Which describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

The Basics of an Insurance Contract

There are four basic parts to an insurance contract:

• Declaration Page
• Insuring Agreement
• Exclusions
• Conditions

It is important to understand that multi-peril policies may have specific exclusions and conditions for each type of coverage, such as collision coverage, medical payment coverage, liability coverage, and so on. You will need to make sure that you read the language for the specific coverage that applies to your loss.

The Declaration Page

This page is usually the first part of an insurance policy. It identifies who is the insured, what risks or property are covered, the policy limits, and the policy period (i.e. time the policy is in force).

For example, the Declarations Page of an automobile policy will include the description of the vehicle covered (e.g. make/model, VIN number), the name of the person covered, the premium amount, and the deductible (the amount you will have to pay for a claim before an insurer pays its portion of a covered claim).

Similarly, the Declarations Page of a life insurance policy will include the name of the person insured and the face amount of the life insurance policy (e.g. $25,000, $50,000, etc.).

The Insuring Agreement

This is a summary of the major promises of the insurance company and states what is covered. In the Insuring Agreement, the insurer agrees to do certain things such as paying losses for covered perils, providing certain services, or agreeing to defend the insured in a liability lawsuit. There are two basic forms of an insuring agreement:

• Named–perils coverage, under which only those perils specifically listed in the policy are covered. If the peril is not listed, it is not covered.
• All–risk coverage, under which all losses are covered except those losses specifically excluded. If the loss is not excluded, then it is covered. Life insurance policies are typically all-risk policies.

The Exclusions

Exclusions take coverage away from the Insuring Agreement. The three major types of Exclusions are:

• Excluded perils or causes of loss
• Excluded losses
• Excluded property

Typical examples of excluded perils under a homeowners policy are flood, earthquake, and nuclear radiation. A typical example of an excluded loss under an automobile policy is damage due to wear and tear. Examples of excluded property under a homeowners policy are personal property such as an automobile, a pet, or an airplane.

The Conditions 

Conditions are provisions inserted in the policy that qualify or place limitations on the insurer’s promise to pay or perform. If the policy conditions are not met, the insurer can deny the claim. Common conditions in a policy include the requirement to file a proof of loss with the company, to protect property after a loss, and to cooperate during the company’s investigation or defense of a liability lawsuit.

Definitions 

Most policies have a Definitions section, which defines specific terms used in the policy. It may be a stand-alone section or part of another section. In order to understand the terms used in the policy, it is important to read this section.

Endorsements and Riders

An insurer may change the language or coverage of a policy at the time of the policy renewal. Endorsements and Riders are written provisions that add to, delete, or modify the provisions in the original insurance contract. In most states, the insurer is required to send you a copy of the changes to your policy. It is important that you read all Endorsements or Riders so you understand how your policy has changed and if the policy is still adequate to meet your needs.

Want to Review Your Policy? 

To obtain a copy of your insurance policy, please contact your insurance agent or company.

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies, and habits. What type of report is that

Whats considered a non-medical insurance application?

Application on which the medical info is completed by the applicant and the agent only. 

When is the earliest a policy may go into effect?

When application is completed and a check is given to the agent. 

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

Aleatory... an insurance contract is an aleatory contract that requires a relatively small amount of premium for a large risk. 

This isn't a duty or responsibility of producers at the time of application...

They don't change any incorrect statements on the application by personally initialing next to the corrected statement, 

when would a misrepresentation on the application be considered fraud?

only if it is intentional and material 

In comparison to consumer reports,,, what is a unique characteristic of an investigative consumer report?

The customers associates, friends, and neighbors provide the reports data 

What is the term for "presentation or depiction that includes non-guaranteed elements of a policy of an individual or group life insurance over a period of years...

True or False: An illustration must be part of the contract?

False: May not be altered by an agent, and must clearly state that it is not part of the contract. 

Insurer receives an application with questions not answered..what must be done with the application?

Return to the applicant for completion. 

A prospective insured receives a conditional receipt, but dies before the policy is issued. The insurer will........

Pay the policy proceeds only if it would have issued the policy. 

An insurance contract requires that both parties meet certain conditions in order for the contract to be enforceable. What contact characteristic does this describe??

Upon policy delivery, the producer may be required to obtain all but 1 of these... -Delivery receipt -signed waiver of premium -statement of good health -payment of premium.

Signed waiver of premium. 

which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?

The fair credit reporting act. 

What is the purpose of a conditional receipt?

It is intended to provide coverage on a date earlier than the date of the issuance of the policy. 

insuring of risks that are more prone to losses than the average risk

a legal representative of an insurance company. 

Applicant or proposed insured

a person applying for insurance

a person who receives the benefits of an insurance policy

amount paid upon the death of the insured in a life insurance policy

a contract between a policy owner & and insurance company which agrees to pay the insured or the beneficiary for loss. 

a person covered by the insurance policy

the company who issues an insurance policy

policy termination due to non-payment of a premium. 

person entitled to exercise the rights and privileges of the policy

The money paid to the insurance company for the insurance policy. 

The binding force in any contract

What best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

What is the concept of insurance premium?

What is the amount paid for an insurance policy called?

What are the concepts of insurance?