Insurance Fundamentals: Understanding Contracts and Policies, Exams of Nursing

Download Insurance Fundamentals: Understanding Contracts and Policies and more Exams Nursing in PDF only on Docsity! FL 6-20 Claims Adjuster Midterm Exam Questions with Correct Answers Best Rated What is Insurance? - Correct Answers Financial tool that protects individuals and organizations from unforeseen and extraordinary financial losses by transferring risk to another party. What is the Principle of Indemnity? - Correct Answers Restoration of approximate previous financial condition; no more, no less. What is a Premium? - Correct Answers A fee that the insured pays in exchange for insurance coverage. What is a Reserve? - Correct Answers A pool of collected premiums that the insurer sets aside to pay claims. Legal Contract - Correct Answers Insurance Policy - Correct Answers A contract to provide financial protection for a fee. Four Requirements of a Legal Contract - Correct Answers 1. Agreement (i.e. Offer and Acceptance) 2. Consideration 3. Competent Parties 4. Legal purpose Termination of Offer - Correct Answers Offer may be terminated by: 1. Revocation by offer or 2. Rejection by offered 3. Time lapse 4. Termination by operation of law: a. Either party does or becomes disabled b. Performance of contract becomes illegal after offer c. Subject matter is destroyed Six Special Characteristics of Insurance Contracts - Correct Answers 1. Personal 2. Adhesion 3. Utmost Hood Faith 4. Lavatory 5. Unilateral 6. Conditional Personal Contract - Correct Answers 1. It protects the policyholder from financial losses. 2. It does not protect property from becoming damaged. 3. Coverage follows the person, not the property. Contract of Adhesion - Correct Answers 1. The insurer is responsible for the terms of the contract. 2. The insured has no say in the wording. 3. Courts favor the insured in the event of an ambiguity. 4. The contract should be interpreted as a reasonable person would interpret it. Utmost Good Faith - Correct Answers 1. Applicants are expected to be completely honest about the risk to the insurer. 2. The insurer must rely on the applicants not to conceal or misrepresent pertinent facts. Lavatory Contract - Correct Answers (It depends on an unknown future event) 1. Neither party can know future losses. 2. Insurer only has to pay if and when covered losses occur. 3. Policyholders could pay more in premiums than they ever get for claims, or insurer could pay more in claims than it receives. Unilateral Contracts - Correct Answers 1. The insurer has an obligation to pay for covered losses. 2. The insured has no obligation (he can stop paying premiums). Conditional Contracts - Correct Answers 1. The insurer only has to perform if certain conditions are met (such as a covered loss). 2. The insured must fulfill all conditions listed in the policy. DICE - Correct Answers An insurance contract has four essential parts: 1. Declaration Page 2. Insuring Agreement 3. Conditions 4. Exclusions Declarations Page - Correct Answers makes the contract specific to the policyholder. Always the first section. It establishes: 1. Names of both parties (insured and insurer) 2. Policy number 3. Location and description of insured item 4. Value of insured item 5. Dates of the policy (beginning and end) 6. Amount and limit of coverage 7. Deductible 8. Premium Risk Retention Groups - Correct Answers - authorized by the Federal Liability Risk Retention Act of 1986 - owned by their members - provide commercial liability insurance RRG Requirements - Correct Answers - members must be involved in similar business endeavors - need not be licensed in multiple states Classification Based on Location - Correct Answers Insurance companies can be classified according to their location: 1. Domestic Insurer: located in a particular state, abides by that state's laws 2. Foreign Insurer: Obeys a state's or US laws, but can be located elsewhere 3. Alien Insurer: Obeys laws of another country altogether Risk - Correct Answers A risk can be the potential for financial loss; being exposed or open to damage. Or it can be an insured item. Speculative Risk - Correct Answers - is undertaken with no certainty of either gain or loss - is made knowingly, by conscious choice - cannot be insured Pure Risk - Correct Answers - is a risk with no chance of gain - can only result in either loss or no loss Can be insured Exposure - Correct Answers the extent to which a person, item, or organization is open to damage or loss. Insurers consider a risks exposure when deciding whether or not to insure it (ex. Gulf Coast - high exposure to hurricanes, CA - earthquakes, high crime areas - theft). Evaluating Exposure - Correct Answers Exposure is: - expressed in dollars or units - A determining factor in issuing a policy and setting premium Hazard - Correct Answers a condition increasing the likelihood or severity of a loss Ex. storing dangerous materials in a building, a record of drunken driving, smoking, etc. Hazard vs. Exposure - Correct Answers - exposure is the possibility of loss - Hazards are things that increase that possibility - More hazards = higher exposure Peril - Correct Answers the actual cause of loss or damage (ex. lightning, fire, flood, vandalism, etc). Insurance policies can be: - "Named Peril": lists each peril that is covered - "All Peril" ("Open Peril"): covers all perils except those specifically excluded Loss - Correct Answers 1. Reductions in value of insured item 2. Financial loss due to an occurrence or accident 3. for insurers: the amount paid out in a claim settlement Insurable Risk - Correct Answers