chapter 1

A loss valuation method

used in many property forms is determined by today's replacement cost minus depreciation for age and obsolescence.

Legal Purpose

Every insurance contract must have a legal purpose. This means the contract must be for a lawful reason, and not against public policy.

Persons covered under an insurance policy, whether named or not, are known as the

Insureds

The Gramm-Leach-Bliley Act

Protect private customer information filed with a financial institution.

What are the two classes of compensatory damage?

Special and General

General Damages

compensate the injured person for pain and suffering, mental anguish, disfigurement, and other similar types of losses.

For a contract to be enforceable by law, the purpose of the contract must be

legal and not against public policy.

Consideration

on the part of the insured is the payment of premiums and the health representations made in the application.

warranty in insurance

statement guaranteed to be true.

Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages?

Special

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. What insurance principles has the insurer violated

consideration

The binding force in any contract is

consideration

Events or conditions that increase the chances of an insured loss occurring are referred to as

hazard

Special damages

tangible damages that can be specifically measured in dollar amounts (such as out-of-pocket expenses for medical, miscellaneous expenses, and loss of wages).

Market value

the price at which property would sell

In return for premium, an insurance company must

Be fair in underwriting and pay covered losses.

What type of damages may be awarded by the court to create disincentives that discourage behavior that is deemed highly undesirable by society?

Punitive

In property insurance, actual cash value is defined as which of the following?

Replacement cost at the time of the loss, less depreciation

Aleatory Contract

which means there is an exchange of unequal amounts or values. The premium paid by the insured is small in relation to the amount that will be paid by the insurer in the event of loss.

Punitive damages

a form of punishment, intended to serve as an example to others to discourage undesirable behavior.

The insured's house is located one mile from the county's new landfill and across the road from the entrance of a rock quarry. It would cost $150,000 to rebuild the house if something happened to it, but when the insured tried to sell it, the best offer he received was $80,000. The insurance company will insure the house for only $80,000. What method of valuation is used to insure this property?

Market value