Property and Casualty Insurance Terms & Related Concepts

Named Peril

(If it not a name peril that caused the loss it will not be covered. It list specific covered perils.) Is a term used in property insurance to describe the breadth of coverage provided under an insurance policy form that lists specific covered perils. No coverage is provided for unlisted perils.

What are three types of hazards?

1. Physical 2. Moral 3. Morale

What is burglary?

A forced entry into another's premies with felonious intent.

Rate

Amount Charged

What is subrogation?

An insurer's legal right to seek damages from third parties after reimbursing insureds for a loss.

In property insurance, when must insurable interest exist?

At the time of loss

What type of policy insures all property at multiple locations for a single amount?

Blanket Policy

Actual Cash Value (ACV) is calculated as followed

Current Replacement Cost - Depreciation - Actual Cash Value

How is the actual cash value of a property Calculated ?

Current replacement cost ( - ) minus depreciation

Obsolescence

Depreciation in the value of a property due to becoming outdated.

If an insured peril was the proximate cause of loss what type if loss is it.

Direct

How are direct and indirect losses related?

Direct losses can cause indirect losses.

What is negligence?

Failure to act as a reasonable prudent person under given circumstances.

Conditions that increase the chance of loss are know as what ?

Hazards

What provision states that if a policy allows for greater benefits that the financial loss incurred, the insured may be compensated only for the amount lost?

Indemnity

An insured's business is damaged by a fire, and temporarily shut down for repairs. As a result, the insured suffers loss of income. What type of loss is the loss of income ?

Indirect or Consequential

What do individuals use to transfer their risk of loss to a larger group?

Insurance

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become

Larger (because of the Law of Large Numbers)

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated ?

Law of Large Numbers

What determines an insurer's responsibility for payment, as stated in an insurance policy ?

Limits of Liability Liabililty

Insurance is a contract that protects the insured from what ?

Loss

The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?

Loss

(Insurance Carried ÷ Insurance Required) X Loss Amount = ?

Loss Payment

An insurer discovers that an applicant for a policy has submitted a fraudulent insurance claim in the past. What type of hazard does this represent?

Moral

A Person who does not lock the doors to his or her house shows an indifferent attitude. What type of hazard does this represent ?

Morale

Under absolute liability, does an injured party need to prove negligence?

No absolute exist when a condition or conduct is inherently dangerous, so proof of negligence is not required.

What term describes a loss caused by continuous exposure to a condition?

Occurence

A policy that covers all causes of loss except for this specifically excluded is known as what type of policy?

Open peril (Or Special) Form

What sublimit in a liability policy puts a ceiling on the payment for all claims that arise from a single accident?

Per Occurrence

A tornado that destroys a property would be an example of what ?

Peril

What is the term for the cause of los insured against in an insurance policy?

Peril

What term defines an exact, direct, and uninterrupted cause of loss?

Proximate Cause

A situation in which a person can experience only a loss and no gain presents what type of risk?

Pure Risk

In property insurance, what is actual cash value?

Replacement cost at the time of the Loss Minus ( - ) Depreciation

Insurance is the transfer of

Risk

Basis of Insurance

Sharing the risk between a large homogeneous group with similar exposure to loss.

What are two types of compensatory damages ?

Special and General

Wagering on a sporting event is known as what type of risk?

Speculative

What type of limits of liability has the limits separately stated for different coverages?

Split Limits

If a manufacturer product is unsafe, what type of liability applies to the manufacturer?

Strict Liability

What provision found in property policies prevents an insured from collecting twice for the same loss; once from the insurer and again from a third party?

Subrogation

What law protects consumers from the circulation of inaccurate or obsolete information?

The Fair Credit Reporting Act

Premium

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

What does indemnity mean in insurance ?

To restore an insured to the same financial status before a loss.

What is a Risk?

Uncertainty of Loss

What is risk?

Uncertainty of loss

Insurer (principal)

the company who issues an insurance policy

Physical Hazard

Are physical conditions that increase the possibility of a loss. They indicate the dangers of the subject of insurance which can be identified by inspection of the risk. Example: Park your car on top of old dry leaves and your car starts a fire that is a physical hazard. or Fire policy - Nature and construction of the building and whether materials used are of a combustible or non-combustible nature.

Split Limits

Are separately stated limits of lability for different coverages. The limits may be stated on a person, per occurrence, or per policy period basis ir can be split between Bodily injury and property damage. Many auto liability polices are written split limits.

Proximate Cause

Is an act or event considered a natural and reasonably foreseeable cause of the damage or event that occurs and damages proper or injures a plaintiff. The negligence must have been the proximate cause of the damage if the injured party is to collect for the damage. This means that there must have been an unbroken chain of events beginning with negligence and leading to the injury or damage. ( The negligence must have been the cause without which the accident would not have happened, also referred to as direct liability.)

Deposit Premium

Is an estimated premium paid in advance at the time the policy is issued that may be adjusted based on actual exposures. The actual premium can be determine by the audit of the insured records at the end of the insuring period. If the audit determines that the initial premium collected was too low, additional premiums will be assess, and vice versa, if the audit shows that the initial premium to the insured was too high (the exposures were over-estimated), the insured will receive a return premium. Typically, audit premium is sued with lability and workers compensation insurance.

Loss

Is define as he reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril. Example:The Loss is the amount of money to repair and the money that is needed to fix a item.

Insurance to Value

Usually found in homeowner splices, provides replacement cost settlement to the policyholder who carries adequate insurance, which means that the property is insured tot the exact dollar amount or percentage of value. If the amount of insurance is less than the value assumed in the premium rate calculation, the insured would still be indemnified at least to the amount of the actual cash value of the loss.

What is the difference between vacancy and unoccupancy ?

Vacancy refers to an insured structure in which no people have been living or working and no property has been stored for the specified period of time. Unoccupancy refers t an insured structure in which no people have been living or working within the required period of time, but some property is stored.

Agreed Value

(Art work would typically have a agreed value stated on the policy in case of the loss. This is where if you have a item that is difficult to value so you would set up a agreed value.) A property policy with a provision agreed upon by the insurer and insured as to the amount of insurance that represents a fair valuation for the property at the time the insurance is written and suspends any coinsurance or other contribution clauses in the policy. This type of valuation works best for items whose value does not flute much. When. Loss occurs, the policy pays the agreed value as specified on the policy schedule, regardless of the insured item's appreciation or depreciation.

Indirect Loss

(Direct lost has to occur. When it does it causes additional living expenses. Indirect loss pays out additional living expenses.) Loss that is a result or consequence of a direct loss. Also known as consequential losses' re losses considered as result of direct loss. Such losses usually result from the time it takes to repair or replace damage property. Example: The most prevalent type of indirect loss for individual homeowners is the extra living expenses that may be incurred by the insured while the home is being repaired.

Strict Liability

(Liable for defective products regardless of fault or negligence) Is commonly applied in product liability cases. A person or business that manufactures or sells a product for defective products, regardless of fault or negligence. If the product causes injury and the claimant can prove the defect, the defendant will be held strictly liable for the damage. Example: If you create a product and someone gets hurt from your product you are liable.)

Market Value

(What a willing buyer will pay a willing seller) IS a seldom-used method of vaping a loss based upon the amount a willing buyer would pay to a willing seller for the property prior to the loss. This method takes into consideration the value of land and location, rather than just the cost of rebuilding the structure itself.

Unoccupancy

(non occupancy) refers to an insured structure in which no people have been living or working within the required period of time, but some property is stored. Example: If the insured moved the hose would be considered VACANT. If the insured went on vacation for 2 weeks, the house would be considered unoccupied.

Relationship if a Perils to Loss Cycle

-----> **Hazards- Conditions causes you to have a loss . -----> **Perils- Causes of loss. (The reason why you loss something.) -----> **Loss- Reduction of value and basis for a claim. -----> **Insurance- Transfer if loss and protection.

Limits of Liability has 3 Expressed Ways

1. Single Limit- One limit for a policy like a homeowners policy 2. Split Limit- You have a split limit per person and per accident. 3. Aggregate Limit- Maximum amount the insurance company will pay.

Two Classes of Compensatory Damages

1. Special 2. General

Types of Liability

1. Strict Liability 2. Vicarious Liability 3. Limits of Liability

Punitive Damages

3rd Class Which is a form of punishment for extreme outrageous behavior, gross negligence or willful intent.

Mysterious Disappearance

A disappearance of property without knowledge as to the location, time or how the property was lost. Losses by mysterious disappearance are excluded from most insurance policies.

Implied warranty

A legal term meaning that a product is suitable for its intended purpose and that it fits an ordinary buyer's expectations.

Exclusions

A provision of an insurance policy or bond referring to hazards, perils, circumstances, or property not covered by the policy. Exclusions are usually contained in the coverage form or causes of loss form used to construct the insurance policy.

Loss Ratio

A ratio that measures losses and loss adjustment expenses against earned premiums and that reflects the percentage of premiums being consumed by losses. (Insured Losses + Adjusting expenses) + earned Premium = Loss Ratio

Peril

A specific cause of loss. Perils insured against in standard property policies include fire, wind, hail and explosions.

What is a deductible in an insurance policy?

A specified dollar amount that the insured must pay before the insurer will pay the policy benefits

Endorsement

An insurance policy form that either changes or adds to the provisions included in one or more other forms used to construct the policy, such as the declarations page or the coverage form. They often effect these changes by modifying the existing insuring agreement, policy definitions, exclusions, or conditions in the coverage form or adding additional information, such as insured locations, to the declarations page.

Underwriter

Any individual in insurance who has the responsibility of making decisions regarding the acceptability of a particular submission and of determining the amount, price, and conditions under which the submission is acceptable.

Special Damages

Are specific out of pocket expenses for medical, miscellaneous expenses, and loss of wages.

Coinsurance

Classes states that, in consideration of reduced rates, the insured agrees to maintain. certain minimum amount of insurance on the insured property. This encourages the insured to insure the property close to its full value. in case of partial loss, the insurer will pay the partial loss un full if the insured has maintained the required percentage of insurance with relation to the value if the property. If the amount of insurance maintained is less than the coinsurance clause requirement, the insurer will only pay the percent of the loss that insurance bears in relation to the amount of insurance that should been carried. In the event of a total loss, the coinsurance clause does not operate, and face amount of the policy is paid.

General Damages

Compensate the injury person for pain and suffering, mental anguish, disfigurement, and other sillier types of losses. (Determination of the amount of general damages is highly subjective and can amount to whatever a judge or jury feels is "right".)

What is covered under Basic form ?

Coverages included in a typical Basic Form policy are: 1. Fire 2. Lightning (natural electricity) 3. Windstorm or Hail 4. Explosion (no coverage for bursting pipes or rupture of pressure relief devices) 5. Vandalism or malicious mischief 6. Vehicles or aircraft collision 7. Riot or civil commotion 8. Sinkhole collapse (excludes cost of filling or collapse into man-mad underground cavities 9. Volcanic Activity (excludes removal of ash or other Basic Form, as its name suggests, is the least comprehensive of the three coverage options. The important thing to note about reading Basic Form policies is that they cover only named perils. This means that if a coverage is not specifically named in the policy, there is no coverage.

Aggregate

General vs Products- Completed Operations

Insurable Interest Requires

In property and Casualty Insurance, insurable interest MUST exist at the time of LOSS

Speculative Risk

Involves the opportunity for neither loss or gain. These types of riskier not insurable. Example: An example of Speculative Risk is Gambling since you can win or loose.

Occurrence

Is a broader definition of loss than accident because it includes those losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected.

Risk

Is the uncertainty or change of a loss occurring. The two type of risks are purse and speculative, only one which is insurable.

Certificate of Insurance

Is written evidence showing that an insurance policy has been issued. the certificate indicates both the amounts and type of insurance prided, but does not obligate the insurer to the ores whom the certificate was issued.

Bodily Injury

It is more difficult to determine the loss monetarily. Bodily injury may lead to claims by the injured party not only for medical expenses and lost wages, but also for disfigurement, pain and suffering, mental anguish, and loss of consortium.

Difference between Physical vs. Moral Hazards

Physical hazard relates to the subject-matter of insurance whereas moral hazard relates to the character, integrity and mental attitude of the insured. Physical hazard can be seen, assessed and rated accordingly whereas moral hazards are not visible and cannot be assessed. Physical hazards can be dealt with by applying excesses, loadings, cover exclusions or other conditions. Moral hazards cannot be easily checked or controlled by such methods so these are dealt with by cautious and selective underwriting at the outset. Remember - A physical hazard is a physical condition that increases the possibility of a loss. Moral hazards are losses that results from dishonesty and the attitude and conduct of people.

Depreciation

Reduction in value, particularly due to wear and tear.

Pure Risk

Refers to situation that can only results in a loss or no change. There is no opportunity for financial gain. Purse Risk is the only type of risk that insurance companies are willing to ACCEPT. Example: Homeowners purchase home insurance to protect against perils that cause damage or loss. The insurer now shares the potential risk with the homeowner.

Insuring Agreement

That portion of the insurance policy in which the insurer promises to make payment to or on behalf of the insured. The insuring agreement is usually contained in a coverage form from which a policy is constructed. Often, insuring agreements outline a broad scope of coverage, which is then narrowed by exclusions and definitions. Persona and poetry to be insured.

What is covered under Special Form?

The best kind of form on a homeowners policy. Everything is typically covered under a Special Form policy, except for these common exclusions: 1. Ordinance of Law (Coverage for loss caused by enforcement of ordinances or laws regulating construction and repair of damaged buildings. Older structures that are damaged may need upgraded electrical; heating, ventilating, and air-conditioning (HVAC); and plumbing units based on city codes.) 2. Earthquake 3. Flood 4. Power Failure 5. Neglect 6. War 7. Nuclear Hazard 8. Intentional Acts Special Form coverage is the most inclusive of the three options. The trick with Special Form policies is that they should be read differently from how you would read a Basic or Broad Form policy. In a Special Form policy, instead of the document listing what's covered, all perils are covered except for the exclusions specifically enumerated in the policy. In this sense, reading a Special Form policy is kind of like the opposite of reading a Basic or Broad Form policy. All unlisted perils are covered perils. This can be extremely beneficial to the insured since Special Form coverage makes allowances for the kinds of screwball hazards one might never expect. However, if something happens to your home or business, and it is on the list, the policy will provide no coverage.

Difference between Moral Hazard vs. Morale Hazard

The critical difference between moral hazard and morale hazard is the intent. Moral hazard described the intentional seeking of risk for personal gain because you do not bear the cost of failure. Morale hazard describes indifference to unintentional risk.

Law of Large Numbers

The larger the number of people with a similar exposure to loss, the more predictable actual losses will be. This law forms the basis for statistical prediction of loss upon which insurance rates are calculated. Example: A 35 Year old Male, the company really does not know the accurately precision when he will die. However, the Law of Large Numbers looks at a larger group of similar risk-35 Year old male of similar lifestyle and health conditions and make some conclusion based on statistics of the past losses. This gives the insurance company a general idea about the prediction of death for this age group.

Policy Conditions

The section of an insurance policy that identifies general requirements of an insured and the insurer on matters such as loss reporting and settlement, property valuation, other insurance, subrogation rights, and cancellation and nonrenewal. The policy conditions are usually stipulated in the coverage form of the insurance policy.

Exposure

The state of being subject to loss because of some hazard or contingency. Also used as a measure of the rating units or the premium base of a risk.

Both robbery and burglary can be considered what?

Theft

Definition

This defines words that are used on the policy. This you will see in bold face and italic or in quotation marks.

In property Insurance, what is the purpose of a coinsurance clauses?

To encourage insureds to insure property close to its value.

Insurance is

Transfer of risk of loss from an individual or a business entity to an insurance company, which in turns, spreads the cost of a loss would have to be borne solely by the individual who suffered the loss.

Per Occurrence

is a sublimit in a liability policy that puts a ceiling on the payment for all claims that arise from a single accident/occurrence.

Underwriting

(Risk selection process) The process of selecting, classifying, and pricing applicants for insurance

Vicarious Liability

(Master Liable for acts of servant. Parents are liable for the children actions.) Doctrine comes from the old English law " Respondeat Superior," in which the master was liable for the acts of their servants. The purpose of this doctrine is to transfer the liability from one person to another person who would probably have a greater ability to pay. Example: In some jurisdictions, parents may be held vicariously liable for negligence acts of the children and employers liable for the acts of their employees.

Moral Hazard

(Ethical Code- Did they lie on the application) Are concerned with the attitude and conduct of people. They indicate those dangers which relate to character, integrity and mental attitude of the insured. They are losses that result from dishonesty or indifference. Insurance Companies suffer losses because of fraudulent or inflated claims. These are not visible and cannot be identified by mere inspection of the risk or subject of insurance. In every risk, an element of moral hazard may be to some degree, always present. Moral hazard describes the behavioral changes that might increase the risk of loss taken because the actor will not bear responsibility should things go wrong. Insurance industry people use to term to refer to the possibility that after receiving coverage, a person might act in a risky way for personal gain because the insurance company will have to cover all losses. Moral hazard is the idea that insurance promotes risk-taking for personal gain. Example: A moral hazard exists when a person wants to take out a policy with the intent to make a profit - fraud. or Previous conviction for arson or Suppose Milton, a professional cliff diver, does not have health insurance. He goes through his career without doing the dangerous dives that could send him to the hospital. Milton knows should he get hurt and need to go to the hospital, he will have to pay the medical bills out-of-pocket. Milton decides to get health insurance, and once his insurance policy goes into effect, he begins to do the dangerous dives. Milton, consciously, takes on riskier behavior than he had before he got insurance because he has reduced his liability.

Coinsurance Penalties is calculated as followed

(Insurance Carried ÷ Insurance Required) X Loss Amount = Loss Payment Is the amount of insurance carried over the amount of insurance the insured should have had, multiplied by the loss, which emus the reduced payment for the loss. Example: For a $100,000 building insured with an 80% coinsurance percentage, the insured would have to carryout least $80,000 ($100,000 X .80) of insurance to emit the coinsurance requirement. If, instead, the insured only carried $40,000 of insurance had a $10,000 loss, he would have to bear 50% of the loss due to deficiency or $5,000, and any deductible.

Special (Open) Peril

(It will cover anything unless is it excluded on the policy. This policy will have the biggest exclusion. It primarily list what is excluded not what is covered.) Is a term used in property insurance to describe the breadth of coverage provided under an insurance policy form that insures against any risk of loss that is not specifically excluded. (This term replaced the use of the term "ALL RISKS.") Refers to property insurance that insures against loss to covered property from all causes except those that are specifically excluded. Example: The policy language begins with the premise that all risks of direct loss are covered, but then excludes coverage where other insurance is needed (flood, auto, or boat insurance), or altogether uninsurable (nuclear hazard) and.those things falling under home maintenance categories such as an aging roof, rotted gutters, gradual seepage, old paint, etc. "Open Perils" wording begins as follows: "We insure against risks of direct loss to property...if that loss is a physical loss to the property; however we do not insure loss..." ...caused by risks associated with general home maintenance (wear and tear), unusual hazards (theft to a dwelling under construction, or vandalism to a home left vacant for over 30 days), and others as listed above.

Morale Hazard

(Mind Set- They do not care because they carry Insurance) Refers to an increase in the hazard presented by a risk, arising from the insured's indifference to loss because of the existences of insurance. Morale hazard is an insurance term used to describe an insured person's attitude about his or her belongings. It represents the rise of indifference to loss because the items are covered. Example: I'm not going to bother fixing this; if it breaks my insurance will pay to replace it. or Speeding in unsafe conditions. or Suppose a person pays insurance for his new phone. Morale hazard arises when the model of his phone becomes outdated, and he no longer cares about it. He is indifferent to his phone getting damaged because his insurance would allow him to get a new one. His indifferent attitude toward his phone leads to unconsciously changed behavior.

Insurable Interest

(Must prove Insurable interest at the time of the claim not at the time of application.) The insured must have a insurable interest in the person or property covered by an insurance policy. In property insurance, this means the insured would incur a financial loss if the insured property was damaged. As a result, an insurable interest may be created by the ownership, custody or control of a property. Example: Mortgagees and leaseholders may have insurable interest in there respective properties.

Absolute Liability

(Obviously hazardous activities or Injured party does not need to prove negligence.) Is imposed on defendants engaged in hazardous activities, such as harboring wild animals, using explosives, etc. The injured party does not need to prove negligence. Example: You have a tiger as a pet and your tiger bit a child.

Actual Cash Value (ACV)

(Replacement cost minus depreciation is how ACV is calculated.) Method of valuation reinforces the principle of indemnity because it recognizes the reduction of value of property as it ages and becomes subjected to wear and tear and obsolescences.

Stated Value

(Schedule amount of insurance, and the maximum the insurer will pay.) Is an amount if insurance scheduled in property policy that is not subject to any coinsurance requirements in the event if a covered loss. This schedule amount is the maximum amount the insurer will pay in the vent of a loss.

Indemnity

(Sometime referred to as reimbursement. Insured can only collect financial loss amount. Insured cannot gain finically after a loss. ) Is a provision in an insurance policy that states that in the vent of loss, an insured or a beneficiary is permitted to collect only to the extent of the finial loss, and is not allow to gain financially because of the existence of an insurance contract. The purpose of insurance is to restore, but not let the insured or beneficiary profit from the loss Example: (Property and Casualty Insurance) Brenda homes gets destroy because of the hurrican and she insures the dwelling for for $200,000. To rebuild the home it's going to cost Brenda $150,000 so the insurance company will reimburse her the amount of the loss of $150,000 not what the policy is insured for.

Direct Loss

(You lost the place where you live in. Direct physical damage to building or person property. Includes other damage where insured peril is the proximate cause of loss.) Loss that is a direct result of a peril, such as fire. Proximate cause of loss. A direct loss refers to physical or financial loss or injury as a direct result of an unbroken chain of events or a proximate cause that led to a risk covered by an insurance policy. The latter refers to a cause that immediately precedes the damage or injury, and without which or in case of the presence of supervening events, no damage or injury would have resulted. Example: An insured put out the fire, the wall and floor covering suffer water damage. Although the water damage is not an insured peril, the damage is paid under the peril of fire because fire was the proximate cause.

Comparative Negligence

- More lenient - Awards for damages are reduce by percentage of negligence of each party.

Contributory Negligence

- The injured party myst be completely free of fault - Any negligence on the part of the injured party that contributed to the injury will defeat the claim.

Casualty/ Liability

- Third-Party contract (policy pays a third party) ***(You, Insurance Company and the person who got hurt)*** - Legal liability for injury or damage to others.

Property

- Two-Party contract between insurer and insured. - Losses to possessions or assets. Example: Damage to your personal property or your automobile.

Two Type of Negligence

1. Contributory Negligence 2. Comparative Negligence

5 Elements of Insurable Risk

1. Due to Chance ( It has to be random ) 2. Definite and measurable 3. Statistically predictable 4. Can Not Catastrophic (The company has to be profitable. ) 5. Randomly selected (The lost can not be intentional) - Large loss exposure - Financial (a monetary interest) - Blood (a relative) - Business (a business partner)

Loss Valuation

A valuation of loss refers to the process of establishing a monetary value to property loss. After a policyholder files a claim, the valuation helps insurers determine the appropriate compensation to repair or replace damaged property within the limits of the policy. Is a factor in determine the premium charged and the amount of insurance required. (At the time of property insurance policy is written, the insured has several options as to how a loss to the insured property will be valued at the time off loss.) Type of Loss Valuation are: 1. Actual Cash Value (ACV) 2. Replacement Cost 3. Market Value 4. Agreed Value 5. Stated Value 6. Salvage Value

Peril

Are the causes of loss insured against in an insurance policy. Example: 1. Life Insurance- Insured against the financial loss cause by premature death of the insured. 2. Health Insurance- Insures against the medical expenses and/or loss of income caused by the insured sickness or accidental injury. 4. Property Insurance- Insured against the loss of physical property or the loss of its income-producing abilities. Example: My car and my personal belongings 5. Casualty Insurance- Insures against the loss and/or damage of property and resulting liabilities. Example: Damage I cause to someone else. A Casualty claim is someone else car and bodily injury to others.

Limits of Liability

Are the insurer's liability for payment as stated in an insurance policy. Limits of liability is the maximum amount of money that the insurance company will pay for a particular loss, or for the loss during a period of time.

What is covered under Broad Form ( Also known as Open Form )?

Coverages included in a typical Broad Form policy ( In addition to what's covered by the Basic Form) are: 1. Burglary/Break-in damage 2. Falling Objects (like tree limbs) 3. Weight of Ice and Snow 4. Freezing of Plumbing 5. Accidental Water Damage 6. Artificially Generated Electricity (Sudden or Accident damage from electrical currents ) 7. Building Collapse 8. Accidental discharge of liquid or steam Broad Form coverage is more expansive than Basic Form coverage. Like with a Basic Form policy, a Broad form policy covers only named perils. Again, if a coverage is not specifically named in the policy, that coverage is excluded. Fortunately, the Broad Form is designed to cover the most common forms of property damage.

Per Person

Is 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

Is the insurer's legal light o seek damages from third parties, after has reimbursed the insured for the loss. Based on the principle of indemnity by preventing the insured from collecting on the loss twice: once from the insurer (insurance company) and a second time from the party causes the damage.

Hazard

Is a condition or situation that increases the chance of loss in an insured risk. Hazard gives to a peril. There are 3 kinds of hazards. Examples: Include poor housekeeping in a factory and inadequate lighting in a crime-prone area.

Deposit Premium Audit

Is a condition that allows the insurer to audit the insured's books or records at the end of the of the policy terms to make sure adequate premium has been collected for the exposure. Usually, the insurer has up to 3 years from the expiration of the policy to perform the audit.

Deductible

Is a dollar amount an insured must pay on a claim before the insurance policy provides coverage. A higher deductible amount usually lowers the amount of the premium. - Insured absorb smaller losses; insurer covers large losses.

Specific Coverage

Is a property insurance policy that covers a specific kind or unit of property for specific amount of insurance. Example: Auto Insurance policy.

Combined Single Limit

Is a single dollar limit of liability applying to the total of damages for bodily injury and property damage combined, resulting from one accident to occurrence. The limit may be used in any combinations of amount, not to exceed the single limit.

Blanket Coverage

Is a single property insurance policy that provides coverage for multiple classes of property at one location, or for one or more classes of property at multiple locations. All insured properties are written for one Toal amount of insurance, no single insured item is assigned a specific amount of insurance. However, different amounts may be shown for building Example: An agent will carry a Error & Omission policy for all his agents in one policy. When a new employee starts they are added to the existing policy.

Accident

Is a sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that neither expected nor intended.

Fair Credit Reporting Act

Is administered by the Federal Trade Commission. The purpose of the law is to protect consumers against the circulation of inaccurate or obsolete personal financial information, and to ensure that consumer reporting agencies are fair and equitable in their treatment of consumers.

Replacement Cost

Is defined as the cost to replace damages property with like kind and quality at today's price, without any deduction for depreciation. This method of loss valuation is contrary to the basic concept of indemnity because following a loss it may provide the insured with a settlement in excess of the property's actual cash value.

4 Elements of Negligence

Is the failure to use the care that a reasonable, prudent person would have taken under the same or similar circumstances. There are 4 Elements: 1. Legal Duty-duty to act or not act 2. Standard of Care-defendant used standard of care that breach legal duty. (Example: The homeowners made a conscious choice to not to what he need to do like cleaning the icy side walk.) 3. Unbroken chain of events- unbroken chain of events that caused damage (Example: when the homeowners did not clear our the side walk when it rained, snowed than it rain agin t.) 4. Actual loss or damage- actual injury or damage. (Example: Injury to a person. When the homeowners did not clean the side walk and someone slipped and fell and broke tjere leg.)

Aggregate Limit

Is the maximum limit of coverage available under a liability policy during a policy year, regardless of number of claims made or number of accidents that occur. Losses paid under coverages subject to aggregate limits reduce the amount available for future losses. Aggregate limits are restored at the anniversary of the policy. Example: - Per Occurrence Limit is $1 Million - Aggregate Limit is $2 Million **Once a claim is paid out it will be subtracted from the Aggregate. Once the Aggregate limit is exhausted any future claims will not be covered. If the claim happens once the policy renews again than the insured has refreshes the Aggregate Limit. - Effective / Renewal Date is January 2019 - January 2020

Vacancy

Refers to an insured structure in which no people have been living or working, and no property has been stored for the period of time required as stated in the policy (60 Consecutive days Usally ). It truly means property that use for daily use and needs. Not meant for storage. If you move out and leave some personal property back to make it feel like its not vacant that doesn't count. It is still considered vacant. You will lose a lot of coverages for example: Vandalism and Malicious Mischief when you do not live on that property on the 61st day even though you paid for the coverage. If the property is your secondary home or a simmer home just make sure the policy is written as a secondary home.

Functional Replacement Value (Replacement Cost)

The cost to replace property with other property that performs the same function with similar efficiency, although the replacement property is not identical to the property being replaced. Example: This valuation method is typically used with older property (such as a Victorian home) for which the replacement value exceeds the insured's ability or willingness to purchase coverage. This is where the item is one of kind or not be available. Functional Replacement will pay for modern and less expensive material to replace and try to make it look like the original did. You would accept the payment pay the difference yourself.

Salvage Value

The estimated value an asset will realize upon its sale at the end of the useful life. The property may be sold as a whole or in part. For Instance, a cary may be beyond repair as a complete automobile but some parts may be salvageable and sold. ( Most policies contain a right to salvage conditions that allows the insurance company to take possessions of the property after payments of a loss. By selling salvage goods, the insurance company can reduce the cost of the claim.)

Property Damage

The extent of the loss is usually simple to determine; it is measure by the actual monetary loss the injured partly suffered, which is measure by the value of property damages or destroyed and the loss of use of that asset.

Declaration Page

The front page (or pages) of a policy that specifies the named insured, address, policy period, location of premises, policy limits, and other key information that varies from insured to insured.

Insurance Policy

a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events.