Insurance Terms & Concepts
What are single insurance limits?
When bodily injury & Property coverages are lumped together Ex: We have a single limit of 60K. Insurance wont pay out more than that towards the bodily injury and property damage.
Firemen caused water damage to a property by spraying water to put out a fire. If the property insurance policy listed "fire" as the only named peril: -The water damage is not a covered. -The fire dept. has liability for the water damage. -The water damage is covered due to the concept of proximate cause. -The Fire damage is covered but not the water damage due to proximate cause.
The water damage is covered due to the concept of proximate cause.
What is representation?
A promise that a certain fact is true in a contract. to get the counterparty to enter into the contract
What is Blanket Insurance and how does it work?
A total limit which can be applied to multiple location or buildings. (Use by landlords or business owners with more than 1 location) Ex: have a 10 mill limit for 3 building. Building A repairs is 2 Building B repairs is 3M Building C repairs is 5M All three can pull from the 10 mil limit to repair
Which of the following is TRUE concerning Subrogation? -Allows the insured to collect twice for the same loss. -Allows the insurer to sue a negligent third party to recover a loss paid. -Requires 70% co-insurance. -May allow insurer to divide the interests of the insureds
Allows the insurer to sue a negligent third party to recover a loss paid
What is subrogation?
An insurer's legal right to seek damages from third parties after reimbursing insureds for a loss. If they recover fully insured deductible will be reimbursed If only a partial recovery- portion of deductible recovered
What is a morale hazard?
An unconscious act that may cause a loss to occur. Ex: Someone who has several accidents in a policy period- carelessness
What does excess means in insurance?
Extra coverage beyond what you already have. If you're sued or have a loss that beyond your primary policy limit the excess covers it.
What is severability?
If one of the parties in the contract is deemed to be invalid/guilty , it doesn't invalidate the whole contract just the party that's guilty ex: Jack and George have a company, Jack lashes out and hurt a customer. Liability will not protect Jack because it was intentional. However that portion of the contract with jack will be severed and George (innocent) will be protected
XYZ Insurance Corp. filed its corporate charter in Tallahassee and has its home office in Tampa: In Florida, XYZ is a domestic insurer. In Florida, XYZ is a foreign insurer .In Florida, XYZ is an alien insurer. None of the above is true.
In Florida, XYZ is a domestic insurer.
If a lender has an insurable interest in an auto, because of the money loaned to finance the auto, the lender would appear on the policy as the: Lessee Loss payee Mortgagor Mortgagee
Loss payee
you have a house valued at $200,000 but $80,000 is only insured. A kitchen fire happened that cost $30,000 to replace. Will the partial loss get covered 100% and why?
No because $80,000 of insured isn't 80% of a $200,000 house. You would only get half Did ($80,000)/ Should (80% of 200,000) = $160,000 half of 160,00 = 80,000 so your only getting half of the partial loss amount.
What is Mortgage Clause?
Nothing the insured does, even dishonestly, can prevent the mortgagee from collecting under the policy
What is a Loss Payable Clause?
Party or entity that gets paid first in the event of a loss connected with a property or auto in which it has financial interest.
An insurer may sever the interests of 2 insureds so that the insurer can protect an innocent party - this is the Doctrine of: Division of Interests Severability Specific Insurance Insurability
Severability
What is a peril?
Something that causes a loss Ex: Fire, Flood, Windstorm
What is a hazard?
Something that increases the probability a loss will occur or severity of loss.
What is Primary Coverage?
When insured pays first
What is Comparative Negligence?
When multiple parties contribute to the accident. The blame is split evenly between the parties.
What are single insurance limits?
When you take the bodily injury & Property coverages and state those separately. Ex: We have a limit of 40K We split it into 3 categories splitting the caps. In this ex well do 10/20/10 Per person cap will be- $10k Bodily Injuries- $20K Property Damage- $10K
What is a valued policy?
a policy that pays the face amount of insurance if a total loss occurs
What are Aggregate Insurance limits?
a provision that give you a limit on what the insurance company is going to pay out on annually bases. So the most an insurance company will pay out for all claims combined
What is a deductible?
a specified amount of money that the insured must pay before an insurance company will pay a claim.
What is alien insurer?
an insurer other than domestic or foreign. Ex: home office can be in England but sell coverage in Florida
Co-insurance
cost sharing & between you and insurer for coverage until you reach your out of pocket maximum.
What is actual Cash Value?
coverage when insurer calculate the depreciation - from the cost = reimbursement amount to replace loss or stolen property.
What is replacement cost ?
coverage when the insurer pays for the current cost/quality of the property loss or stolen without factoring depreciation.
What is liability/casualty insurance?
insurance that is payed to a 3rd party on behalf of the insured, if the insured is negligent.
What is Concealment ?
intentional withholding of information that could change the underwriters decision on a policy
What is a foreign insurer ?
one formed under the laws of any state =, district, territory in the US other than the state you're in. Ex: Home office can be in California, but authorize transaction insurance in Florida
What is a domestic insurer ?
one formed under the laws of the state Home office in the state their corporate charter was filled
What is Direct Loss in insurance?
results from the damage, destruction, or theft of property. Ex: Fire strikes and burns down a building. Which destroys personal property directly.
What is specific insurance?
separate limits which are applied to each individual building or property
What happens if the total value of the property or home drops below 80%?
the co insurance "penalty" will be used to reduce the claim payment on partial loss.
What is abandonment?
when an insured abandon property and still claim for damage of full value.
What is Liberalization?
when company increases coverage/benefits with no additional premiums.
What is proximate cause?
when there is a unbroken chain of events that causes loss which will be insured. Ex: Building caught on fire, firefighters come to put it out but it ended up causing water damage to the building. you would say the fire caused the water damage due to the chain of events happening after.
An insured has A SPLIT limit liability policy with 10/20/10 limits. He owes the following people liability bodily injuries claims of: Passenger 1 = $12,000, Passenger 2 = $10,000, Passenger 3 = $18,000. How much liability insurance will his policy pay for these claims? $ 10,000 $ 20,000 $ 30,000 $ 40,000
$ 20,000
An insured has a home with a replacement cost / value of $100,000, on which he carries an insurance policy for $80,000 with an 80% Coinsurance clause. The insured has a $20,000 partial loss, the insurance company will pay how much for this partial loss of $20,000? (Remember $80,000 is 80% of $100,000) 20,000 16,000 80,000 - 0 -
20,000
What the % of total value does a policy holder of co insurance need to have for insurer to pay 100% on partial losses from accidents ?
80% or more
What is moral hazard?
A conscious act that may cause a loss to occur Ex: Arson
What is Indirect loss insurance?
A financial loss as a result of aa direct physical damage or theft loss. Ex: Lightning strikes a pole and power goes out at your grocery store for a long period of time. The meat then starts spoiling which results in loss. This is indirect loss
What is a Physical Hazard
A physical characteristic that may cause a loss to occur Ex: Stair way in poor condition
To turn partially damaged property over to the insurance company and ask them to pay for a total loss is called Morale hazard Abandonment Conveyance Proof of Loss
Abandonment
Liability limits may be expressed as a: Aggregate Limit Split Limit Single Limit All of the above
All of the above
what is the Florida valued policy law
Claim settlement method by which the policy amount would be paid in a total loss to a building based on insured value.
What is property insurance?
Covers damages, loss of property
"Actual Cash Value" ACV means: Replacement cost Original cost minus depreciation Current cost to replace Current cost to replace minus depreciation
Current cost to replace minus depreciation