocal insurers |
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fraternal insurers |
"fraternal benefit societies," primarily life insurance carriers that exist as social orgs and usually engage in charitable and benevolent activities |
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Lloyd's of London |
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reinsurers |
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facultative reinsurance |
negotiated on an individual risk basis |
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treaty reinsurance |
involves an automatic sharing of risks by the ceding company |
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excess and surplus lines |
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risk retention groups |
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self-insurers |
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US Gov't as an insurer |
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domestic insurers |
a company is a domestic insurer in the state where it's incorporated |
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foreign insurers |
licensed to conduct business in states other than the one in which it was incorporated (includes DC or other US territories) |
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alien insurers |
incorporated in a country other than the US, DC, or any US territory |
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authorized/admitted |
entitles to transact insurance within the state, having complied with the law and satisfying all conditions |
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unathorized/nonadmitted |
not entitled to transact insurance within the state (some types of transactions, like surplus lines or reinsurance, may be permitted by unauthorized companies, but are still regulated |