Understanding Insurance Contracts and Policies, Exams of Nursing

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CLAIMS ADJUSTER EXAM 2024 Insurance - correct answer✔✔ -an economic device used to protect against extreme unforeseen loss - the transfer of risk from one party to another Premium - correct answer✔✔ -the fee paid by the insured in exchange for insurance Principle of Indemnity - correct answer✔✔ -the insurer should be restored to where they were before the incident -no profit can be made Idemnification - correct answer✔✔ -to compensate for loss or damage; to provide security for financial reimbursement to an individual in case of a specified loss incurred by the person 4 Elements of a Legal Contract - correct answer✔✔ -Agreement- signature or handshake -Consideration- money exchange -Competent Parties-18 yrs. old, sober, sane -Legal Purpose-no contracts for money laundering Insured - correct answer✔✔ individual who pays premiums in exchange for protection -can be a person, person's or an organization - "You," "Your," or "Your's" (if the insured is a group it is important to list the "first named insured,"- because that is the only one that can authorize changes to the policy) Insurer - correct answer✔✔ -company or group offering insurance -can be a government organization -terms- "We," "Us," and "Our 6 Characteristics of a Contract: Personal - correct answer✔✔ -protects the person (insured) from loss -does not protect property from becoming damaged -coverage follows the person not the property 6 Characteristics of a Contract: Adhesion - correct answer✔✔ -one party dictates terms -the insured has no power to write the contract -courses will favor the insured in a case of ambiguity 6 Characteristics of a Contract: Utmost Good Faith - correct answer✔✔ -applicants are expected not to withhold any information or the contract can be voided 6 Characteristics of a Contract: Aleatory - correct answer✔✔ -depending on a unknown future event -Insurer only has to pay in and when covered losses occur 6 Characteristics of a Contract: Unilateral - correct answer✔✔ -only the insurer make an obligation to pay for covered losses 6 Characteristics of a Contract: Conditional - correct answer✔✔ -the insurer only has to perform if certain conditions are met Private Commercial Insurer - correct answer✔✔ -for profit -collects premiums -a portion of premium is used to pay claims -excess premiums become profit Types of Insurance Private Insurance - correct answer✔✔ -sells insurance based on consumer preferences -offer a variety of insurance products -voluntary participants -generates a profit Types of Insurance Stock Insurance Company - correct answer✔✔ -always for profit -stockholders provide capital -non-participating insurers -no dividends go to policy holders Types of Insurance Mutual Insurers - correct answer✔✔ -for profit -owned by policy holders -policy holders elect board of directors -participating insurers: policy holders participate in dividends Types of Insurance Re-Insurer - correct answer✔✔ -an insurer that provides insurance for other insurers -the insurer buys insurance to protect against loss -re-insurer pays a percentage of the insurers losses, or any losses over a certain amount (kinda like gap) Types of Insurance Reciprocal Insurance - correct answer✔✔ -a group of people or organizations that insure each other Characteristics: -unincorporated - non-profit -operated by attorney- in fact -members pay into individual accounts -cost of claims shared by whole group Types of Insurance Fraternal Benefit Societies - correct answer✔✔ -non-profit -engages in charitable activities -provides some types of insurance -typically consist of people with similar religions, ethnicities and occupations - correct answer✔✔ Types of Insurance Risk Retention Group - correct answer✔✔ -a group of people with similar insurance needs who form an organization to buy insurance as a group -usually formed to provide commercial liability insurance -do not act as insurers -not exposed to risk the way insurers are -members must operate in related businesses with similar risks Types of Insurance Private Non-Commercial Insurance - correct answer✔✔ -Private- not for profit -Returns profits to policy holders by reducing premiums or explaining benefits (Classification Based on Location) Domestic Insurer - correct answer✔✔ -located in a particular state, abide by state laws (Classification Based on Location) Foreign Insurer - correct answer✔✔ -obeys a states or US Laws but can be located elsewhere (Classification Based on Location) Alien Insurer - correct answer✔✔ -obeys laws of another country altogether Risk for Insurers - correct answer✔✔ -the potential for financial loss; being exposed or open to damage -an insured item Speculative risk - correct answer✔✔ -cannot be insured -is undertaken with no certainty of either gain or loss -is made knowingly, by conscious choice. -examples: lottery, stock market, gambling, investing in a business 6 Conditions of Insurable Risk Definable Risk - correct answer✔✔ The risk must be definable: 1.) The insurer can define the exact conditions under which the item is covered by the policy example: jewelry is covered up to a specified limit if stolen 2.) The item itself is definable (it can be precisely described) example: a house, car, or diamond necklace can be defined. An entire riverbend cannot. 3.) The item has a precise value example: a house or car does. A family photo does not 6 Conditions of Insurable Risk Unexpected Loss - correct answer✔✔ The loss must be : -unforeseeable -unexpected -reasonably unpreventable -completely random in nature example: Flood insurance is not available in many areas because flooding has become expected 6 Conditions of Insurable Risk Substantial Loss - correct answer✔✔ -the loss must cause substantial economic hardship example: if you burn your favorite t-shirt , you can easily buy a new one. This is not a substantial loss. if a guest accidentally backs his car into your porch, you can't easily replace it. This is a substantial loss. 6 Conditions of Insurable Risk Exclusions - correct answer✔✔ The insurer must be able to exclude coverage for large scale disasters why? -insurers have to charge adequate premiums -some losses would require such large premiums that it is impossible to insure them example: -wars -terrorism -nuclear and missile attacks -earthquakes -floods 6 Conditions of Insurable Risk Law of Large Numbers - correct answer✔✔ a large number of similar risks or insured units reduces the possibility of variation from the expected number of claims. (the more units that are insured; the more predictable the losses will be) -spreads the risk across more policies -helps the insurer to predict losses more accurately -"similar risks," can mean: cars, houses , person's lives, similar businesses, etc. (scenario: if an insurance company only covered 12 cars for a certain amount per month and all of the cars were stolen that month the payout would bankrupt the company. There must be a large number of insured units to regulate the price.) Risk Managment - correct answer✔✔ Managing risk keeps insurance in the black (which means making a profit) -a policyholder pays premiums, and in return the insurer takes risks -What is the chance of loss on an item? -How can the insurer reduce the risk of loss when insuring a particular item or person Risk Management Techniques (ways for insurers to safely take risk) Risk Avoidance - correct answer✔✔ -eliminates risk by refusing to grant policy, usually because -high exposure to chance of loss means probable high claims costs -applicant has record of fraud or poor credit -applicant has a record of irresponsible behavior or has made many claims Risk Management Techniques (ways for insurers to safely take risk) Risk Reduction - correct answer✔✔ -requiring policyholder to pay higher premiums -requiring building upgrades for safety and less chance of damage. -providing less coverage Risk Management Techniques (ways for insurers to safely take risk) -is a type of "behavioral hazard." Morale Hazard - correct answer✔✔ -results from policyholder's unconscious decisions. -results when insured acts differently because of the comfort of that insurance protection provides -is another form of a behavioral hazard Moral vs. Morale - correct answer✔✔ moral hazards are conscious decisions and morale hazards are unconscious changes in behavior Physical Hazard - correct answer✔✔ a physical condition that increases the chance of a loss examples: -environmental: potholes -material: asbestos in an old house -operational: poorly maintained engine -occupational: working in a coal mine Fraud - correct answer✔✔ Deceiving an insurer to profit form an insurance policy -usually involves misrepresentation or concealment types: hard, soft Hard Fraud - correct answer✔✔ deliberately planning or faking a loss example: planning a car accident Soft Fraud - correct answer✔✔ aka: opportunistic fraud exaggerating a claim to inflate the indemnity Proximate Cause - correct answer✔✔ When there is an unbroken chain of events between an occurrence and a loss, then that occurrence is the proximate cause of the loss can determine which losses are covered by an insurance policy damages are covered if: -caused by a covered peril -if their proximate cause was a covered peril Occurrence - correct answer✔✔ An event, incident, or condition that causes damage example: a.) a car veering off of a road and hitting a tree b.) lightening striking a house and damaging a roof c.) the weight of ice tearing off rain gutters causes damage that leads to damage then leads to more damage. - is the proximate cause of resulting losses Direct Loss - correct answer✔✔ -physical harm due to tangible property directly related to peril Indirect Loss - correct answer✔✔ -an economic loss that results from a direct loss -added expenses or lost income due to physical damage example: -renting a hotel room while home is being repaired -lost time from work Claim - correct answer✔✔ demand for payment in accordance with the terms of an insurance policy (does not always result in indemnification) First Party Claim - correct answer✔✔ -is filed by the policyholder against his/her own insurance policy -must be paid by policyholder own insurance -is filed against an insurance policy by anyone other than the person named on the policy. Third-Party Claim - correct answer✔✔ a claim filed against the insurance policy by someone who is not on the policy The Claims Process: Filing a Claim - correct answer✔✔ -does not grant immediate indemnification -when you file a claim it is because you believe they are owed payment by an insurer -policy owners file claims by calling the insurer The Claims Process: Proof of Loss Forms - correct answer✔✔ an insurer must provide proof of loss forms when: - a policy holder files a claim -when a policy holder requests them in writing -within 15 days if an insurer fails to send proof of loss forms, it gives the right to require them from the claimant The Claims Process: Acknowledgment - correct answer✔✔ after receiving the claim the insurer must within 15 days: -acknowledge the receipt of the claim -begin investigating the claim Insurance Adjuster - correct answer✔✔ -represents the insurer -is responsible for evaluating the circumstances of a claim