chapter 5 fin

true or false the insurer cannot subrogate against its own insureds

true

consideration

value that each party gives to other insured consideration- payment of premium plus agreement to abide by conditions insurers consideration- promise to do certain thinks as specified in the contract ( pay for loss )

replacement cost minus depreciation

what it would be to buy new - wear and tear

what is life insurance an exception

life insurance is a valued policy that pays a stated sum to the beneficiary upon the insureds death. insurance must be purchased before death occurs.

how do they handle business income insurance

loss of profits plus continuing expenses

do unsecured or general creditors normally have an insurable interest in the debtors property.

nope

does suporgation apply to life insurance

nope.

what is a pecuniary relationship

on person may be financially harmed by the death of another

when must insurable interest exist for property insurance and two reasons why

the insurable interest must exist at the time of the loss. 1- property insurance are contracts of indemnity 2-you may not have interest when contract is first written but you gain interest right before the loss

when must insurable interest exist for life insurance

the insurable interest requirement must be met only at the inception of the policy , not at the time of death ~ when the policy is written ~if you get divorced you can still get money on husbands death

what is the principles of subrogation

the insurer is entitled to recover from a negligent third party any loss payments made to the insured ex: jack hits my car , my insurance pays for my damages , jack gives me money , that money goes to my insurance

how do they handle liability insurance

the insurer pays up to the policy limit

fair market value

the price a willing buyer would pay a willing seller in a free market the fair market value may be lower than the replacement cost minus depreciation if the location of the building is deteriorating .

what happens if the insured waives the right to sue the negligent party ,

the right to collect from the insurer for the loss is also waived.

insurable interest of life insurance

* you can purchase as much insurance on your life as you want * if you buy your own insurance the beneficiary does not have to have an insurable interest in your life. who has an insurable interest on my life? *close family ties or marriage ( husband , wife , grandparent ) *cousins only if they have a pecuniary relationship * my corporation *business partner

insurable interest in property and casualty insurance (4 people )

*Owner *Potential legal liability ~laundry mat has an interest in my clothing that they are cleaning because if anything happened to it their. *secured creditors ~commercial bank that gives you a lone on your house *contractual right ~purchasing protects abroad and needing them to get to the usa same

what are the exceptions of principle of indemnity

*Valued policy *valued policy laws *replacement cost insurance *life insurance

what is a valued policy law an exception

*is a law that exists in some states that requires payment of the face amount of insurance to the insured if a total loss to real property occurs from a peril specified in the law *loss must be total * insure the amount before peril , sometime can make profit

what is a warranty

-statement the become part of the insurance contract and is guaranteed by the maker to be true in all respects ex: liquor store says they will have a alarm system to lower premium.

what are the three purposes of insurable interest.

1- prevent gamgling ~ oh i think that house it gonna go on fire lets insure it 2- reduce moral hazard ~ hmm i could get lots of money if i light my neighbors house on fire let me get that insured 3-to measure the amount of the insureds loss in property insurance ~ how much would you lose

what are the three purposes of subrogation.

1- prevents the insured from collecting twice from the same loss 2-used to hold the negligent person responsible for the loss 3-helps to hold down insurance rates.

how do prove claims of concealment

1- prove the concealed fact was known by the insured 2- the insured intended to defraud the insurer

what are the 4 thinking insurance contracts need to be legally enforceable

1-offer and acceptance 2-consideration 3-competent parties 4-legal purpose

what three important legal doctrines support the principle of utmost good faith.

1-representations- 2-concealment- 3-warranty-

modifications to warranty

1-statements are representations not warranties 2- interpret breach where minor breach only temporarily affects risk 3-allow the insured to recover for a loss unless the breach of warranty actually contributed to the loss

how have the courts determined actual cash value

1.) replacement cost less depreciation 2.) Fair market value 3.) Broad evidence rule

what are the two purposes of indemnity

1.) the first purpose is to prevent the insured from profiting from a loss. 2.) is to reduce moral hazard

what is the principle of utmost good faith

a higher degree of honesty is imposed on both parties to an insurance contract than is imposed on parties to other contracts.

offer and acceptance

applicant make offer insurer accepts or turns down property and casualty- can be written or oral also involves binder which is a temporary contract for insurance so you have immediate coverage. life insurance- always in writing , must be apporved before life insurance is in force. no binder.( given conditional premium receipt : date of application or medical exam )

legally competent

both parties must have legal capacity to enter into a binding contract ex: CANTS: insane person , intoxicated person , corporation that act outside the scope of their authority , minors *contract at age 15 some states 18 insurer must be licensed

what is concealment

intentional failure of the applicant to reveal a materiel fact to the insurer .

what is a valued policy

is a policy that pays the face amount of insurance if a total loss occurs. ex: used with antiques , fine arts , rare paintings , family heirlooms ~you think its worth 10000 dollars so you get it insured for that amount in total loss you will get 10000 no matter how much its actually worth

what is broad evidence rule

means that the determination of actual cash value should include all relevant factors an expert would use to determine the value of the property.

what is replacement cost insurance an exception

means there is no deduction for physical depreciation in determining the amount paid for a loss Ex: if your old roof is ruined by a tornado , you would the price of a new roof because you can not buy a old roof so you would be in a substantial loss having to pay for a new roof .

what type of insurance is most likely to be used in property insurance

replacement cost less depreciation

what is the principle of indemnity

state that the insurer agrees to pay no more than the actual amount of the loss : stated differently , the insured should not profit from a loss.

what are representations

statement made by the applicant for insureance ex: ask your height weight , health insurance voidable if representations are .... material- if insurer new true facts insurance wouldnt be issued false- statement not true or misleading relied on by insurer- insurer relies on representation inorder to give a certain premium

principle of insurable interest

states that the insured must be in a position to lose financially if a covered loss occurs. ex: you have an interest in your can because if it gets totaled you pay for a new one