214 Florida Insurance- TERMS AND DEFINITIONS – WELL ANSWERED

214 Florida Insurance- TERMS AND DEFINITIONS – WELL ANSWERED

Insurance - Financial protection against loss or harm - An arrangement by which company gives
customers financial protection against loss or harm such as theft or illness in return for premium
payments.
Life Insurance - Is based on actuarial or mathematical principles and guarantees a specified sum
of money upon the death of the person who is insured.
Annuities - Provide a stream of income by making a series of payments to the annuitant for the
annuitant's lifetime or for a specifically designated period of time.
Risk - Uncertainty regarding loss; the probability of loss occurring for an insured or prospect
Speculative Risks - Involve the possibility of loss and gain. (Not Insurable)
Pure Risks - Involve the possibility of loss only. (Insurable)
Peril - Cause of risk (when a building burns, fire is the peril)
Hazards - The source of danger
Physical Hazard - A hazard being of physical nature.
A person being treated of cancer, the disease is the physical endangerment. (Blindness &
deafness)
Risk Avoidance - Occurs when individuals evade risk entirely. "If you don't drive, then you
avoid getting in an auto accident."
Risk Reduction - Takes place when the chances of loss are lessened. Changing a lifestyle to
minimize a known risk.
Risk Retention - Being aware of the risks involved and taking precautions for financial
protection. Auto policy's deductible is an illustration of risk retention
Risk Transference - The act of shifting the responsibility of risk to another in the form of an
insurance contract.
Adverse Selection - Refers to the tendency for those individuals who present less favorable
insurance risk to seek or continue insurance to a great extent than other risks.
Insuring Pure Risk - Loss must be due to chance
Loss must be definite and measurable
Risk must be predictable
Loss must NOT be catastrophic
Exposure to loss must be large
Loss exposures must be randomly selected
Mutual Insurers - Participating policies
Owned by policyholders
Vote for directors and trustees
Directors and management have control
Typically higher rates
Assessment Mutual Insurers - Prohibited in Florida
Pure Assessment Mutual Company - Don't pay premium and total loss is divided among
members
Lloyds of London - NOT considered an insurance company
- An association of individuals and companies that individually underwriter insurance.
Fraternal Benefit Societies - Must be nonprofit, have a lodge system, and offer insurance to its
members only
Home Service Insurer - Insurer that offers relatively small policies with premiums payable on a
weekly basis.
Captive Agents - A.k.a. Career agents
Works for only one insurer and sells only that insurers products
Independent Agents - Is self-governing and actually works for himself. This affords him the
versatility to represent several insurers and their different insurance products.
Special Agents - Usually not license and don't sell insurance. Assist insurance companies field
representatives.
Career Agency System - (GA) - Build sales staffs and agents are treated as employees. They are
recruited and trained. A principal of the company supervises agents.
Personal Producing General Agency System - (PPGA) - The agent supplies his own working
environment. Agents hired by a PPGA are considered employees of the PPGA, not the insurance
company, and are supervised by the regional salary

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