General Insurance Principles
What is a morale hazard?
(Lazyness) Consists of carelessness or indifference that individuals have because they are covered by insurance and protected from loss.
What is blanket insurance ?
A single property insurance policy that provides coverage for multiple locations. 1 limit -> multiple locations
What is unoccupancy?
No people but there is furniture (example: summer home)
What are the three types of hazard?
Physical, Moral, Morale
What is an open peril?
Policies cover all losses except those listed in policy
What is a named peril?
Policies cover losses from perils that are specifically listed
insurance
Transfer of risk of loss from an individual or a business entity to an insurance company
Risk
Uncertainty of loss
Combined Single Limit
A single dollar limit of liability applying to the total of damages for bodily injury and property damage combined, resulting from one accident or occurrence.
Per Occurrence (Accident)
A sublimit in a liability policy that puts a ceiling on the payment for all claims that arise from a single accident/occurrence
Three elements of insurance risk
1. Financial (a monetary interest) 2. Blood (a relative) 3. Business (a business partner)
What are the two types of risk?
1. Pure Risk 2. Speculative Risk
What is stated amount?
A way of establishing an upper most value. We cover ourselves for accidents or left based upon a legitimate appraisal.
What is Actual Cash Value (ACV)?
ACV = replacement cost - depreciation cash value
Deductible
Amount you must pay before you begin receiving any benefits from your insurance company
What is coinsurance?
An amount a policy holder is responsible for according to their insurance policy. The policy holder must meet a specific amount in order to avoid penalty you need to Carry a minimum policy of 80% of property. (insurance carried / insurance required) X loss amount = loss payment
What is a hazard?
Anything that increases the likelihood of loss
What is a peril?
Anything that may cause a loss
What is strict liability ?
Applied in product liability cases. A person who manufactures or sells product makes an implied warranty that the product is safe
When must insurable loss be proven?
At the time of the loss
What is an occurrence
Broader definition of loss than accident - event that happens "ON OR ABOUT" no definite date
Split limit
The amount of coverage is divided between bodily injury (BI) and property damage (PD). example: 25/50/25 would indicate that the policy would pay up to 25,000 for the injury of a single person; up to 50,000 for bodily injury to two or more people (but not more then 25,000 to any one person) and up to 25,000 for damage to property of others.
What is speculative risk?
The chance either to gain or to lose.
What is absolute liability?
The insured is 100% responsible and liable. Involvement in hazardous activities
Aggregate Limit
The maximum amount an insurer will pay for all covered losses during the covered policy period.
per person
The maximum amount available for payment of bodily injury to a single person in an accident, regardless of the policy limit stated in the policy for bodily injury claims.
Subrogation
The process by which an insurer can, after it has paid a loss under the policy the the insured recover the amount paid from the third party (who caused the loss or is otherwise legally) - prevents insured from getting two payments
Example of absolute liability
Tigers in backyard owning a swimming pool
What is market value?
What the property will sell for in a competitive marketplace **not important
Indemnity
a payment for damage or loss You do not gain- break even
What is pure risk?
a risk that presents the chance of loss but no opportunity for gain
what is proximate cause?
act or event that started the chain of events - needs to be identified to determine if there is coverage
What is moral hazard?
Hazard increased by dishonesty or character of insured
Example of morale hazard?
Leaving your door unlocked - lazyness
What is a physical hazard example?
Lose shingles on a roof, broken gutter, overloaded electrical outlets
Direct loss
Loss that is a direct result of a peril, such as fire.
Indirect Loss
Loss that is a result or consequence of a direct loss
What defines vacancy?
No people, no furniture , completely empty vacant buildings can be insured but it is hard to get coverage (policy usually only lasts 60 days)
What is an example of negligence ?
Not cleaning the sidewalk up after snow fall
What is a moral hazard example ?
Not plowing during snowfall and someone falls
Insurable interest
Person has something to lose financially in the event of a loss
What is physical hazard?
Striding out of the tangible or physical features
What is an accident ?
Sudden, unplanned and unexpected event
What is peril?
cause of loss
What is negligence?
failure to use ordinary or reasonable care
What is an example of speculative risk?
gambling or investing
What is Replacement cost ?
the cost to replace damaged property with like kind and quality at today's price, without any deduction for depreciation You get ACV. Then when the property is restored/fixed you get reimbursed the full amount.
What is Specific insurance ?
A property insurance policy that covers one location (1 limit -> 1 location)
What is insurance to value
A replacement cost settlement to the policy holder who Carrie's adequate insurance. The property is insured to the exact dollar amount or percentage of value
What is an example of stated amount?
Jewelry , cars , paintings, art
What is limits of liability?
Dollar figure that sets forth the upper most boundary of limit.
What are examples of peril?
Earthquake, Flood, Fire, vandalism, burglary
What is vicarious liability?
Employers can be held responsible for the negligent acts of their employees
