Property & Casualty

╚ Coinsurance Question #3. Insured C purchases $160000 insurance from insurer on a building valued at $200,000. The policy has an 80% coinsurance clause. If the insured has a $100,000 loss, how much will the company pay? Step1: How much insurance is required. Step2 Did they carry this much? Step 3 If no, apply the coinsurance formula

$160,000 Insurance Carried. Replacement value $200,000. 80% coinsurance. $100,000 loss Step 1 How much insurance is required? $200,000 * 0.8 = 160,000 Step 2: Did they carry this much? Yes Step3: If no, apply the coinsurance formula 160000/160000*100000=100000 (Ins Carried/Ins required ) x loss

Lloyd's Association

-Sells any insurance except life insurance. -A group of underwriters form a Lloyd's plan. -Maximum book of business is 10 times the net assets of the underwriters. -Not rate regulated -Lloyd's must appear in company name

Marketing (distribution) Systems

4 basic distribution systems used to market insurance: ▬Captive: -Insurer contracts with independ agents to represent & sell for only that insurance comp, Typically paid on a commission basis. - Insurance company owns & control all accounts, policy records, & renewals. ▬Direct writer: -Direct writing agent is an employee of the comp, may be paid a salary, commission or both. - Insurance comp owns & controls all accounts, policy records, and renewals. ▬Direct response: -This system does not use agents, but instead solicits through direct mail or telemarketing. -Insurance comp owns & controls all accounts, policy records, and renewals. ▬ Independent Agent: -Independent contractor who contracts with several different companies to represent & sell insurance for those companies - receives only commission. Agent owns & controls the accounts, policy records, and renewals.

Exposure

A condition or situation the presents the possibility of loss

╚ Fraud & False statements

A person who transacts insurance in interstate commerce & who intentionally makes false material statements :- In connection with financial reports or documents presented to insurance regulators or their deputies appointed to investigate the person; & - To influence the actions of such officials. Is subject to the following penalties: *A fine; or *Imprisonment for up to 10 yrs; or *both a fine & imprisonment for up to 10 yrs. *Imprisonment can be ordered for up to 15 yrs if the false statements jeopardized the safety & soundness of an insurer & were a significant cause of the insurer being placed in conversation, rehabilitation, or liquidation by the courts.

Risk Purchasing Groups

A purchasing group is comprised of members whose business or activities expose them to a similar liability & form a group to purchase liability insurance on a group basis

Q. Pro-rata cancellation occurs when

A. - A policy is non-renewed - A mortgage has been satisfied - An insured cancels a policy at inception - AN INSURANCE COMPANY CANCELS A POLICY AT ANY TIME

Q. During a tornado, a barn is destroyed when a section of its wall is blown down, knocking over a lantern, which sets the barn on fire. The proximate cause of the loss is

A. the fire the collapse of the wall THE TORNADO the smoke

╚ Subrogation

According to the terms of property & casualty contracts, insureds are required to assign their rights to recovery after a loss to the insurance company. ▬Insurer then has legal right to recover the amount paid for the loss from the at-fault party & take any further legal action necessary. ▬The deductible is returned to the insured when or if the loss payment is recovered

╚ Salvage

After paying insured for his loss of property, insurer can recover the damaged property & sell it to reduce the insurer's financial loss

Insurable Interest

All insurance contracts are required to contain an element of insurable interest. - Personal/financial interest - Economic loss required - For property & casualty must exist at time of loss

╚ Occurrence

An event that happens over time. - Can be a series of accidents. - Can be continuous or repeated exposure to conditions. - Result in injury or disease (i.e. black lung disease)

Accident

An event that is sudden & unexpected. - Financial loss occurs. - The specific time & place can be proven (i,e, a car accident)

AM Best (Best's Rating)

An example company who publishes the following company company ratings:-A++,A+(superior), -A,A-(excellent), B++,B+(good), C++,C+(fair), C,C-(marginal), D(below mim stndrs), E(under state supervision), F(in liquidation)

Assignment

Assignment of policy by insured not valid unless insurer has given written consent

Self Insurance

Business organizations that set up their own reserves for the purpose of insuring themselves

Elements of an Insurable Risk CANHAM

CANHAM - Lost must be:▬Calculable:prior loss statistics are available.▬Affordable:premiums must be affordable to the average consumer. ▬Non-catastrophic:No earthquakes, war, terrorism. Homogeneous exposures:Similar exposures. ▬Accidental:Not intentional. ▬Measurable: Number & dollar amounts

Perils

Causes of loss. - Common causes of loss include fire, wind & lightning. - A policy can be written jn one of two forms: ▬SPECIFIED (named), perils covered specifically listed in policy. ▬OPEN PERIL (all risk), Specifically lists exclusions; everything else is covered

Coinsurance question #1. Insured A purchases $80,000 insurance from insurer on a building valued at $120,000. The policy has an 80% coinsurance clause. if the insured has a $10,000 loss, how much will the company pay?. Step1 How much insurance is required Step2 Did they carry this much? Step3 If no, apply the coinsurance formula

Coinsurance Answer #1, $80,000 of insurance carried, 80% coinsurance, $120,000 replacement cost, $10,000 loss Step1. How much insurance is required $120,000 x .80 = $96,000 Step 2: Did they carry this much? No, they only carry $80,000 Step 3: If no, apply the coinsurance formula (80000/96000)*10000= $8333 (Ins Carried/Ins required ) x loss

Coinsurance Question # 2. Insured B purchases $50000 insurance from insurer on a building valued at $125000. The policy has an 80% coinsurance clause. If the insured has a $35000 loss, how much will the company pay? Step1: How much insurance is required. Step2 Did they carry this much? Step 3 If no, apply the coinsurance formula

Coinsurance Answer #2 $50,000 of insured carried, 80% coinsurance, $125,000 replacement cost, $35,000 loss Step1. How much insurance is required? 125000*.80 = 100.000 Step 2: Did they carry this much? No, they only carry $50,000 Step3: If no, apply the coinsurance formula 50000/100000 * 35000 = 17500 (Ins Carried/Ins required ) x loss

╚Loss Payable Clause

Condition found in property insurance policies that specifies the rights & duties of the mortgagee under the policy; also called the loss payable condition

╚ No Benefit to the Bailee

Condition found in some property insurance contracts that states that a bailee is not covered under an insured's policy while the bailee has possession of the insured property

Property Insurance

Covers the insured's real estate & personal property against damage or loss due to covered perils & consequential losses.

Partial Vs. Total Loss

Determining whether a loss is a partial or total loss is critical in the claim settlement process ▬Total Loss: A total loss is one where the damage is so extensive that it would cost more to repair or replace than the normal market value of the undamaged home ▬Partial Loss: any loss that is not determined to be a total loss

╚ Rate Fillings

Each state has a method of approving, or ratifying, rates & forms filed by insurance companies. ▬Prior Approval: The insurance company must obtain approval from the state before using the rates & forms.▬File & Use: The company may begin using the rates as soon as they are filled; the state eventually reviews them & either accepts or rejects them. ▬Use & File: Insurers must file rates & forms with the state within a certain time period after they are first used. ▬Open competition: The state allows companies to compete openly, subject 2 rate adequacy 2 meet claim costs,& non-discrimina ▬Mandatory:The state has unique forms & rates that must be used by all insurers doing business in the state.

Non-concurrency Example

Example: ▬Co A insurers property for 25% of total coverage (with earthquake excluded) ▬Co B insurers property for 75% of total coverage (with earthquake endorsement) ▬Home is damaged by an earthquake (covered by Co B) ▄Co A pays nothing ▄Co B pays 75%

╚ Hazard

Hazards increase the chance of loss. ▬Physical: material characteristics. ▬Moral: Dishonest tendencies. ▬Morale: Careless irresponsible attitude

╚ Appraisal

If the actual cash value (ACV) or amount of the loss is not agreed to by the insured & insurer: -each select a competent appraiser-each pays for respective disinterested appraiser -Appraisers select an umpire-share costs -Appraisers & umpire determine solution

Insurance to Value

Insurance 2 value is the amount of insurance compared 2 the replacement cost of the property. Maintaining insurance 2 value , or 100% replacement cost, is important for both the insurance company & the insured. ▬Insurance company benefits: The insurance company must have accurate premium rates, & maintaining coverage at the level assumed by those rates is important for the financial well-being of the comp. ▬Insured Benefits: while total losses are few, the chance of a total loss still exists (i.ecatastrophes) & full coverage will rebuild the covered property in its entirety. When covered for less than the full value, the insured can become partia lly responsible for the loss

╚ Limits of Liability

Insurance contracts state the max amount of coverage agreed to be paid in the event of a loss. Limits are stated in 3 diff. ways:▬Combined Single Limit (100K) ▬Split Limits (100/300/50) ▬Aggregate Limit (100K per ocurrence/300K aggregate)

╚ Abandonment

Insured cannot abandon damaged property to the insurer & demand to be reimbursed for its value

Suit Against Us (Legal Action Against Insurer)

Insured cannot take legal action against insurer unless there has been full compliance with policy terms & action taken within specified time limits

Sources of Insurability Information

Insurers need information about the individuals & properties they are looking to insure. The underwriter uses these sources of information to determine the eligibility of the risk to be insured

Surplus Lines Insurance (not admitted)

Insures risks not available in standard market due to their unusual characteristics. ▬ Aviation, excessive professional exposures, amusement parks. ▬sold by unauthorized/non-admitted carriers. ▬High risks, malpractice, flood insurance

Proximate Cause Example

Lightning hits a house causing a fire in the kitchen. The kitchen is also damaged by water when the firefighters put out the fire. What is the proximate cause? Lightning hits the house

Underwriting Ratios

Loss ratio▬Key underwriting profitability ratio, the relationship of loss exposures to income▬The following ratio is used to determine underwriting profitability:-Paid out(claims) vs Paid in (premium income) - (incurred losses+loss adjustment expenses)/earned premium

Rating Organizations

Other examples of rating organizations include: ▬Insurance Services Office (ISO): develops loss costs & standardized forms (upon which this course is based)▬National Council on Compensation Insurers(NCCI): Maintain jurisdiction over the workwrs' compensation field; & ▬Surety Association of America:Rating bureau for surety bonds

Hazard Examples

Physical: cracked sidewalk Moral: Intentionally burn down house Morale: Leave keys in unlocked car

Casualty Insurance

Protects insured from financial loss from non-property insurance losses.. - Non-property insurance coverage

Coinsurance

Purpose: Encourage insured to carry as close to full value of property as possible. ▬If insured to value, claims are paid in full up to policy limits ▬If underinsured, partial claims are subject to a penalty ▬Standard coinsurance rule-80% of replacement cost

Overview of Property Insurance

Refers to insuring damage to the property people own & have acquired: ▬Homes & their contents ▬Commercial buildings/contents, including inventory ▬Valuable items, such as jewelry, antiques, & fine arts

╚ Subrogation

The act of assigning or substituting the rights of one party to another for the purpose of collecting a debt or claim.

╚ Proximate Cause

The cause responsible for the loss: ▬closely related to direct loss; insured peril is required. ▬Unbroken chain of events. - "Had it not been for this occurring. This would not have occurred"

Managing Risk (Risk Management)

The dollar amount of potential risk is determined by statistics of prior losses. -Statistics determine whether risk is insurable.- The analyzing of pure risks to the possibility of loss & determining how to handle these exposures. - Managing risks is a system of choices available to individuals, businesses, & insurance companies

Reinsurance

The insurance company's insurance company. - Insurance company determines retention limit & buys reinsurance for the balance. - Also known as "POOLONG THE RISK"

╚ Insured

The insured is the policyholder, person, business or entity whose interest is protected in the policy. ▬Named Insured: Person, business, or other entity specifically designated by name (named in the declarations) as the insured to whom the policy is issued. ▬First Named Insured: first person listed in the declarations as an insured; the first named insured may have a higher level of duties or rights under the policy. ▬Additional Insured: An individual or company, in addition to the insured, who is listed in the declarations & has an insurable interest in the property insured (mortgage of a home or lien-holder of car)

╚ Loss Valuation

The process of determining the value of the loss. ▬Replacement cost. Today's cost to fully replace lost or damaged property with like kind or quality property " without deduction for depreciation". ▬ Actual Cash Value (ACV): Replacement cost minus depreciation due 2 wear,tear obsolescense ▬Functional replacement cost: Cost to repair or replace with functionally equivalent materials. ▬Market value: the price a buyer would pay & a seller would accept in a competitive market ▬Agreed value: the value of the described property agreed on by both insurer & insured ▬Stated amount: An amendment to the valuation provision of a policy that provides a stated maximum amount for payment of any loss. ▬Valued policy: Valued policy is an exception to the principle of indemnity. Under this provision,the insurer is liable for the full amount of damages up to the policy value

╚Adverse Selection

The tendency for people with a greater-than-average exposure to loss to purchase insurance

Insurance

The transfer of risk from insured to insurer.

Other Loss Settlement Provisions

These provisions may apply depending on the unique situation: ▬Other insurance -multiple policies apply to same loss ▬Coinsurance clause - insurance to value

Indemnity

To restore policy holder to pre-loss condition; make whole. - No better - no worse

Other insurance Example question H owns a 100K property insured by both insurers A & B. The property suffers a fire loss & is covered by both insurers. Insurer A has 25K coverage . Insurer B has 75K on their policies. How much would each share in the cost of a 40K fire loss?

Total policy limit $100,000. Insurer A 1/4 of policy limit. Insurer B 3/4 policy limit. Total cost of fire loss $40,000. insurer A pays $10,000 Insurer B pays 30,000. Pro rata calculation

╚ Risk

Uncertainty of financial loss. - PURE RISK: chance of loss only, can be covered by insurance. - SPECULATIVE RISK: chance of loss or gain, gambling, cannot be covered by insurance

Underwriting

Underwriter:-Employee of the insurance company who is responsible for the selection, classification & acceptance or rejection of a proposed insured. ▬Underwriters do not make proposals, producers do

Loss

Unintended, unforeseen damage to property, injury, or amount paid. ▬Direct: Physical loss to property with no intervening cause. ▬Indirect: Consequential loss as the result from a direct loss

╚ Liberalization Clause

▬A clause that broadens or extends coverage either due to company voluntary action or legal determination ▬No addition premium charged ▬No action required by the insured

╚Producer Authority

▬A producer is provided authority through the agency contract. ▬Contract grants a producer the authority to act as a legal representative for the company (e.g. collecting premiums & setting small claims). ▬One of the most important responsibilities of a producer involves binding authority. Because a producer may collect premiums, he is able to bind coverage (grant it immediately upon receipt of the premium)

╚Three Types of Authority

▬Actual/expresses authority: Authority as specified in the producer's contract (written authority). ▬Implied authority: Authority that is not expressly granted, but which a producer is assumed to have in order to transact the business of the principal(i.e. printing business cards that contain the principal's name). ▬Apparent authority: Authority a reasonable person would assume a producer has based on the producer's actions & statements.

╚Admitted/Authorized vs Non- admitted/ Unauthorized Insurance Carriers

▬Admitted or authorized carriers are carriers that have been issued a Certificate of Authority to transact business in the state. ▬Non-admmitted or unauthorized carriers are those that do not qualify for a certificate of authority in the state or have not applied for one.▬ Most producers are usually prohibited from doing businss on behalf of unauthorized carriers. Unauthorized carriers can only transact Surplus Lines business through a property licensed surplus lines producer. ▬Unauthorized or non-admitted carriers may be so for various reasons:-They may not normally do business in the state.-They may only transact kinds of insurance for which authorization is not required.▬They may not meet state requirements

╚The Producer/Principal Relationship

▬Agent: Someone who acts on behalf of another. ▬Principal: Party to whom action is taken. Insurance company

╚ Contribution by Equal Shares

▬All insurers share equally up to the limit of the lowest policy ▬Remaining insurers share accordingly until all limits are met or the loss is paid ▬Companies split the bill even if coverage provided is unequal

╚ Disclosure Authorization

▬Applicants for insurance must be given advance notice of the insurer's practice regarding collection & use of personal information ▬Notice must be given in writing at the time of application

╚ Termination of Policies

▬Cancellation: Insurer or insured cancels contract before end of policy period. - Premium refunds: Earned, company keeps proportionate premium used. Unearned premium, proportionate premium not used is returned to the insured. Short-rate, company keeps penalty (service change). Pro rata, Insurer cancelled; insured received full unearned premium; no penalty. ▬Non-renewal: Happens at end of policy period

Rating Organizations

▬Companies that rate financial strength of insurance carriers based on analysis of management, investment performance, company claim experience, & other factors. ▬The length of time in business is not a factor.▬These ratings are one of the widely used indicators of financial health in the insrnce industry

Four Elements of a legal Contract CLAC

▬Competent parties, Who's not: minors, mentally/legally incompetent, alcohol/drug influence,enemy aliens. ▬Legal objective: legal purpose. ▬Agreement: offer & acceptance. ▬Consideration: exchange of values(money=promises)

Basic Property Policy Structure (DICEE)

▬D eclarations page: contains 5P's Person/Property, Policy Number, Policy term, Policy limit, Premium. ▬I nsurance agreement: Describes how coverage provided by insurer & perils covered ▬C onditions: Obligations of each party to the contract; are stated ground rules ▬E xclusions: What's not covered ▬Endorsements (Riders): Add, modify, or take away coverage

Question: A company's promise to pay for damage caused by, or resulting from, any covered cause of loss would be found in which of the following sectios of a commercial property policy:

▬Declarations, ▬INSURING AGREEMENT, ▬Conditions, ▬Exclusions

╚ Policy Structure (DICEE)

▬Declarations: contains 5 P's: person/property, policy number, policy term, policy limit, premium + mortgage. ▬Insuring agreement: describes coverage provided by insurer & perils covered. ▬Conditions: Obligations of each party to the contract; are stated ground rules. ▬Exclusions: What's not covered. ▬Endorsements(riders): Add, modify or take away coverage

Loss Examples

▬Direct: - Lightening strikes a house. - Auto collides with tree. ▬Indirect: - Loss of rental income. -Loss of profits

╚ Insurers/Insurance Organizations

▬Domestic: with respect to a particular state, an insurer is incorporated, organized, or domiciled in that state. ▬Foreign: With respect to a particular state, an insurer that is incorporated, organized, or domiciled in another state, district, or territory. ▬Alien: An insurance company that is incorporated, organized, or domiciled outside of the USA.

Duty to Defend

▬In the event of an "occurrence," insured has certain duties he must perform & information he must provide. If coverage is applicable under policy & all insured's obligations are fulfilled, insurer has duty to defend the insured.

Types of premiums

▬Initial premium: Down payment can be full amount or partial payment. - Subject to rating/ underwriting charge. ▬Deposit/audit premium: Certain types of commercial policies are subject to premium audit. - Insured pays a deposit premium at policy inception. - "True up" after audit completed at end of policy term. - If different than estimated premium, applicable refund or charge to insured

╚ Reciprocal Insurer

▬Insurance companies made up of policyholders who insurance other policyholders.▬Reciprocals are managed bay an attorney-in-fact

Law of Large Numbers

▬Insurance companies take on many risks with a reasonable assurance of paying a certain number of claims.▬- As number of loss exposures increase, difference between actual & expected results becomes smaller. - This allows the insurance company to predict potential future losses more accurately. MORE PEOPLE INSURED MORE THEY CAN PREDICT LOSS

Cancellation

▬Insured may cancel at any time ▬No advance notice by insured is required ▬Insured must surrender policy if demanded by insurer ▬Insurer cancellation: Reasons stated in policy & subject to state specific laws, rules & regulations

Loss Settlement

▬Insurer has the option to settle property as follows:-Take all or part of the property at agreed value. -Repair rebuild, replace with like kind & quality ▬Insured should be indemnified but not profit from a loss

Assignment

▬Involves the transfer of a legal right or interest in an insurance contract to another party. ▬ valid only with written consent of insurer

╚Risk Retention Groups

▬Liability insurance company owned by the policyholders of the same business group; only companies within the business group qualify (car dealers) ▬A risk retention group may reinsurance another risk retention group as long as they have a similar liability ▬The risk retention group must be approved by the commissioner & have a certificate of authority

Loss Costs

▬Loss costs are the factors used in figuring insurance rates that represents how much an insurance company needs to cover expected losses

Mortgage Clause

▬Mortgage company will collect despite insured's actions-policy voidance ▬Insurer has right to take over mortgage balance from mortgagee-after insured defaults; after loss payment is made to mortgagee ▬Mortgagee notification: mortgagee (and insured) must be notified in the event of an insurer cancellation

╚ Mutual Insurers

▬Owned by their policyholders, who receive the dividends directly as end-of-year policy additions or cash.▬Mutuals are incorporated & managed by a board of directors who do not need an insurance license. ▬Nonprofit insurer-most mutuals issue non assessment policies & would then qualify as a legal reserve or level premium insurance company

╚Stock Insures

▬Owned by their stockholders, who receive dividends as stock value dividend payments. -Incorporated as a for-profit company -When organizing, will issue shares of stock to raise funds - Issues nonparticipating policies (nonpar) -Pays taxable dividends to share holders if a profit is made -May issue par policies to compete with mutuals

Question: The insurer is pro-rating a claim on a commercial property policy because there is more than one insurance policy. When paying on a concurrent basis, each policy will:

▬Pay to the limits ▬PAY TO ITS LIMIT, NOT TO EXCEED THE POLICY LIMITS OR LOSS, & THEN ONLY TO ITS FAIR SHARE ▬be voided because this is illegal ▬pay on a pro-rata basis

Personal vs. Commercial Lines

▬Personal: Insurance for families & individuals (auto, homeowners, watercraft, inland marine, miscellaneous forms). ▬Commercial: Insurance for business of any size of professionals (doctors, lawyers). - Business Auto & truckers. - Commercial property, -Ocean/inland marine. - Workers compensation. - Crime forms. - Surety bonds. - Miscellaneous forms.

╚ Other Contract Provisions & Concepts

▬Policy definitions: Defines key terms. ▬Policy period: When coverage begins & ends. ▬Policy territory: Identifies where coverage applies. ▬Additional/supplemental coverages: Reduced or separate limits of liability; specifies certain requirements.

Other insurance

▬Primary: primary policy pays first up to the lesser of its limit or amount of loss ▬Excess: excess policy pays after primary limits are exhausted ▬Pro rata liability: amount paid for a loss is proportionate to the total loss as the amount of coverage bears to the total coverage

╚ Duties After Loss (of the insured)

▬Prompt notification of loss ▬Protect damaged property ▬Separate damaged from undamaged property ▬Provide written proof of loss ▬Provide inventory of damaged property ▬Cooperate with the insurer

╚ Legal Issues Affecting Insurance Contracts

▬Reasonable expectations: what the average person would infer from a policy or contract, despite the use of technical language, hidden provisions & confusing language. ▬Utmost good faith: Honesty, cooperation & full disclosure of parties to a contract. ▬Representations: Oral or written statements by individual seeking to enter into a contract. ▬Warranty:Guarantees answers on the application; this can void the policy. ▬Concealment: Failure to disclose all material facts. ▬Fraud: Intentional misrepresentation of a material fact. ▬Binder: Temporary contract pending issue of the policy(30 to 60 days- cancellable with 2 days notice). ▬Waiver: The voluntary relinquishment of a known right. ▬Estoppel: The involuntary relinquishment of a known right; to legally prevent something from happening.

Deductible

▬Requires the insured to pay a specific amount or percentage of loss. ▬Retention limit ▬ Insurer pays in excess of deductible. Reduces premium

Private vs Government Insurers

▬Residual Market:The government can provide insurance that is not ordinarily available from private insurers ▬Federal programs:-War risk insurance-Nuclear energy liability insurance-Flood insurance-federal crop insurance▬State Programs:-Unemployment insurance-Worker's compensation benefits

Methods Of Handling Risk (STARR)

▬Sharing: Chance of loss is shared among many individuals & called pooling the risk ▬Transfer: Shifting the financial burden of a loss from the insured to another party. THIS IS THE PURPOSE OF INSURANCE ▬Avoidance: Avoiding a particular activity that could turn into a loss ▬Retention: Accepting the possibility of a loss yourself. A deductible is a form of retention -the insured assumes part of the risk by insuring only above a certain dollar amount.▬Reduction: Taking action to reduce the possibility of loss.

Coinsurance Formula

▬Step 1: Determine insurance required ▬Step2: Do they carry at least this amount? ▬Step 3: If no, apply the following formula: {(insured carried)/[(RCxCoins%)insurance required]}xloss =claim payment or (Ins Carried/Ins required)xloss (minus deductible, if aplicable)=claim payment

Endorsements (Riders)

▬These attachments modify policy by adding or deleting coverage. Typical property endorsements include: -Scheduled personal property, -Water back-up/sump pump overflow -Personal injury, -Additional residence rented to others, -Business pursuits

╚ Certificate of Authority. Admitted is the same as authorized

▬This is a legal certificate issued by state Department of Insurance (DOI). ▬Grants insurance company legal right to write insurance contracts in the particular state

Exclusions

▬This section lists perils not covered, property not covered, or both. ▬Exclusions are necessary because they: - Eliminate duplicate coverage, - Eliminate unnecessary coverage, -Eliminate Uninsurable perils , - Manage Physical or moral hazards

╚ Duties & Resposabilities

▬To the insured:-To evaluate th client's insurance needs & make proper recommendations with regard to coverage. - If a producer fails to recommend a needed coverage or leaves a coverage gap that results in a loss that is not covered, the insured may have a valid claim against the producer. ▬To the insurer:-If a producer incorrectly implies or tells an insured that there is coverage under a policy when no coverage actually exists under hat policy, the insurer could be held liable for the loss, -The insurer might have to pay the loss but could then have a valid claim against the producer & could sue to recover the amount paid to the insured.

Nonconcurrency / Nonconcurrent

▬Two policies without identical coverage ▬Loss percentage is shared, but one will pay for loss as a covered peril; other will not due to an exclusion ▬Can result in coverage gaps or disputes

╚ Special Features of Insurance Contracts

▬Unilateral Contract: only enforced by one party to the contract. One sided, only the insurer has promise to keep. ▬Aleatory contract: The insurance contract is valid even though there are unequal exchanges between the parties. Small premium paid, large coverage benefit. ▬Contract of adhesion: The contract must be accepted by the insured, exactly as written by the company. ▬Conditional Contract: The contract may be voided if all policy conditions are not met. ▬Personal Contract: Insures the person who owns the property, not the property itself. The contract cannot be transferred to another person without the insurer's approval.

╚ Vacancy vs. Unoccupancy

▬Vacancy: No people/activity, No property/contents. ▬Unoccupancy: No people/activity, Yes property/contents.

╚ Fair Credit Report Act

▬Written & verbal disclosure required at the time of application. ▬Credit report contains information from the past 7 years (10 years for bankruptcy information). ▬Insured may request a copy of the report from the credit bureau ▬Insurance may challenge the accuracy of the report's contents ▬Insured may obtain the identity of others requesting information about them from the credit bureau