Washington State Property & Casualty Insurance Exam
Unauthorized Insurer
Is held personally liable. Each violation is separate and can result in suspension, revocation of license, and a min fine of $25,000. (Class B Felony)
Total Loss
A loss that exists when the cost to repair a damaged vehicle (or other property) equals or exceeds the value of said property
Occurrence
A loss that occurs at a specific time and place or over a period of time.
Rentention
A method of dealing with risk by intentionally or unintentionally keeping a portion of it for the insured's account; the amount of responsibility assumed but not reinsured by the insurance company.
Sharing
A method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss who share the losses that occur within that group.
Duty to Defend
Insurer's duty to assume the expense of defending the insured in litigation and lawsuits.
Named Peril
A specific cause of loss listed and described in an insurance policy. Also used to describe policies containing named perils.
Fair Credit Act: Prohibited Info
- Bankruptcy more then 10 years - 150,000 or less in credit transactions - civil suits, records of arrest/convictions/crimes - any negative information older that 7 years
Renewal Fees for Licences
(Every 2 years) Producer- $55 Limited insurance- $20 Surplus lines broker- $20 Ajuster- $50 Late Fees: 30 days: 50% of renewal 31-60 days: 100% 61-12 months 200% (12+ months must restart licensing process)
Commercial Crime (Employee Dishonesty)
(ISO) Coverage A also known as Fidelity, is defined as the loss of company money, securities, and other property caused by employee theft, burglary, or robbery
Federal EMERGENCY Flood Program
*in effect after all NFIP criteria has been met. Single Family: Building-$35,000 Contents- $10,000 Other residential: $100,000 and $100,000 Small Businesses: $100,000 and $100,000 Other Non Residential : $100,000 and $100,000
homeowners policy may be used for the following
- 1 to 4 family owner-occupied residences - no more then 2 families or 2 roomers/boarder - various ownership types and building stages -construction, townhomes, and duplexes.
HO-6 Coverage D (loss or use)
- Additional living expenses - Fair rental value - Civil authority prohibits use
Insurance Code: Remedies & Penalties
- Cease and desist order form commissioner - if not followed within 10 days of order a max fine of $250 will be issued for each violation
Dwelling Coverage C: Exclusions
- Coins, currency, bills, deeds passports, manuscripts - Animals -aircraft flyable - watercraft (with motor) - motor vehicles - restoration of data - credit cards etc - water or steam - grave markers and mausoleums
Examples of Conditions
- Inspections - Changes to the policy - Liberalization clause - Return of premium
Dwelling Coverage B NOT Included
- Land where other structures are located - structures rented or held for rental - other structures that are used for business (commercial, manufacturing and farming) - Grave Markers
HO-6 Coverage A
- Land, structures rented/private garage. - Business structures solely owned by insured or tenant and used to store business property
other coverages DP broad & special forms
- Lawns, trees, shrubs, and plants $500 per or 5% of amount of coverage -Breakage if glass -Collapse
DP Other coverages
- Other structures Debris removal - Improvements, alterations and additions - worldwide coverage - rental value +add live expenses - Reasonable repairs - property repairs - property removed
Duties after a loss
- Protect the damaged property from further damage - Prepare an inventory of damaged property - Cooperate with the insurer in settling the loss - Notify the police in case of a theft loss - Submit to the insurer a signed sworn proof of loss within an allotted amount of time after being requested to do so.
Material Misrepresentation
- a false statement that changes the outcome of issuing a policy - generally with the health statement - if found to be intentional is considered fraud
Coverage will be extended to newly required auto for replacement vehicles as follows
- coverage will be broadest offered on the existing vehicles on dec page - if the vehicle is in addition to the listed vehicles the policy will grant coverage only if insured is notified within 14 days of becoming the owner
Notice of Hearing
- must state grounds of hearing (can be written demand by aggrieved person) - Right to request administrative law judge
Appointing a insurance producer
- notice of appointment within 15 days - Commissioner will verify within 15 days - if deemed ineligible commissioner will notify within 10 days If approved it must e renewed every 2 years, and will receive notice within 60 days of the renewal date.
Dwelling Coverage C
- personal property. located on described location - model or hobby aircraft including parts - motor vehicles but only if servings handicapped or the premise. -Rowboats/canoes - Blank storage media an pre packaged computer software - property moved to a newly acquired residence for 30 days
Claim Settlement Options
- the value of loss or damaged property - cost of repair or replacement - cost of taking all or part of the property at an agreed or appraised value - cost of repairing, rebuilding or replacing the property of like kind and quality
What can DP policies cover?
- up to 5 boarders - up to 4 residential units - prop in construction - owner occuped, tenant ccuped or both -mobile homes (DP-1) -Seasonal Dwellings 3-12 months
HO-6 COVERAGE C
-Personal Property -guests property
insurance Commissioner duties
-Protects the Public from unfair trade practices - Examinations/investigations - Hearings - Cease and Desist orders - Public information - Appoints Dep. Chief Commissioner -
HO-8 Covered Perils
-Theft coverage $1,000 - Worldwide coverage, limited to 10% or $1,000 - Debris Removal -Trees, plants and shrubs ($500 max each) - Property Guests or employees - Coverage A&B functional replacement cost basis - Glass or safety glazed materials limited to $100
There is a 30 day waiting period after the applicant has been accepted before the coverage goes into effect except under the following conditions:
-first 30 days of a community enters emergency or normal programs. the coverage is applied 12:01am the day after - when existing policy is assigned to the property purchaser and at 12:01am after the 5th day the endorsement requests and premium has been mailed for policy.
Insured's duties after a loss
-give prompt written notice to insurer of facts relating to the claim. -notify police -protect the property from further damage - if examination under other within 60 days send a signed sworn proof of loss ect.
Interline Endorsement
A written amendment designed to eliminate redundancy and minimize the number of endorsements in the policy.
Personal & Commercial Umbrella
1,000,000 minimum in excess coverage (SIR)
Policy Structure
1. Declarations 2. Definitions 3. Insuring Agreement 4. Additional Coverage 5. Conditions 6. Endorsements 7. Exclusions and Policy Limits
Commercial Crime Form Classifications (two types)
1. Discovery Form 2. Loss Sustained Form
3 Elements of insurable risk
1. Financial (a monetary interest) 2. Blood (a relative) 3. Business (a business partner)
5 basic individual rate-making approaches
1. Judgment rating 2. Schedule Rating 3. Experience Rating 4. Retrospective Rating 5. Merit Rating
Elements of Negligence Act
1. Legal Duty 2. Standard of care 3. Unbroken chain of events 4. actual loss or damage
Commercial Package Policy Coverages
1. commercial general liability 2. commercial property 3. inland marine 4. commercial auto 5. equipment breakdown 6. crime 7. farm
Commercial property form structure
1. general liability 2. commercial property 3. inland marine 4. commercial auto 5. equipment breakdown 6. crime 7. farm
BOP Exclusions
1. money and securities 2. aircraft and vehicles 3. watercraft while afloat 4. accounts, bills, and other evidence debts 5. computers installed in any aircraft, watercraft, or vehicle 6. contraband or property in course of illegal trade/transport 7. land, water, crops, or lawns 8. outdoor fences, radio, and television antennas, satellite dishes, detached signs, trees, plants and shrubs 9. electronic data, except as covered under the electronic additional coverage and pre packaged software 10. Animals (unless owned by others and boarded with the insured)
Cancelation/Nonrenewal (auto)
10 days notice for nonpayment 20 days for any other reason (auto)
According to the state regulations pertaining to claim settlements, after receiving a notification of claim from an individual policyholder, the insured must acknowledge the notice within how many days?
10 working days (business days)
Policy limits expressed 25/50/25 mean what?
25k for bodily injury per person 50k for all bodily injures 25k for property damage
how many days to share a customer report?
3 days
Admitted Insurer
An insurer to which a state insurance department has granted a license to do business within that state.
If an insurer cancels a contract, written notice must be provided to the insured within what a certain period of time.
45 days prior to cancelation *unless from non paid premiums (10 days)
Fire Policy Cancelation
5 days prior notice needed
Single-family dwelling are automatically provided with replacement cost insurance to ___% of the replacement value maximum allowed under FIP.
80
medical malpractice insurance cancelation
90 days notice of cancelation
Farm - coverages (A-J)
A - private dwellings B - private other structures C - household personal property D - loss of use E - scheduled farm property F - unscheduled farm property G - barns/silos/outbuildings H - BI/PD liability I - personal/advertising injury J - medical payments
Business Entity Affiliates
A business must have AT LEAST 1 affiliated individual licence to transact insurance
Value Reporting Form
A commercial property form that bases the insured's premium for business personal property on the values that the insured reports to the insurer periodically during the policy period.
Reasonable Expectations
A concept which states that the insured is entitled to coverage under a policy that a sensible and prudent person would expect it to provide. Reinforces the rule that ambiguities in insurance contracts should be interpreted in favor of the policyholder.
Morale Hazard
A condition of carelessness or indifference that increases the frequency or severity of loss.
Hazard
A condition that increases the frequency or severity of a loss.
Deductible
A dollar amount that the insured is responsible for paying when an insured peril occurs. The insurance company will pay for any amount over the deductible, up to the maximum amount of coverage.
financial responsibility
A driver's (or car owner's) ability to pay for damage caused by an accident when he or she is at fault. It is usually in the form of liability insurance.
Builders Risk Coverage Form
A form that covers buildings in the course of construction, including additions or alterations to existing buildings.
Consequential Loss
A loss not directly caused by a peril insured against but arising indirectly. Ex: Store catches fire, creating loss of income after fire
Insurance Producer
A person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance. - Must be 18+ - has not had a license denied, suspended, or revoked - completed Pre-licensing/ exams - paid fee(s) - Fingerprinted/ background check
Contractors Equipment Floater
A policy that covers mobile equipment or tools while located anywhere in the coverage territory.
Commercial Package Policy (CPP)
A policy that covers two or more lines of business by combining ISO's commercial lines coverage parts.
Excess Policy
A policy that only pays for loss after the primary policy has paid its limit.
Primary Policy
A policy that pays first in the event of a covered loss or, in a layered program of insurance, the policy that covers the first layer of loss.
offer
A promise or commitment to perform or refrain from performing some specified act in the future.
Specific Insurance
A property insurance policy that covers a specific kind or unit of property for a specific amount of insurance.
Unoccupied
A property that has contents or furnishings in it, but is not being used or lived in.
Pro Rata
A provision found in some property insurance policies that provides for the sharing of loss with other insurance that may be written on the same risk in the same proportion as their limits of insurance bear to the total of coverage of all policies covering the risk, whether collectible or not.
Additional/Supplementary Coverage
A provision in an insurance policy that provides an additional amount of coverage for specific loss expense, at no additional premium.
No Benefit to Bailee
A provision that excludes any assignment or granting of any policy provision to any person or organization holding, storing, repairing, or moving insured property for a fee.
Blanket Insurance
A single property insurance policy that provides coverage for multiple classes of property at one location, or provides coverage for one or more classes of property at multiple locations.
loss costs
A rating method developed by ISO that provides an insurer with that portion of a rate that does not include provisions of expenses or profit and are based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value and through trending to a future point in time
investigative consumer reports
A report similar to a consumer report, but one that also provides information on the consumer's character, reputation, and habits. (insurer must share report within 5 days) The customer has a right to know what was in the report
Retrospective rating
A self-rating plan under which the actual losses during the policy period determine the final premium (subject to a minimum and maximum premium).
Combined Single
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.
Nonconcurrency
A situation in which other insurance is written on the same risk, but not on the same coverage basis.
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
Binder
A temporary written or oral agreement to provide insurance coverage until a formal written policy is issued. - may not extend more then 90 days - premium can only differ $10 from actual policy
Mutual Insurance Company
A type of insurance company owned by its policyholders. Can share dividends
Define: Surety
A written promise or BOND by a person or entity who guarantees the performance of an obligation of another party. It can protect an owner's interests by ensuring that the contractor fulfills the requirements of the contract documents.
Third-Party Provisions
Address the rights of a third party that may have a secured financial interest in the insured property.
Dwelling Coverage E
Additional Living Expenses on broad or special form. The policy is triggered only with direct damage claim (A,B,C) is covered by this policy. - repairs - payment for loss 2 weeks
Spoilage Endorsement
Adds coverage for the insured's perishable stock
False Advertising
Advertising that is misleading, deceptive, and untrue. Ex: newspaper add with untrue statements about terms and benefits of a policy.
Individual knowingly (willfully) violates the Fair Credit Reporting act
Agent: 2 years in prison individual: a $2,500 fine
inducement
An action aimed at persuading
DP-3 Special Form
An all risk policy (on the structure coverage only), in which anything not excluded is covered. Contents (if covered) are still named peril, as in the DP-2. Includes all DP-1 and DP-2 coverage.
Overinsurance
An excessive amount of insurance that would result in overpayment to the insured in the event of a loss. * it is prohibited as it violates the principle of indemnity
Stock Insurance Company
An incorporated insurance company with capital divided into shares and owned by the shareholders. Profits are shared by the stockholders. Policyholders are NOT entitled to share in company profits.
Authorized Insurer
An insurer that has qualified and received a Certificate of Authority from the Department of Insurance to transact insurance in the state.
Alien Insurer
An insurance company that is incorporated outside the United States and does business within.
Personal Auto Policy (PAP)
An insurance policy for the owners of private passenger vehicles. combines physcal damage insurance on the auto.
Domestic Insurer
An insurer doing business in the jurisdiction in which it is incorporated. (insurers in Washington and office as well)
Foreign Insurer
An insurer licensed to operate in a state but incorporated in another state. (ex Gooshead is out of texas and works in Washington)
Deformation
An oral or written statement of insurance policies that persuades a person to engage in insurance. including financial conditions of people or another company.
proximate cause of loss
An unbroken chain of events leading from the negligent act to damage sustained. Ex: Building catches fire, due to the fire department putting out the flames the walls and floors have water damage. An incident creating another loss
Accident
An unexpected happening that may result in injury, loss, or damage.
Directors and Officers Liability
Applies to officers/directors of corporations or non-profits if there is a suit claiming they managed the business w/o proper regard for the rights of others. Coverage is activated by wrongful acts rather than an accident or occurrence(can be in past or present). Such as misstatements from directors & officers, as well as neglect and breach of duty does not pay fines, penalties or punitive damages
How often must the Insurance Commissioner examine companies?
As often as deemed necessary, but MUST be done every 5 years
Implied Authority
Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal.
Methods of Handling Risk
Avoidance Retention Sharing Reduction Transfer
insolvent
Bankrupt; unable to pay debts.
Period of Restoration
Begins 72 hours after the direct physical loss for business income. It begins immediately for extra expense coverage.
Ordinance or Law
Broad and Specialty form polices allow up to 10 allow up to 10% of coverage A (orB if there is no coverage limit for A) if owned. Clean up of pollutants.
BOP Coverages
Buildings, business property or both.
BB BICE GOLF (broad)
Bursting of heating syst Burglary damage Breaking of water heaters Ice, snow, or sleet weight Collapse of building/part of building Electrical damage Glass breakage Objects falling from outside Leakage of water or steam damage Freezing of plumbing
Temporary Insurance Producers Licence
Commissioner may issue temp. license for a max of 180 days. usually in event of producers recovery, sale of a business, training and licencing of new personal to operate a business.
Convicted of a felony
Commissioner may revoke or refuse insurers licenses immediately. Within 15 days may revoke a ordered licence or by ordering a hearing within 10 days.
Licence Suspension Hearing
Commissioner must hold a hearing within 90 days.
Compensatory vs Punitive Damages
Compensatory: are intended to compensate Punitive: are intended to punish
Transacting Insurance
Conducting insurance business, such as soliciting or negotiating to buy or sell an insurance policy.
Declarations
Contains the basic information about the policy: names, legal reps, premise info, policy effective dates, limits, coverage, deductible, premium.
Coverage F: Medical Payments to Others
Coverage F is "good will" coverage that pays the medical bills incurred by others in an accidnet, regardless of the fault or liability of the insured. The minimum limit of $1000. Coverage F will pay for the following as long as they are claimed within 3 years of the date of the accident, and the loss occurs to a guest, other individuals or residence employees: medical and surgical care; x-rays; dental services; ambulance, hospital and professional services; funeral services.
Policy Territory
Defines the location where coverage will be provided.
Peak Season Endorsement
Endorsement that covers the fluctuating values of business personal property by providing differing amounts of insurance for certain time periods during the policy period.
Spoilage Endorsement
Endorsement used with the Building and Personal Property and Condominium Commercial Unit-Owners Commercial Property coverage forms. It adds coverage for the insured's perishable stock - personal property that must be maintained under controlled conditions to protect it from loss or damage.
Continuing Education (CE)
Every 2 years. 24 hours total, 3 hours in ethics. must hold on to certificate for 3 years
Loss Sustained Form
Form that covers losses actually sustained during the policy period and discovered no later than one year after policy expiration.
Discovery Form
Form that covers losses discovered during the policy period even though they may have occurred before the policy period.
General vs Special Damages
General - compensate for pain suffering, mental anguish, or disfigurement Special - out of pocket expenses for medical, mischances expenses, or for loss of wages
Homeowners Forms
HO2- named H0-3 open and named peril H0-4 named (renters) H0-5 Open peril, 1-4 unit owner occupied HO-6 named peril, condos Ho-8 Named peril (historic/elabrit home)
(NFIP) National Flood Insurance Program
Identifies floodplains and maps thru FEMA. the community must meet the federal requirements and must purchase within 1 year after becoming available. *- structures must have two solid walls and a roof. be partially above ground, and not entirely over water.
Unreasonable Denial of Claim
May be taken to supreme court, if determined the claim denial was unfair insurer could pay 3x the amount of claim first party must submit claim within 20 days prior to filing for action
Unfair Practices
Illegal business practices that exploit the unequal bargaining position of consumers
Legal Purpose
In contract law, the requirement that the object of, or reason for, the contract must be legal.
Additionally Insured
Individuals or businesses that are not named as insured on the declarations page, but are produced by the policy, usually in regard to a specific interest. Additionally insured are added though endorsements.
Commercial Crime Insurance
Insurance that covers (1) money and securities against numerous perils (not limited to crime perils) and (2) property other than money and securities against crime perils, such as employee theft, robbery, theft by outsiders, and extortion.
Surplus Lines
Insurance that is not available or offered in the regular marketplace from admitted insurers.
Coverage E: Personal Liability
Insurance that protects an insured when a claim or suit for damages is brought because of bodily injury or property damage allegedly caused by an insured's negligence. Base coverage is $100,000 per occurrence but can be hirer
Retroactive date endorsement
Limits coverage under the discovery form version by providing a cutoff date for losses that occurred before the policy inception.
Dwelling coverage A NOT included
Land, including land on which the dwelling described in the declarations is located
Proximate Cause
Legal cause; exists when the connection between an act and an injury is strong enough to justify imposing liability.
Misrepresentation
Materials that are false, misleading, or deceptive of policy benefits, terms, payment of dividends. Also includes oral statements. Knowingly committing this is considered a gross misdemeanor, and licences can be revoked
Unlawful Insurance Fraud
May be fined, imprisoned for up to 10 years or both . if they endanger a accompanied insurer up to 15 years. * if the embezzlement amount is less then $5,000 prison time may be reduced to 1 year.
Twisting
Misrepresentation for the purpose of inducing a person to purchase, lapse, forfeit, surrender or change an insurance policy. Twisting is an unfair trade practice.
Business Personal Property
Moveable property used for business within 100 feet of premises max coverage is 10k
Place of Business Requirements
Must be accessible to the public. Does not apply to life and disability insurance.
Change of Address
Must contact commissioner within 30 days. this includes a change of residence, mailing, business, or email
Insurer terminates independent agents contract
Must give 120days written notice unless: - Abandonment of agency - gross and willful misconduct - loss of licences via commissioner - change of ownership/ sale of agency -Fraud or material misrepresentation - default in payments due to insurer
Can you keep or retain a policy for safekeeping?
No, not under any circumstance
Guaranteed Association
Non Profit that protects insured claim payments and avoid financial losses if insurer becomes insolvent. within 30 days of liquidation. -claims in excess of $100 but not more then $300,000 - should never be claimed as guaranteed backing to insurance (unfair trade practice)
Dwelling Coverage B
Other Structures such as detached garages and other outbuildings (e.g. sheds & fences) or structures with used for business with defined parameters
Business Owners Policy (BOP)
Package policy designed to provide broad property and liability coverage for small businesses.
Risk
uncertainty concerning the occurrence of a loss
PAP Parts
Part A- Liability Coverage Part B- Medical Payments Coverage Part C- Uninsured Motorist Coverage Part D- Coverage for Damage to your auto Part E- Duties after an Accident or Loss Part F- General Provisions
Farm Coverage
Part of the Commercial Package Policy that provides Property and Liability insurance to farmers for both their personal and business exposures like livestock
Suspended license period
up to 12 months
DP-1 Basic Form
Perils insured against are fire, lightning, and internal explosion.
Dwelling Policy
Policy that provides Property coverage to individuals and families. Covers dwellings, other structures, personal property, and fair rental value. Some versions also cover additional living expense. The unendorsed policy does not provide liability coverage.
Personal Lines Insurance
Property and casualty insurance for an individual. Policies include Property and Casualty coverages.
Valued Policy
Provides for payment of the full policy amount in the event of a total loss without regard to actual value or depreciation (used primarily in marine coverage)
Identity Fraud Expense Coverage
Provides for reimbursement of expenses incurred as a result of identity theft or fraud. Covered expenses up to the $15,000 limit, including reasonable attorney fees to defend suits.
Internet Liability and Network Protection Policy
Provides liability coverage on a claims-made basis for risks that are specific to business use of the internet, such as network security, electronic publishing liability, and loss of data. five agreements: 1. website publishing liability (publishing copyright etc.) 2. Network security liability (computer breaches) 3. Replacement or restoration of electronic data 4. cyber extortion 5. business income and extra expense (e-commerce or extortion)
Federal Regulations: Fair Credit Reporting Act
Purpose is to protect the public. Reports fall into two categories: - Consumer - Investigative consumer
Schedule Rating
Rates are developed by applying a schedule of charges and credits to some base rate to determine the appropriate rate for an individual exposure.
Record Retention
Requires insurer to maintain records for 5 years.
(DRPL) Designated Responsible Licensed Person
Responsible for insurers compliance with insurance laws/ rules
Commercial General Liability
Section I - Coverages Coverage A - Bodily Injury and Property Damage liability Coverage B - Personal and Advertising Injury Coverage C - Medical Expense Section II - Who is an Insured Section III - Limits of Insurance Section IV - Conditions Section V - Definitions
Exclusions
Section of an insurance policy that lists property, perils, persons, or situations that are not covered under the policy.
NFIP National Flood Insurance Program Limits
Single Family: Building-$250,000. Contents- $100,000 Other Residential: Building- $250,000. Contents- $100,000 Small Businesses: Building- $500,000 Contents: $500,000 Other Non Residential: Building- $500,000 Contents- $500,000 *if a community has NFIP they must purchase flood insurance as part of the mortgage process.
Concealment or Fraud
Specifies that the policy may be voided if there is material concealment, misrepresentation, or fraud on the part of the insured.
Methods of satisfying financial responsibility
Split limits: 25/50/25 or combined single: One lump sum to cover bodily injury and property damage.
Insurance Commissioner (IOC)
State elected term of 4 years.
Fair Access to Insurance Requirements (FAIR) plans
States created these plans to make essential property insurance available to consumers in areas where coverage had become unavailable or hard to obtain due to conditions that are beyond the control of property owners
Dwelling Coverage A
The Dwelling itself and attached structures, materials and building equpment
Stacking (auto insurance)
The ability to combine the limits of two or more applicable auto insurance policies for a single incident. If there is more than one auto policy in force at the time of loss, stacking those policies' limits may be possible in some circumstances
Apparent Authority
The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
If business Entity Affiliate is terminated
The commissioner must receive notice within 30 days of termination.
Replacement cost
The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation.
Homeowners cancellation
The effective date of cancellation cannot be before the 10th day after the insurer mails notice if the insurer cancels for non-payment of premium; or the 30th day after the insurer mails notice if the insurer cancels for any other reason.
Utmost Good Faith
The fair and equal bargaining by both parties in forming the contract, where the applicant must make full disclosure of risk to the company, and the insurance company must be fair in underwriting the risk.
First Named Insured
The individual whose name appears first on the policy's declaration
Named Insured
The individual(s) whose name appears on the policy's declaration.
Renewal
The initial licenses are valid from the date that they are issued until the last day of the licensee's birth month.
First Party Claimant
The insured is the first party claimant. Ex: Making a claim to your own insurance company
Experience Rating
The insured's own past loss experience enters into the determination of the final premium.
Examination of books and records
The insurer is granted the right to audit books and records of the insured relating to the policy for a period of up to 3 years (36 months) after the end of the policy
Subrogation
The insurer's legal right to seek damages from third parties, after it has reimbursed the insured for the loss. based on the principle of immediately
Limits of Liability
The insurer's liability for payment as stated in the policy
The law of agency
The law that governs the relationship between a principal and his or her agent.
Aggregate Limit
The maximum amount an insurer will pay for all covered losses during the covered policy year.
Class rating (manual rating)
The practice of computing a price per unit of insurance that applies to all applicants possessing a given set of characteristics.
Loss
The reduction, decrease, or disappearance of value of the person or property insured in a policy, by a peril insured against.
Abandonment
The relinquishing of insurance legal right or interest in an insurance policy. In property and casualty insurance, assignments of polices are valid
Actual Cash Value (ACV)
The required amount to pay damages or for property loss, which is calculated based on the property's current replacement value minus depreciation.
Unintentional tort
The result of acting without proper care, generally referred to as negligence.
Insuring Agreement
The section of an insurance policy containing the insurer's promise to pay, the description of coverage provided and perils insured against.
Conditions
The section of an insurance policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy.
Non-Renewal
The termination of a policy at the expiration of its term. The policy does not renew and no coverage is provided after the expiration date.
cancellation
The termination of an in-force insurance policy by either the insured or the insurer prior to the expiration date shown in the policy.
Policy Period
The time period, stated on the declarations page, during which the policy provides coverage.
Increased Cost of Construction
This additional coverage covers the additional costs required to a comply with building codes when a building is damaged by a covered cause of loss. It is only available for buildings on a replacement cost basis and maximum amount payable is 5% of the building or $10,000.
Newly Acquired or Constructed Property
This coverage extension applies to Coverage A and Coverage B. It provides up to $250,000 for each new building for up to 30 days. It also provides for Coverage B Business Personal Property up to 30 days located at newly acquired or constructed buildings up to $100,000.
nonowned detached trailers
This coverage extension covers up to $5,000 (unless higher limit shown in declarations) for when a nonowned trailer is left with the insured to unload.
DP-2 Broad Form
This dwelling coverage form covers perils included under the DP-1 with ECE and optional VMM endorsement attached, plus: burglars; falling objects; weight of snow, ice, sleet; accidental discharge or overflow of water or steam; sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water heating system, or an air conditioning or automatic fire protective sprinkler system, or an appliance for heating water; freezing of a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or of a household appliance; and sudden and accidental damage from artificially generated electrical current.
Property Off Premises
Up to $10,000 for Property that is away from its described location temporarily.
Competent Parties
Those entering into the contract must be of legal age and must be mentally competent and not under the influence of explicit drugs
Notice of Cancellation
To cancel your policy, your insurance company must mail notice or be delivered
Judgment Rating
Used when credible statistics are lacking or when the exposure units are so varied that it is impossible to construct a class.
Mobile Equipment
Various types of vehicles designed for use principally off public roads, such as bulldozers and cranes.
When would a commissioner order a replacement policy?
When a unauthorized insurer improperly placed a policy. Would be replaced by a policy with a legal insurer.
Moral Hazard
When the act of insuring an event increases the likelihood that the event will happen
Fiduciary Capacity
When the business a person transacts or the money or property which he handles is not for his own benefit but for another person -Agent/producer represents the insurance company - Any diversion of funds is considered larceny by embezzlement and will be prosecuted accordingly
When is a insurance license exempt?
When they work at a company or themself but do not conduct the solicitation, sale, negotiation of insurance.
WHARVES
Windstorm Hail Aircraft/vehicles Riot/civil commotion Volcanic eruption Explosion Smoke
Separate Account Requirement
Withing Fiduciary Capacity: all premium or returned premiums must be accounted for and in a seperate account. (may be intrest barring accounts and held by producer to help with bank fees/charges)
Consumer Reports
Written and /or oral statements regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.
Reporting of Actions
You must report to the commissioner within 30 days of any administrative action taken on them by another jurisdiction or governmental agency
Inflation Guard
a coverage extension that automatically increases amounts of insurance on buildings by an agreed upon percentage annually
Loss Ratio
a formula to show a quick analysis of the insurance company's financial performance for a certain period. Formula: (incurred losses + loss adjusted expenses)/ Earned Premium
Auto Symbol 1
any auto - any auto covered for liability arising out of maintenance, use or ownership of
Intentional Tort
any deliberate act that causes harm to another person
Avoidance
eliminating or avoiding the risk by discontinuing the activity
1033 waiver
a personal convicted of a felony may apply for a ____ to transact insurance business. cannot be 50k+ for each violation.
Non-Resident Producer
a producer who lives (domicile) and conducts business from another state other than Washington. Will receive a non resident producers license.
Other Insurance
a provision in an insurance policy that defines how the policy will respond if there is other valid insurance written on the same risk
Coinsurance
a provision under which both the insured and the insurer share the covered losses. This encourages the insured to ensure the property closer to its full value
medical malpractice insurance
a type of liability insurance that covers physicians and other health care professionals for liability claims arising from patient treatment.
Tort
a wrongful act or the violation of someone's right that leads to legal liability
Warranties
absolutely true statement upon which the validity of the insurance policy depends
Excess Charge
allowing insurers to charge a reduction fee, overall charges must be reasonable to the value of work.
Strict Liability
an implied warranty that the product is safe. businesses are liable for defective products, regardless of fault or negligence.
Non-admitted Insurer
an insurer that is not licensed to business in a particular state. (a surplus lines broker works with non-admitted carriers)
Covered Auto
any vehicle shown in the declarations; newly acquired auto; trailer the insured owns; any auto/trailer not owned by insured while being used as a temporary substitute for any other vehicle which is out of normal use because of: breakdown, repair, servicing, loss, or destruction
Representations
are statements believed to be true to the best of ones knowledge, but are not guaranteed to be true.
Coverage D - Fair Rental Value
available if a covered property loss to the dwelling or other structure makes the building uninhabitable and the insured cannot collect the rent he would have been able to receive if the loss had not occurred.
An insured has a personal auto policy with both comprehensive (other-than-collision) and collision coverage. His car is stolen and recovered five days later. If the insured claims transportation expenses of $20 per day, how much will his policy pay? a)$45 b)$60 c)$75 d)$100 The policy will pay $20 per day after 48 hours, not to exceed 30 days in total.
b)$60. The policy will pay $20 per day after 48 hours, not to exceed 30 days in total.
Intervening Cause
bars or reduces recovery to an injured person if an intervening cause interrupted the chain of events and sets in motion a new chain of events.
Merit Rating
base on not having an actual loss record but other factors that indicate the probability loss will occur. Ex: Bad driving record, but no at fault accidents
Standard Mortgage Clause (loss payable clause)
basic provision for all property policies for "Real" Property
Peril
causes of loss insured against in an insurance policy
Special Peril/Open Peril (All Risk)
cover all perils except for those that are specifically excluded. If it doesn't state it's not covered then it is covered. **if there is a dispute over whether something is covered it**
Personal Injury Protection (PIP)
coverage for medical, hospital, and funeral costs of the insured and passengers in the event of an auto accident (Endorcment Auto symbol 5)
Underinsured and Uninsured Motorist
coverage that helps an insured with bodily injury when another motorist has insufficient coverage. Coverage will pay the difference between the UIM and the at fault drives bodily injury limits
HO-4 (contents broad form)
covers a tenant's personal property on a named perils basis
Equipment breakdown insurance
covers losses due to the accidental breakdown of covered equipment
Signs Coverage Form
covers neon, mechanical, and electrical signs fir $2,500
HO-6 Unit Owners Form (condo users)
covers personal property on a named perils basis. A minimum of $5,000 of insurance is also provided on the condominium unit that covers improvements and additions
Commercial Property Insurance
covers property losses resulting from fire, storms, accidents, theft, and vandalism
Pollutant Cleanup and Removal
covers the costs to extract pollutants from land or water at the insured's premises if the pollution was caused by a covered cause of loss. This coverage is subject to a $10,000 limit per policy period that applies in addition to the policy limit. The expenses must be reported to the insurer in writing within 180 days of the loss.
HO-3 (special form)
covers the dwelling and other structures on a risk-of-direct-physical loss basis. All direct physical losses are covered except those losses specifically excluded. Personal property is covered on a named perils basis
HO-2 (broad form)
covers the dwelling, other structures, and personal property on a named perils basis
Policy Delivery
delivered by: 1)certified or registered mail 2) personally delivered by the agent 3) 1st class mail with a signed receipt 4) by any other means approved by commissioner
Obsolescence
depreciation in value of the property due to becoming outdated
Display of license
each broker and salesperson must display their license customarily where the public can see it
Guilty of violations
each fine of up to $1,000, must be paid within 15-30 days
Claimant
either the first party, third party or both. can include immediate family members designated by client
Scheduled Personal Property
endorsement - provides broader coverage for personal jewelry, furs, cameras, musical instruments, silverware, fine arts, golf equipment, and stamp/coin collections. must be insured on full value basis.25% of the amount or $10,000
Joint Ownership Coverage (personal auto)
endorsement used when individuals own a vehicle together but do not meet the traditional def. Applies to people living together who reside in the household but are nonresident relatives. Limited to that vehicle
Underwriter's Function
evaluating applications submitted to the insurer and determining the policy whether a policy should be issued and the terms conditions and rates for that policy
Earth Movement (earthquake)
excluded in all polices but usually can be purchased separately. 72 hours is considered a single incident
Components
factors that determine rates, including loss reserves, loss adjusting expenses, operating expenses and profits
business income agreed value
financial data for the previous 12 months
Cannot deny based on
gender sex age credit score
auto symbol 8
hired auto only - protection for vechiles hired, leased, rented or borrowed
Vacant vs Unoccupied
if someone moves completely out it is considered vacant. if they go on vacation for two weeks it would be considered unoccupied.
Inducement
illegal action. referring to rebating to have someone purchase a policy for a reward.
Inspections and Surveys
insurer's right, but not duty, to inspect the insured operations during the policy period; insurer may give insured the report and recommendations but is not required to do so. cannot warrant that conditions are safe and comply with laws, codes etc.
Fraud
intentional misrepresentation of an existing, important fact. Grounds for termination of insurer or the insurance contract.
Estoppel
is a legal process that can be used to prevent a party to a contract from re-asserting a right or privilege after or after that right or privilege has been waved. The legal consequence of waiver
Liberalization
is a property insurance clause that extends broader legislated or regulated coverage to current policies as long as it does NOT result in a higher premium
Proof of Financial Responsibility
is an individuals ability to cover liability arising out of the ownership, maintenance, or use of a motor vehicle
Scheduled insurance
is an insurance policy that lists specific items that will be covered by the insurer. Scheduled property is often included as a supplement to a primary insurance policy.
Individual unknowingly violates the Fair Credit Report Act
is liable for the amount equal to the loss as well as any legal fees
Exclusions of a flood
landslides, sewer backups unrelated to a flood, windblown rain, snow or sleet and flooding within the insureds control.
Home daycare coverage
may be attached to the policy to cover the liability exposer associated with the busniess.
"unsured" portion of premium
money must be returned to the insured no later then 45 days after date of cancelation.
Reply to the Insurance Commissioner
must be done within 15 days
auto symbol 9
non owned autos only - covers designed non owned vehicles used on the insured's behalf in the course of the insured's business
Elements of a Contract
offer, acceptance, consideration
Outdoor Property
outdoor fences, radio and television antennas, signs which are not attached to buildings, and trees, shrubs and plants (other than "stock" held for sale).. The most the insurance company will pay for loss under this extension is $1,000, and not more than $250 for any one tree, shrub or plant.
Auto symbol 5
owned autos subject to no fault - select personal injury protection coverage, applies only to those owned vehicles subject to no fault laws
Auto symbol 2
owned only - owned by the insured
Auto symbol 4
owned other than private passenger - only owned nonprivate passenger autos covered
auto symbol 3
owned private passenger - only owned private passenger autos covered
auto symbol 6
owned subject to compulsory uninsured motorist law - covers designed vehicles subject to a compulsory uninsured motorist law to ensure there will be some degree of protection for victim of uninsured motorist
Define flood
partial or complete inundation of 2 or more acres normally in a dry land area, or 2 or more properties (at least one being the insured's)
Gravemarks
pay up to $5,000
Debris Removal
pays for the expense of removing debris resulting from a loss that is covered by the policy (must be within 180 days of loss)
electronic data
pays up tp $2,500 per year for data losses. Can be increased.
After insurer termination of independent agent they must:
permit renewal of all polices in insurance book for 1 year. - rate of commissions transfers - must assign policy to nearest located insurer
Endorsements
printed addendums to a contract that are used to change the policy's original terms, conditions, or coverages. must be attached to the policy and signed by executive officer. It may be used to add or cancel parts of policy as well as correct mistakes/ typos.
Failure to issue proper receipts
producers must provide proper receipts for premiums paid. It is a violation of the law. (conditional receipts, etc.)
Unilateral Contract
promise in exchange for an act
Business income and extra expenses
provides coverage for expenses incurred as a result of extortion threat or ecommerce incident
HO-5 Comprehensive Form
provides open perils coverage ("all-risks coverage") on the dwelling, other structures and personal property.lanlord furnishing uo to $2,500
reduction
reducing the amount of exposer to risk
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 (usually 60 days)
indemnity
reimbursement; the principle of insurance to take you back to the state prior to the loss.
Definitions
sections that describes the essence, precise meaning, or scope of a word or phrase
FINRA (Financial Industry Regulatory Authority)
solicits licences for variable life and variable annuity
Consideration
something of value exchanged for something else of value
auto symbol 7
specifically described auto - limits coverage to autos owned by the insured that are listed & described in the policy declaration
Agreed Value
the accepted value of a non-cash asset at the time of its contribution by the owner
Contact adhesion
the accepter of the contract must "adhere" to the written contract
Avoidance
the act of evading something to reduce risk
Market Value
the amount for which something can be sold on a given market prior to loss
Coinsurance Penalty
the amount of insurance carried over the amount of insurance should have had, multiplied by loss, which equals the reduced payment of loss. Example: for a $100K building insured at 80% coinsurance. the insured would carry at least $80K ($100K x.80) to meet the insurance requirement. Example 2: only carried $40K of insurance and had a 10K loss, they would bear 50% of the loss due to deficiency, or 5K and any deductible
Express Authority
the authority of an agent, stated in the document or agreement creating the agency
Loss Payable Clause
the clause used to cover the interest of a secured lender in personal property
Homogeneity
the degree to which terms are similar
Split Limits
the limits of liability for different coverages. The limits my be stated per person, per occurrence, or per period basis. (many auto polices) Example: 25/50/25 25k for single person 50k for bodily injury to 2+ people 25k for damaged property of others
Third Party Claimant
the opposite party of the first party claimant. Ex: James has a policy with Goosehead (first-party) and gets into an accident, hitting Coles car (third party), cole then makes a claim on James's Goosehead policy.
Receiving Written Notice from Commissioner
the person must respond within 90 days. if not made the request is considered waved.
Rebating
the practice of giving an individual a premium reduction or some other financial advantage not stated in the policy as an inducement to purchase the policy. It May not exceed $100 per person in a 12 month period.
Underwriting
the process of selecting, classifying, and pricing applicants for insurance
(WYO) Write Your Own insurance program
the same insurance you would receive in the NFIP...non risk baring though the FIA
Overinsurance Provision (property insurance)
the use of the special provision to cover the cost of repair or replacement of property
Waiver
the voluntary relinquishment of a known legal right, claim or privilege
Assignment
transfer if legal tight or interest in an insurance policy. only valid with the prior written consent of the insurance
Insurer Provisions
used in the event of loss to repair or replace damaged property with property of like kind and quality or to adjust the loss and make payment to the insured or a person legally entitled to receive payment within 60 days of receiving the insured's proof of loss
Vicarious Liability
when one person is liable for the torts of another(usually acts of children)
Acceptance
when underwriting approves the application and approves a policy
commercial policy cancelation
written notice (no time limit)