Chapter 1, 2
What is a certificate of insurance?
A written document showing the types and amounts of insurance that have been issued to the insured Proof of coverage; and summary of the policy's coverage.
What is risk reduction?
Activities directed towards enhancing protective behaviors and avoid risks Ex. Throwing a party but having uber ready for everyone
What is a agent/producer?
Acts as a legal representative of the insurance company
Who are the two type of people who are licensed to sell insurance?
Agents and Brokers
What is inherent vice?
Natural deterioration
Does deductible uphold the principle of indemnification?
No
Does the insured need a reason to cancel?
No
Does the written notice of cancellation need to be made in advance to the insurer?
No
How many of the Insureds must agree to a change in the policy?
Only the first named insured
What are actuaries?
People who compile mountains of data about people of specified age, gender, occupation, avocation. (number Crunchers)
Who is the coinsurance percentage set by?
Policy
What's another name foe agent?
Producer
What is the cause of loss form?
Property policy determines the degree of peril coverage
What is a Nonrenewal?
Termination of the insurance coverage by either the insurer or the insured at the end of existing policy period
What is Other Insurance clause
That each policy will pay only a portion of the loss
Who owns the broker fiduciary?
The Insured.
What is an assignment?
The transfer of a policy to a new policy owner
What does the broker do?
They work with several insurance companies to find the best coverage for the Insured.
when does an insured get a pro rata refund/ proportional?
When the insurer cancels
Does Basic and Broad form policies provide named-peril coverage
Yes
What is insurable interest?
a financial interest in the covered property.
What is pure risk?
a risk that presents the chance of loss but no opportunity for gain. For ex. a car accident or Fire
What is a peril?
cause of the loss (fire, windstorm, collision)
What is written notice that insured to cancel?
form of a letter, telegram, e-mail ,fax or physically surrendering the policy ti the insurer
What is a pro rata refund/ proportional?
if the Insurer cancelled the policy one-third of the way through its period, the Insured would re- 16 ceive a two-thirds refund.
What is the coinsurance clause?
in a property insurance contract encourages the insured to insure the property to a stated percentage of its insurable value
What is exclusion?
is a peril or item not covered by the policy
What is speculative risk?
is a risk situation that offers the opportunity for gain as well as the possibility of loss. This type of risk is not supposed to be insured and should not be covered. For ex. gambling
What is moral hazard?
lack of incentive to guard against risk where one is protected from its consequences, e.g., by insurance.
What is a broker?
representative of the insures, not a representative of the insurance company.
What's another name for endorsement?
rider or extension
What is underwriting?
selection and classification of risk.
What is per-loss deductible?
specifies the amount of first-dollar loss paid by the insured for each loss.
What is cancellation?
termination of the policy during the policy period.
What is insurance?
that the client agrees to incur a small immediate loss( The policy premium) in exchange for protection against the potential of larger future loss( totaled car)
What is the purpose of deductible?
they reduce morale hazard. If its large enough, it will also reduce moral hazards by discouraging the Insured's intentional destruction of property. So, we can say it both morale and moral hazards.
What the most common property exclusion?
○ Intentional acts of the Insured ○ War or terrorism ○ Nuclear catastrophe ○ Flood (although flood insurance is readily available) ○ Earthquake (although earthquake insurance is readily ○ Sewer backup ○ Off-premises power failure that causes a loss (such as spoil age of frozen food) ○ Wet and dry rot; ○ Mechanical breakdown ○ Mold ○ Damage caused by birds, insects, rodents, or vermin ○ Wear and tear ○ Inherent vice.
What is a waiver of Liability?What is a waiver of Liability?
A form that states that you won't be held responsible for any damages
What is a Physical Hazard?
A hazard that increases the chance of loss. (Worn tires,Slippery floor, faulty wiring)
What is a morale hazard?
Consists of carelessness or indifference that individuals have because they are covered by insurance and protected from loss. (For example, employees scheduling unneeded doctor visits or a employee tossing a lit cigarette into a trash can) They dont care if the insured or not insured.
When there more perils the policy is more
Expensive
Who are policy holder know as
Insured
Who are insurance agents known as
Insurer
What is a hazard?
Is any factor that increases the chance of a loss occurring.
What is a deductible?
Is the portion of the loss that the insured must absorb before the insurance company begins to pay
What is the underwriter's?
Its how insurance companies review policy applications and determine whether the applicants are acceptable risks.
Raising the deductible does what to the premium
Lowers
What are the three types of cause of loss forms?
- Basic - Broad -All-Risk (Special)
what is underwriting job?
- Identify the hazard -Assess the risk of a particular peril occurring -Determine the premium
What are the types of Insurers?
- Stock companies -Mutual companies -Reciprocal Companies -Fraternal Benefit societies -Government Insures
What are some reasons that insurer must justify cancellation?
- The Insured's nonpayment of premium - The Insured's material misrepresentation or concealment - Financial impairment of the Insurer - A substantial increase in the risk (e.g., a driver's license is suspended, or a person with an auto policy is de clared to be blind but wants to keep driving).
What are some reason why an Insurer cannot cancel a policy?
- claims filed- Failure to file a claim
What are the 3 types of hazards?
-Physical Hazard -Moral Hazard -Morale Hazard
What are some risk manage techniques?
-Risk avoidance - Risk Reduction - Risk shifting (Waiver of Liability) - Risk Retention (self Insuring) -Buying Insurance - Insurance
Who has insurable interest?
-ownership -landlord and tenant -bailor and bailee -mortgagor and mortgagee - contractor building a structure
What is the standard deductible in the U.S?
5 percent
What is coinsurance percentage?
80% insurance
What is risk retention ( Self Insuring)
A client may choose to build up funds to pay the claim. For Ex. ski boat the sinks. they buy a new one with there money out of pocket.
What is a mutual companies?
Are owned by policyholders .Ex Statefarm
What is a stock companies?
Are owned by stockholders
What is the name of the new policy owner?
Assignee
What is the name of an old policy owner?
Assignor
What is liberalization clause?
Automatically updates the policy
What is risk avoidance?
Choosing not to act on a behavior you know is risky Ex. Not throwing a party
What is another name for an insurance agents?
Field underwriters
What is risk shifting?
Getting someone else to agree to accept the risk. Ex. Having people sign Waiver of Liability
What is another name for Waiver of Liability?
Hold Harmless Agreement
Having more physical hazard will cause your policy premium to?
Increase
What is one of the most basic principle of insurance?
Indemnification
What method is insurance described as?
Sharing risk or spreading risk
What does the insured get if they cancel?
Short-rate refund
What is an endorsement?
Simply an addition to the policy.
What are two distinct type if risk?
Speculative risk and Pure risk
What is the National association of insurance commissioner (NAIC).
State insurance regulators.
What is risk?
The chance of loss or uncertainty of loss
Who owns the agents fiduciary duty?
The insurance company
What is indemnification?
The insured is restored to his or her approximate financial position prior to the occurrence of the loss
What is Limit of Liability?
The max amount of coverage agreed to be paid per loss
