PFIN 340 Ch 10

Actual cash value

a claim settlement method in which the insured receives payment based on the current replacement cost of a damaged or lost item, less depreciation - Payment you receive is based on the current replacement cost of the damaged or lost item less depreciation

Collision

automobile insurance that pays for damage to the insured's car when it is involved in an accident - If you are not at fault, your insurer will try and collect from the other driver's property damage liability first — called subrogation

assigned risk pool

consists of people who are unable to obtain automobile insurance due to poor driving or accident records and must obtain coverage at high rates through a state program that requires insurance companies to accept some of them.

homeowner's insurance

coverage for a place of residence and its associated financial risks

Peril

is the cause of a possible loss, such as fire, windstorms, explosions, robbery, accidents, and premature death

Umbrella policy

supplementary personal liability coverage - personal catastrophe policy - $1,000,000 or more in liability coverage

premium

the amount of money a policyholder is charged for an insurance policy

e

A parent may be held responsible for the actions of their child if those actions cause financial or physical harm to others. This is known as: a) umbrella coverage b) self insurance c) strict liability d) negligence e) vicarious liability

Strict Liability

A situtation in which a person is held responsible for intentional or unintentional actions

medical payments coverage

Automobile insurance that covers medical expenses for people injured in one's car or as a pedestrian - Covers the cost of health care for persons injured in your automobile, including yourself; also covers if you are injured while riding in another person's automobile or a pedestrian

Bodily injury liability

Covers the risk of financial loss due to legal expenses, medical expenses, lost wages and other expenses associated with injuries caused by an automobile accident for which you were responsible

Negligence

Failure to take ordinary or reasonable care, such as failure to supervise children in a pool

rating territory

the place of residence used to determine a person's automobile insurance premium - Different costs due to number of claims made in the geographic area where you live

Deductible

the set amount of a policyholder must pay per loss on an insurance policy

a

which of the following is an insurable risk? a) professional misconduct b) purposeful injury to another c) stating a small business d)gambling e) quitting your job because you dislike it

Risk

is uncertainty or lack of predictability, such as the loss that a person or property covered by insurance faces

Vicarious Liability

- When a person is held responsible for the actions of another person - Parent held responsible for child causing physical harm to another - Employer held responsible for an employee causing damage

personal property floater

Additional property insurance to cover the damagae insurance to or loss of a specific item of high value - HIGH VALUE ITEMS

Uninsured motorist protection

Automobile insurance coverage for the cost of injuries to a person and members of his or her family caused by a driver with inadequate insurance or by a hit-and-run driver. - Covers the cost of injuries to you and your family if your vehicle is hit by a person without insurance. However, it does not cover property damage

comprehensive physical damage

Automobile insurance that covers financial loss from damage to a vehicle caused by a risk other than a collision, such as fire, theft, glass breakage, hail, or vandalism. Covers damage to your vehicle that is not caused by a collision, such as... - Fire, theft, or vandalism - Glass breakage - Wind, hail, flood, tornado, etc. - Falling objects or hitting an animal - Some things in your car, like some radios and stereo equipment, are not covered

a

Larry Foster has bought a car with extra safety features, including front and side airbags and antilock brakes. How is Larry managing his risk? a) reduction b) development C) avoidance d) shifting e) assumption

B

Personal risks are the uncertainties surrounding the loss of income or life due to all except: A) premature death B) Professional misconduct C) disability D) unemployment E) illness

e

Which of the following is a list of personal belongings with purchase dates and cost information? a) additional living expense b) umbrella policy c) personal liability policy d) personal property floater e) household inventory

a

_______ protects you against financial loss when your car damages other vehicles, street signs, or buildings. a) Property damage liability b) assigned risk coverage c) collision d) no-fault insurance e) comprehensive physical damage

driver classification

a category based on the driver's age, sex, marital status, driving record, and driving habits; used to determine automobile insurance rates

replacement value

a claim settlement method in which the insured receives the full cost of repairing or replacing a damaged or lost item - depreciation is NOT considered

Household Inventory

a list or other documentation of personal belongings, with purchase dates and cost information - WITH DOCUMENTATION

coinsurance clause

a policy provision that requires a homeowner to pay for PART of the losses if the property is not insured for the specified percentage of the replacement value

speculative risk

a risk in which there is a chance of either loss or gain such as starting a small business or gambling - Uninsurable risk

Pure risk

a risk in which there is only a chance of loss, also called insurable risk - Accidental and unintentional risks - Nature and financial cost of the loss can be predicted

D

a system that requires each insurance company operating in a state to provide coverage to individuals who may have had many expensive claims is referred to as: a) premium discounts b) no-fault insurance c) comprehensive coverage d) an assigned risk pool e) equal opportunity insurance

endorsement

an addition of coverage to a standard insurance policy

No-fault insurance

an automobile insurance program in which drivers involved in accidents collect medical expenses, lost wages, and related injury costs from their own insurance companies - System is intended to provide fast, smooth methods of paying for damages without taking the legal action frequently necessary to determine fault; drivers collect from their own insurance companies

Property Damage Liability

automobile insurance coverage that protects a person against financial loss when that person damages the property of others - Covers damage to other person's car when you are at fault. It also includes damage to such things as street signs and buildings

Medical payments coverage

home insurance that pays the cost of minor accidental injuries on one's property - for minor accidental injuries on your property and minor injuries caused by you, family members, or pets

Hazard

increases the likelihood of a loss, such as defective house wiring

Insurance company

is a risk-sharing firm that assumes financial responsibility for losses from an insured risk Also referred to as insurer

liability

is legal responsibility for financial cost of another person's losses or injuries

Insurance

protection against possible financial loss; it gives you peace of mind

Financial responsibility law

state legislation that requires drivers to prove their ability to cover the cost of damage or injury caused by an automobile accident - State legislation: Nearly all states have compulsory automobile insurance laws - Requires drivers to prove their ability to cover the cost of damage or injury caused by them in an automobile accident - Automobile insurance coverage falls into two categories: bodily injury coverage and property damage coverage

d

An umbrella policy is designed to cover: a) expensive personal property b) additional buildings on your property c) flood damage d) major personal liability claims e) property when traveling away from home

50

Fewer than what percent of people who live in flood-prone areas have flood insurance?

a

Henry Edwards was injured in an accident caused by another driver who did not have insurance. Henry's medical expenses would be covered by: a)uninsured motorists protection b) medical payments c) bodily injury liability d) no-fault coverage e) collision