Insurance Test!

absolute liability

strict or absolute liability is liability without negligence.

market value

the amount of money you could get for property in the market. May be higher or lower than the replacement cost of the property, depending upon the location of the property and the current conditions

deductible

the amount the insured must pay on every claim

peril

the cause of loss.

direct loss

a fire burns the house down, the burnt down house is this

stated value

a policy insured at a "stated value" means that the insured chooses a limit of coverage for the property. In the event of a loss, the insurer will pay the claim in one of the three ways, choosing whichever is least: the stated value, the cost to repair the property not to exceed the stated value will be paid in the event of a total loss. When insuring property such as a classic car, "agreed value" is better type of coverage.

binder

a temporary insurance contract that may be verbal or written. Deemed to include all usual terms of the policy for which it was gicen, plus endorsements.

Elements of a contract

all four C-O-A-L must be present in order to have a valid contract of any type, including insurance policies

insurable interest

based up economics or an equity position. Required at the time of loss in order to recover on a policy

bodily injury

bodily harm, sickness, or disease, including required care, loss of services, and death that results

Common Policy Conditions of the CPP

cancellation policy changes audit by insurer inspection by insurer premium transfer of rights

moral hazard

circumstances of moral or habits that increase the probability of a loss from an insured peril, such as an insured previously convicted of arson. A dishonest person is a moral hazard. A person who is not paying their credit card bills timely is a moral hazard

common policy declarations page

contains the names of the parties to the contract, the policy period, a description of the insured's business, a schedule of coverage parts and the premiums charged for each and the total policy premium

liability

covers bodily injury (BI) and proerty damage (PD) to others caused by the negligent acts of the insured. Although fire policies do not contain any coverage for liability, all homeowners policies do. Has no deductible for coverage.

loss

damage resulting to the structure caused by a peril, such as fire or lightning

interline endorsements

designed to eliminate duplicate language and minimize the number of endorsements required. Interline endorsements effectively coordinate the coverage provided in one coverage part of the policy to other coverage ports precent redundancy

coverage A

dwelling: the policy cover the residence premises shown on the declarations page, including structures attached to the dwelling and an material and supplies located on or next to the residence premises and used to construct, alter, or repair the dwelling.

offer

every legal contract must have a clearly communicated offer from one party to the other. Usually , when an applicant fills out the application and pays the initial premium, he or she is making an offer to purchase insurance from the insurer

negligence

failure to act as a reasonable person would in the same set of circumstances

obligations of the insurance company

found in the insuring agrrement, the obligations of the insurance company will vary depending up which policy is purchased. The insuring agreement states which losses will be covered, which property is covered, and which perils are insured against

declarations

found on the first page of the policy. It contains the name of the insurance company and the name of the insured. It also contains the address of the property covered and the policy limits.

acceptance

if the insurance company issues the policy, they have made an acceptance of the applicant's offer and coverage is now in force. Of course, most property and casualty agents have binding authority, which means that they can actually place coverage in force prior to the time the policy is issued by the company. Binders are considered temporary insurance policies to be superseded by the actually policy within a very short period of time

legal purpose and capacity

illegal contracts are not enforceable in court. In addition, all parties to a contract must have legal capacity, which is defined as being of legal age and not under influence of alcohol or drugs.

policy limit

in the event of a claim, then policy will never pay the insured more than the policy limit that is indicated in the declarations

morale

increase in the hazards presented by a risk arising from the insured's indifference to loss because of the existence of insurance. Example: an insured fails to repair faulty wiring, believing it is less expensive to pay insurance premiums than to pay an electrician. A careless person is an example.

duties of the insured after a loss

it states that the insured must give immediate written notice of claim to the insurer, protect the property from further damage, and furnish proof of ACV

strict liability

liability without fault.

indirect loss

loss of rental value (loss of use) is an indirect loss that is covered on some policy forms. Losses of this nature is also called "time element losses", since they occur over a period of time

cancellation

may be done by either the insured or insurer. If the insures is canceling the policy mid-term they must have a specific reason and give written advance notice of the cancellation.In a cancellation situation, a refund is due to the insured, either 'short rate' if the insured canceled the policy, or 'pro-rata' if the insurer cancels the policy

indemnity

means to pay.

pure risk

no chance of gain, only chance of loss. You can only insure this

conditions

normally contained in the 165 lines of text, the conditions apply both to the insured and the insurer. Example: it is the insured's duty to protect the property from further damage.

non-renewal

occurs at the policy anniversary date. The insurer must give the insured advance written notice that their policy will not be renewed. No premium refund is due.

vacancy

occurs when the insured has moved out and taken his or her belongings

coverage B

other structures: the policy covers other structures on the residence premises set apart from the dwelling by a clear space (unattached), including structures connected by only a fence or utility line. Business and farm structures are not covered. This coverage is an additional 10% of Coverage A, so in the event a covered loss destroyed the dwelling and the outbuilding, you could collect for both.

Off-premises personal property coverage

personal property located away from the residence premises is only covered up to 10% of the limited for Coverage C, or $1,000, whichever is more. Personal property moved to a newly acquired principal residence is not subject to this limitation for 30 days from the time you start to move

coverage C

personal property: the policy covers personal property owned or used by an insured, while it is anywhere is the world, for the perils named on the policy. At the option of the insured, property of others on the residence premises, including that owned by a guest or residence employee, is also covered. Coverage is 50% of Coverage A, in addition, except for off premises coverage.

actual cash value

replacement cost- depreciation=

physical hazard

result from material or structual feature of a risk, as opposed to human or management factors, such as oily rag by the furnace

mortgagee rights

rights granted to a mortgagee(lender), under a property contract issued to a mortgagor, by virtue of the mortgagee's interest in the property. Mortgagee holders have the right to notice of cancellation,and the right to continue paying the premium themselves.

vicarious liability

some state statutes spell out situations where one party may be responsible for the negligent activities of another party

ednorsement

something added to a policy to modify its terms

occurrence

something occurring over a period of time, but still covered by the policy

hazard

something that increases the risk. Example: Drinking and drive

replacement cost

starting with the DP-02 broad form fire insurance policy, the contract promises to pay all covered property insurance losses to the building structure in full, if the insured carries 80% of the full replacementcost of the structure as a policy limit at the time of the loss. You can never recover more than the policy limit

consideration clause

the applicant's consideration is the amount of the premium paid and the company's consideration is its agreement to abide by the provisions contained in the policy and to pay covered claims. Required to make a valid contract

named insured

the person named on the declarations page and their spouse, if a resident of the same household

limits of liability

the policy limits.

effective time

the policy starts and ends at 12:01 a.m on the inception and expiration dates shown in the declarations. The policy is usually written for a term of one year. The time is always Standard Time

effective location

the policy takes effect at 12:01 am at the location of the property insured, even if the insurance company's office is in another time zone

salvage value

the right to salvage belongs to both the insurer and the insured. If the insured requests to keep the salvage, the insurer will lower the claim amount paid. If the claim is paid in full, then the insurer owns the slavage and may sell it to offset their loss. If a claim is paid in full and the stolen item is found, it should be returned to the insurer, who may then offer to sell it back to the insured. The amoun that the insurer can get for the salvage left after a total loss

risk

the uncertainty of loss. Example: when you drive your car you may become involved in an accident

proximate cause

this is a negligence term, meaning that a party's negligence must be the proximate cause or reason for the resulting injury to others. Generally, there must be a direct chain of events leading form the negligent act up to the resulting injury or property damage in order for the negligent act to be considered the proximate cause.

subrogation

this is when another party causes damages to your property. Your insurance company pays the claim, but then takes your right of recovery and sues the negligent other party recover the money they paid out to you. They stand in your place

assignment

this is when the ownership of the policy itself is changed. For example: you sell your house and you assign your property insurance policy to the buyer. This may be done, but assngments are not effective until approved by the insurer and, in reality, are seldom done

other insurance provision

this policy provision protects the insurance company against a client who purchases more than one policy on the same property. If a loss occurs, each policy will pay a proportianate share depending on what % its policy limits bears to the entire policy limits in force on all policies. This is in accordance with the principle of indemnity, which states that you cannot make a profit from insurance. Remember, pro-rata liability sharing is not necessarily equal

insuring agreement

this states what coverage is provided

definition of the insured

this states who is covered on policy.

residence premises

up to a four family dwelling plus other buildings and the grounds where you reside and which is shown in the declarations

exclusions

usually listed in a separate section of the policy, this is a list of things that are never covered, such as flood, war, earthquake, etc.

unoccupancy

when the insured is on a vacation or trip

speculative risk

you may gain, you may lose. Example: investing in the stock market. This cannot be insured