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279 Cards in this Set

  • Front
  • Back
Risk
The uncertainty about outcomes, some of which can be negative.
Probability
The likelihood that an outcome or event will occur.
Loss exposure
Any condition that presents a possibility of loss, whether or not an actual loss occurs.
Hazard
A condition that increases the frequency and/or severity of loss.
Moral hazard
A condition that increases the frequency and/or severity of loss resulting from a person acting dishonestly.
Morale hazard
A condition that increases the frequency and/or severity of loss resulting from careless or indifferent behavior.
Physical hazard
A condition of property, persons, or operations that increases the frequency and/or severity of loss.
Legal hazard
A condition of the legal environment that increases the frequency and/or severity of loss.
Property loss exposure
A condition that presents the possibility that a person or an organization will sustain a loss resulting from damage (including destruction, taking, or loss of use) to property in which that person or organization has a financial interest.
Tangible property
Property that has a physical form.
Intangible property
Property that has no physical form.
Real property
Tangible property consisting of land, all structures permanently attached to the land, and whatever is growing on the land.
Personal property
All tangible property other than real property.
Liability loss exposure
A condition that presents the possibility that a person or organization will sustain a loss resulting from a claim alleging that the person or organization is legally responsible for injury and/or damage.
Personnel loss exposure
A condition that presents the possibility of loss caused by a key person's death, disability, retirement, or resignation that deprives an organization of that person's special skill or knowledge that the organization cannot readily replace.
Personal loss exposure
A condition that presents the possibility of an individual's or a family's loss caused by a family member's illness, death, disability, or unemployment.
Net income loss exposure
A condition that presents the possibility of loss caused by a reduction in net income.
Pure risk
A chance of loss or no loss, but no chance of gain.
Speculative risk
A chance of loss, no loss, or gain.
Subjective risk
The perceived amount of risk based on an individual's or organization's opinion.
Objective risk
The measurable variation in uncertain outcomes based on facts and data.
Diversifiable risk
A risk that affects only some individuals, businesses, or small groups.
Nondiversifiable risk
A risk that affects a large segment of society at the same time.
Risk management program
A system for planning, organizing, leading, and controlling the resources and activities that an organization needs to protect itself from the adverse effects of accidental losses.
Risk management process
The method of making, implementing, and monitoring decisions that minimize the adverse effects of risk on an organization.
Pre-loss goals
Risk management program goals that should be in place even if no significant losses occur.
Post-loss goals
Risk management program goals that should be in place int he event of a significant loss.
Balance sheet
The financial statement that reports the assets, liabilities, and owners' equity of an organization as of a specific date.
Income statement
The financial statement that reports an organization's profit or loss for a specific period by comparing the revenues generated with the expenses incurred to produce those revenues.
Statement of cash flows
The financial statement that summarizes the cash effects of an organization's operating, investing, and financing activities during a specific period.
Hold-harmless agreement
A contractual provision obligating one party to assume another party's legal liability in the event of a specified loss.
Indemnification
The process of restoring an individual or organization to a pre-loss financial condition.
Hazard analysis
A method of analysis that identifies conditions that increase the frequency or severity of loss.
Theoretical probability
Probability that is based on theoretical principles rather than on actual experience.
Empirical probability
Probability that is based on actual experience.
Probability analysis
A technique for forecasting events on the assumption that they are governed by an unchanging probability distribution.
Law of large numbers
A mathematical principles stating that the actual (empirical) relative frequency of each of the possible outcomes more nearly approaches the true (theoretical) probability of that outcome as the number of independent events increases.
Probability distribution
A presentation (table, chart, or graph) of probability estimates of a particular set of circumstances and of the probability of each possible outcome.
Central tendency
The single outcome that is the most representative of all possible outcomes included within a probability distribution.
Expected value
The weighted average of all of the possible outcomes of a theoretical probability distribution.
Mean
The sum of the values in a data set divided by the number of values.
Median
The value at the midpoint of a sequential data set with an odd number of values, or the mean of the two middle values of a sequential data set with an even number of values.
Mode
The most frequently occurring value in a distribution.
Dispersion
The variation among values in a distribution.
Standard deviation
The average of the differences (deviations) between the values in a distribution and the expected value (or mean) of that distribution.
Coefficient of variation
A distribution's standard deviation divided by its mean or expected value.
Normal distribution
A probability distribution that, when graphed, generates a bell-shaped curve.
Probable maximum loss (PML)
An estimate of the largest loss that is likely to occur.
Maximum possible loss (MPL)
The total value exposed to loss at any one location or from any one event.
Risk control
A conscious act or decision not to act that reduces the frequency and/or severity of losses or makes losses more predictable.
Avoidance
A risk control technique that involves ceasing or never undertaking an activity so that the possibility of a future loss occurring from that activity is eliminated.
Loss prevention
A risk control technique that reduces the frequency of a particular loss.
Loss reduction
A risk control technique that reduces the severity of a particular loss.
Separation
A risk control technique that disperses a particular asset or activity over several locations and regularly relies on that asset or activity as part of the organization's working resources.
Duplication
A risk control technique that uses backups, spares, or copies of critical property, information, or capabilities and keeps them in reserve.
Diversification
A risk control technique that spreads loss exposures over numerous projects, products, markets, or regions.
Life safety
The portion of fire safety that focuses on the minimum building design, construction, operation, and maintenance requirements necessary to assure occupants of a safe exit from the burning portion of the building.
Business continuity management
A process that identifies potential threats to an organization and provides a methodology for ensuring an organization's continued business operations.
Risk financing
A conscious act or decision not to act that generates the funds to pay for losses and risk control measures or to offset variability in cash flows.
Retention
A risk financing technique by which losses and variability in cash flows are financed by generating funds within the organization.
Transfer
In the context of risk management, a risk financing technique by which the financial responsibility for losses and variability in cash flows is shifted to another party.
Insurance
A risk financing measure that transfers the potential financial consequences of certain specified loss exposures form the insured to the insurer.
Alternative risk transfer (ART)
Those risk financing measures that do not fall into the category of guaranteed cost insurance.
Guaranteed cost insurance
Insurance policies in which the premium and limits are specified in advance.
Primary layer
The first level of insurance coverage above any deductible.
Excess layer
A level of insurance coverage above the primary layer.
Excess coverage
Insurance that covers losses above an attachment point, below which there is usually another insurance policy or a self-insured retention.
Umbrella policy
A policy that provides coverage above underlying policies and may also offer coverage not available in the underlying policies, subject to a self-insured retention.
Buffer layer
A level of excess insurance coverage between a primary layer and an umbrella policy.
Self-insurance
A form of retention under which an organization records its losses and maintains a formal system to pay for them.
Large deductible plan
An insurance policy with a per occurrence or per accident deductible of $100,000 or more.
Captive insurer (or, 'captive')
A subsidiary formed to insure the loss exposures of its parent company and the parent's affiliates.
Risk retention group
A group captive formed under the requirements of the Liability Risk Retention Act of 1986 to insure the parent organizations.
Rent-a-captive
An arrangement under which an organization rents capital from a captive to which it pays premiums and receives reimbursement for its losses.
Protected cell company (PCC)
A corporate entity separated into cells so that each participating company owns an entire cell but only a portion of the overall company.
Finite risk insurance plan
A risk financing plan that transfers a limited amount of risk to an insurer.
Pool
A group of organizations that insure each other's loss exposures.
Retrospective rating plan
A risk financing plan under which an organization buys insurance subject to a rating plan that adjusts the premium rate after the end of the policy period based on a portion of the insured's actual losses during the policy period. (Different from an Experience Rating Plan)
Loss limit
The level at which a loss occurrence is limited for the purpose of calculating a retrospectively rated premium.
Capital market
A financial market in which long-term securities are traded.
Securitization
The process of creating a marketable investment security based on a financial transaction's expected cash flows.
Insurance securitization
The process of creating a marketable insurance-linked security based on the cash flows that arise from the transfer of insurable risks.
Hedging
The purchase of sale of one asset to offset the risks associated with another asset.
Derivative
A financial contract that derives its value from the value of another asset.
Contingent capital arrangement
An agreement, entered into before any losses occur, that enables an organization to raise cash by selling stock or issuing debt at prearranged terms after a loss occurs that exceeds a certain threshold.
Nonadmitted insurer
An insurer not licensed to do business in the insured's home state.
Admitted insurer
An insurer licensed by a state insurance department to do business in the insured's home state.
Residual market
The term referring collectively to insurers and other organizations that make insurance available through a shared risk mechanism to those who cannot obtain coverage in the admitted market.
Reinsurance
The transfer of insurance risk from one insurer to another through a contractual agreement under which one insurer (the reinsurer) agrees, in return for a reinsurance premium, to indemnify another insurer (the primary insurer) for some or all of the financial consequences of certain loss exposures covered by the primary insurer's policies.
Ceding commission
An amount paid by the reinsurer to the primary insurer to cover part or all of the primary insurer's policy acquisition expenses.
Retrocession
A reinsurance agreement whereby one reinsurer (the retrocedent) transfers all or part of the reinsurance risk it has assumed or will assume to another reinsurer (the retrocessionaire).
Financial market
A mechanism used for trading securities.
Securities
Pieces of paper or electronic records that provide evidence of equity or debt instruments.
Money market
A financial market in which short-term securities are traded.
Primary market
A mechanism in which new securities are sold, with the proceeds going directly to the issuer.
Secondary market
A mechanism for investors to buy and sell previously issued securities.
Third-party administrator (TPA)
An organization that provides administrative services associated with risk financing and insurance.
Special investigative unit (SIU)
A division set up to investigate suspicious claims, premium fraud, or application fraud.
Underwriting
The process of evaluating insurable loss exposures, accepting or rejecting them, classifying accepted risks, and determining the appropriate insurance premium.
Insolvency risk
The risk of an insurer being unable to meet its financial obligations.
Written premiums
The total premium on all policies written (put into effect) during a particular period.
Policyholders' surplus
The difference between an insurer's assets and its liabilities.
Premium-to-surplus ratio
A ratio that indicates an insurer's financial strength by relating net written premiums to policyholders' surplus.
Loss reserve
A liability on an insurer's balance sheet that shows the estimated amount that will be required to settle claims that have occurred but have not yet been paid.
Unearned premium reserve
The insurance premiums prepaid by insureds for insurance coverage that the insurer will provide in the future.
Earned premiums
The portion of written premiums that corresponds to coverage that has already been provided.
Unearned premiums
The portion of written premiums that corresponds to coverage that has not yet been provided.
Paid losses
Losses that have been paid to, or on behalf of, insureds during a given period.
Incurred losses
The losses that have occurred during a specific period, no matter when claims resulting from the losses are paid.
Loss adjustment expenses (LAE)
Expenses that an insurer incurs to investigate, defend, and settle claims.
Net underwriting gain or loss
An insurer's earned premiums minus its incurred losses and underwriting expenses for a specific period.
Overall gain or loss from operations
An insurer's net underwriting gain or loss plus its net investment gain or loss for a specific period.
Fortuitous loss
A loss that is accidental and unexpected.
Civil-law system
A basic legal system that relies on scholarly interpretations of codes and constitutions rather than court interpretations of prior court decisions, as in common-law systems.
Common-law system
A legal system in which the body of law is derived more from court decisions as opposed to statutes or constitutions.
Doctrine of 'stare decisis'
A method of case resolution in which courts follow earlier court decisions when the same issues arise again in lawsuits.
Criminal law
A classification of law that applies to acts that society deems so harmful to the public welfare that government is responsible for prosecuting and punishing the perpretrators.
Civil law
A classification of law that applies to legal matters not governed by criminal law and that protects rights and provides remedies for breaches of duties owed to others.
Tort
A wrongful act or omission, other than a crime or breach of contract, for which the remedy is usually monetary damages.
Tortfeasor
One who commits a tort.
Negligence
The failure to exercise the degree of care that a reasonable person in a similar situation would exercise to avoid harming others.
Proximate cause
The event that sets in motion an uninterrupted chain of events leading to a loss.
Intentional tort
A tort committed with intent to cause harm or with intent to do the act that causes harm.
Strict liability, or absolute liability
Liability that arises from inherently dangerous activities, resulting in harm to another, regardless of the degree of care taken.
Compensatory damages
A payment awarded by a court to indemnify a victim for actual harm.
Special damages
Compensatory damages for actual losses that the plaintiff claims resulted from the defendant's wrongful act.
General damages
Compensatory damages that do not have an economic value and that are presumed to follow from the type of wrong claimed by the plaintiff.
Punitive, or exemplary damages
A payment awarded by a court to punish a defendant for a reckless, malicious, or deceitful act or to deter similar conduct; need not bear any relationship to a party's actual damages.
Injunction
A court-ordered equitable remedy requiring a party to act or refrain from acting.
Contract
A legally enforceable promise.
Promisor
The party to a contract making a promise.
Promisee
The party to a contract to whom a promise is made.
Privity of contract
The connection or relationship between parties to a contract because they have mutual interests.
Breach of contract
The failure of a party to a contract, without legal excuse, to perform all or part of the contract.
Consideration
Something of value or bargained for and exchanged by the parties to a contract.
Flat cancellation
The cancellation of an insurance policy as of its effective date.
Binder
In insurance, a temporary contract outlining the coverage provided.
Void contract
An agreement that, despite the parties' intentions, never reaches contract status and is therefore not legally enforceable or binding.
Voidable contract
A contract that one of the parties can reject (avoid) based on some circumstance surrounding its execution.
Canceled contract
A legally enforceable contract that is no longer in effect.
Genuine assent
Contracting parties' actual assent to form a contract or their indication of intent to contract by their actions and words.
Fraud
An intentional misrepresentation resulting in harm to a person or an organization.
Material fact
In insurance, a fact that would affect the insurer's decision to provide or maintain insurance or to settle a claim.
Duress
The use of restraint, violence, or threats of violence to compel a party to act contrary to his or her wishes or interests.
Undue influence
The improper use of power or trust to deprive a person of free will and substitute another's objective, resulting in lack of genuine assent to a contract.
Agency
A legal, consensual relationship that exists when one party, the agent, acts on behalf of another party, the principal.
What is altruism?
Unselfish concern for the welfare of others.
Why is altruism the one characteristic that most distinguishes professional behavior from unprofessional behavior?
Because professionalism involves serving the public interest.
How should CPCUs place the public interest above their own?
CPCUs should place others' interests above their own by doing their utmost to live up to the high aspirational standards expressed in the canons.
Matriculation (CPCU)
The process of registering as a CPCU candidate
Applicant (CPCU)
A CPCU student who has submitted a matriculation form that has not yet been approved.
Candidate (CPCU)
A CPCU student whose matriculation application has been approved.
Designee (CPCU)
A person who has earned the CPCU designation, regardless of whether he or she has officially become a CPCU.
CPCU
A person who currently holds the CPCU designation.
Canons
Broad aspirational goals of CPCU conduct.
Rules
Specific, enforceable standards that prescribe the minimum levels of required professional CPCU conduct.
Guidelines (CPCU)
Instructions that are enforceable when they are specifically part of a Rule.
Advisory Opinion (CPCU)
A written interpretation of the CPCU Code of Professional Ethics provided by the Board of Ethical Inquiry.
Board of Ethical Inquiry (CPCU)
An eight-member board, chaired by the Ethics Counsel, responsible for implementing, establishing, and approving CPCU ethics policy.
Ethics Counsel (CPCU)
The chair of the Board of Ethical Inquiry (BEI) who receives written complaints of ethical violations, investigates the complaints, and presents the facts to the BEI for consideration, and communicates BEI recommendations to the Ethics Policy Committee of the Board of Trustees of the American Institute and delivers the verdicts.
Ethics Policy Committee (CPCU)
A committee of the Board of Trustees of the American Institute that reviews matters of policy relating to American Institute ethics activities and promulgates the specific disciplinary procedures and penalties to be used in enforcing the code.
Why is it unethical for a person who does not maintain high levels of professional competence to claim to be a professional?
Because any person claiming abilities he or she does not possess misrepresents himself or herself to the people with whom he or she deals.
Whis is it especially important that a CPCU maintain the competence developed through CPCU studies and other professional studies?
Maintaining the competence developed through CPCU studies is essential to remain a professional.
What is the minimum standard a CPCU shoudl meet in maintaining professional competence?
The minimum standard a CPCU should meet is to remain informed on technical matters that are essential to maintain competence in his or her particular position in insurance or risk management.
What types of activities will help CPCUs meet the aspirational goal of improving professional knowledge, skills, and competence?
Taking or teaching CPCU and IIA courses or other insurance/risk management courses, teaching similar courses, writing articles, conducting research, or performing other similar activities will help CPCUs meet the aspirational goal of improving professional knowledge, skills, and competence.
Naturally, CPCUs are expected to refrain from illegal activities, but legality is generally considered a minimum standard of behavior. How do the aspirational goals of Canon 3 (Legal Conduct) go beyond encouraging legal behavior?
Canon 3 requires CPCUs, in addition to obeying laws and regulations, not to cause unjust harm to others.
Are CPCUs subject to discipline for illegal conduct outside the scope of their business conduct? Explain.
CPCUs are subject to discipline for illegal conduct outside the scope of their business conduct. Any CPCU convicted of a felony is subject to automatic suspension of his or her CPCU designation.
Under what circumstances is a CPCU to be held responsible for violating a law or regulation about which he or she was unaware?
Because CPCUs are responsible for knowing the laws and regulations to which they are subject, they always are held responsible for violating a law or regulationa bout which they were unaware.
In what ways shoudl a CPCU use his or her knowledge and skills in improving the insurance mechanism?
By improving insurance contracts, maintaining insurers' financial strength, helping ensure insurance availability, and helping reduce the cost of insurance. CPCUs can also encourage loss control and can support sound research that will lead to improvement in the insurance system.
Does the Code obligate a CPCU to answer all questions posed by appropriate regulatory authorities investigating other CPCUs' conduct?
Yes.
CPCUs should strive to establish and maintain dignified and honorable relationships with insurance practitioners and other professionals. What is the connection between professional relationships and ethical behavior?
The connection is that anyone who is dignified and honorable does not exceed his or her legal limitations, disclose confidential information inapropriately, or misrepresent his or her professional abilities.
A CPCU should proudly display the CPCU designation and explain its significance. Yet, every CPCU has many limitations in his or her professional expertise. What steps should a CPCU take to compensate for these limitations?
A CPCU can compensate for his or her own limitations by acknowledging them and drawing on the knowledge of other professionals when necessary. It helps to have established a dignified and an honorable relationship with other professionals.
Most insurance activities necessarily require the use of confidential business or personal information, such as the specific injuries of an accident victim or the earnings of a firm's individual employees. Some items of information may even be relevant to civil or criminal actions. How should a CPCU treat confidential information while remaining true to both Canons 5 & 6?
In the case of civil or criminal actions, a CPCU should not release confidential information to others unless it is required by law or required by someone to perform legitimate occupational duties.
One way a CPCU can improve the insurance mechanism is to support proposed legislation that he or she believes is favorable and consistent with the goals of service to the public. Does the Code encourage or discourage lobbying efforts by a CPCU speaking as an individual?
The Code neither requires nor prohibits lobbying activities. Such activities can be appropriate and desirable in improving the public understanding of insurance and risk management, as well as leading to improvement in the insurance mechanism.
What precautions should a CPCU take when expressing a position on political or other issues?
CPCUs who lobby or otherwise take a public position on controversial issues should clarify that they are acting as individuals and not on behalf of the American Institute or the CPCU Society.
How may Rule R8.4 be violated by a CPCU who is engaged in lobbying efforts?
A CPCU engaged in lobbying efforts may violate Rule R8.4 by creating the impression that he or she is acting as a representative of the AICPCU
In what ways does Canon 8 seek to maintain the dignity of the CPCU professional designation?
By ensuring appropriate and dignified use of the designation and the key.
The code includes specific restrictions on the ways in which the CPCU designation and the CPCU key are to be used. What problems are these restrictions designed to prevent?
Undignified commercialization and unfair comparisons, as well as any other unethical practices.
The code includes specific restrictions on the ways in which the CPCU designation and the CPCU key are to be used. List the specific ways described in the Code in which the initials CPCU and the CPCU key may be used.
In business cards, stationery, office advertising, signed articles, business and professional listings, telephone listings, and in any other manner approved by the AICPCU
The code includes specific restrictions on the ways in which the CPCU designation and the CPCU key are to be used. List the specific prohibitions against misuse of the CPCU designation or the CPCU key.
The CPCU designation should be treated as a personal designation that is associated w/ the individual CPCU. It should not be used as part of a firm, partnership, or corporate name; trademark, or logo. It should not be affixed to any object, product, or property w/o permission from the AICPCU. The letters CPCU should not appear on a vanity license plate, a Web page address, an e-mail address, or a telephone "number" that is represented by letters.
What are appropriate ways of announcing that a CPCU candidate has met all requirements and has earned and received the CPCU professional designation?
Appropriate ways of announcing that a CPCU candidate has met all requirements and has earned and received the CPCU professional designation are the news release available from the AICPCU, articles in an employer's publications, and dignified advertisements.
Under what circumstances should a CPCU reveal information regarding a Code violator?
Except for unauthorized use of the CPCU designation, CPCUs are never required to report violations of the Code by CPCUs or CPCU candidates. However, they are ethically required to furnish information to the Ethics Counsel or other appropriate authority investigating a Code violation.
Is a CPCU obligated to report a non-CPCU who uses the CPCU designation?
Yes, CPCUs are obligated to report the use of the CPCU designation by any non-CPCU, including CPCU candidates.
Principle of indemnity
The principle that insurance policies should compensate the insured only for the value of the loss.
Contract of indemnity
A contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of the loss.
Collateral source rule
A legal doctrine that provides that the damages owed to a victim should not be reduced because the victim is entitled to recover money from other sources, such as an insurance policy.
Utmost good faith
An obligation to act with complete honesty and to disclose all relevant facts.
Contract of adhesion
A contract to which one party must adhere as written by the other party.
Reasonable expectations doctrine
A legal doctrine that provides for an ambiguous insurance policy clause to be interpreted in the way that an insured would reasonably expect.
Conditional contract
A contract that one or more parties must perform only under certain conditions.
Declaratory judgment action
A legal action in which the insurer (or insured) presents a coverage question to the court and asks the court to declare the rights of the parties under the applicable insurance policy.
Waiver
The intentional relinquishment of a known right.
Estoppel
A legal principle that prohibits a party from asserting a claim or right that is inconsistent with that party's past statement or conduct on which another party has detrimentally relied.
Reservation of rights letter
A notice sent by an insurer advising the insured that the insurer is proceeding with a claim investigation but that the insurer retains the right to deny coverage later.
Nonwaiver agreement
A written contract in which the insured and the insurer agree that neither will waive any of its rights under the policy as a result of the investigation or defense of a lawsuit against the insured.
Monoline policy
An insurance policy that covers a single type of insurance.
Package policy
An insurance policy that covers more than one type of insurance.
Coverage part
One or more forms that together provide coverage for a line of insurance.
Self-contained policy
A single document that contains all the agreements between the insured and the insurer and that forms a complete insurance policy.
Modular policy
An insurance policy that consists of several different documents, none of which by itself forms a complete policy.
Manuscript form
An insurance form that is drafted according to terms negotiated between a specific insured (or group of insureds) and an insurer.
Insuring agreement
A statement in an insurance policy that the insurer will, under certain circumstances, make a payment or provide a service.
Policy condition
Any provision in an insurance policy that qualifies an otherwise enforceable promise of the insurer.
Insured party
A person, corporation, or other entity contractually entitled to a loss payment or other benefits according to an insurance policy's terms.
Named insured
A person, corporation, partnership, or other entity identified as an insured party in an insurance policy's declarations page.
Insurable interest
An interest in the subject of an insurance policy that is not unduly remote and that would cause the interested party to suffer financial loss if an insured event occurred.
Loss payee
A secured creditor to whom the debtor has pledged specific personal property as collateral for a loan.
Loss payable clause
A policy provision that protects the creditor's interest in personal property pledged as collateral for a loan.
Mortgagee
A lender in a mortgage arrangement, such as a bank or another financing institution.
Mortgage clause
A policy provision that protects the creditor's (mortgagee's) insurable interest in real property pledged as collateral for a mortgage loan.
Separation of interests provision
A policy provision that clarifies the extent to which coverage may apply separately to more than one insured party.
Bailee
A party having possession of another's personal property and a duty either to return it to the owner or to deliver or dispose of it as agreed.
No benefit to bailee provision
A property insurance policy provision that states that it is the insured, and not the bailee, who is protected when covered property is in a bailee's custody.
Assignment
The transfer of property from one party (the assignor) to another party (the assignee).
Assignment provision
A policy provision that prohibits an insured from transferring ownership of an insurance policy to another party without the insurer's written consent.
Factual expectancy
A situation in which a party experiences an economic advantage if an insured event does not occur or, conversely, economic harm if the event does occur.
Joint tenancy
A concurrently owned and undivided interest in an estate that transfers to a surviving joint tenant upon the death of the other.
Tenancy by the entirety
A joint tenancy between husband and wife.
Tenancy in common
A concurrent ownership of property, in equal or unequal shares, by two or more joint tenants who lack survivorship rights.
Tenancy in partnership
A concurrent ownership by a partnership and its individual partners of personal property used by the partnership.
Policy period
The timeframe, beginning with the inception date, during which insurance coverage applies.
Policy schedule
A list that identifies specific items, usually with values attached, that are covered by a property insurance policy.
Ensuing loss
The loss attributable to a subsequent peril that results form loss by an initial peril.
Supplementary payments
Payments for a range of additional claim-related expenses as specified in a liability policy.
Occurrence-basis coverage
Coverage that is triggered by the actual happening of bodily injury or property damage during the policy period.
Claims-made coverage
Coverage that is triggered by a claim alleging bodily injury or property damage that is made during the policy period, even if the claim arises from an event that happened before policy inception.
Retroactive date
The date on or after which injury, damage, or another insured event must occur in order to be covered under a claims-made policy.
Cancellation
An action taken by either the insurer or the insured to terminate coverage that otherwise would continue until policy expiration.
Nonrenewal
The ending of the contractual relationship between the insured and insurer by an action of the insurer to terminate coverage on the policy's expiration date.
Policy termination
The ending of the contractual relationship between the insured and insurer by cancellation, expiration, or nonrenewal.
Anniversary date
The specific day and month that a policy initially became effective.
Changes provision
A policy provision that states the procedure that must be followed to alter the policy and who has the authority to request an alteration.
Liberalization clause
A policy provision that explains the expansion of coverage that occurs when an insurer introduces a revised or updated version of the policy that is broader than the insured's current policy.
Examination of books and records provision
A policy provision that indicates the insured's duty to permit a premium auditor representing the insurer to conduct the audits necessary to determine the final premium when the premium is based on an auditable exposure or to confirm the amount payable on a claim.
Premium audit
An examination of an insured's operations, records, and accounts to determine exposure for the insurance coverages provided.
Inspection and surveys provision
A policy provision that states the insured's duty to permit an insurer representative to enter the insured's premises and make loss control inspections and surveys.
Increase in hazard provision
A policy provision that limits or suspends coverage during the period in which a specified hazard has increased.
Protective safeguards provision
A policy provision that suspends coverage when a protective device is not functioning.
Abandonment provision
A policy provision that specifies the insurer's post-loss position on the rejection of damaged property abandoned by the insured.
Bankruptcy provision
A policy provision stating that the insurer is obligated to pay claims on behalf of an insured who is bankrupt.
Insurance to value
The choice of a limit in property insurance that approximates the maximum potential loss.
Actual cash value (ACV)
A valuation method typically calculated as the replacement cost at the time of loss minus depreciation.
Replacement cost
The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation.
Depreciation
The reduction in value caused by the physical wear and tear or technological or economic obsolescence of property.
Market value
The price at which a particular piece of property could be sold on the open market by an unrelated buyer and seller.
Broad evidence rule
A method for determining actual cash value based on court decisions that require all relevant factors to be considered.
Actual loss sustained
A valuation method in business income policies designed to make the insured whole by demonstrating the actual amount of loss that occurs during the period of restoration.
Agreed value method
A valuation method in which the insurer and the insured agree on the value of the insured object and state it in a policy schedule.
Functional valuation method
A valuation method that determines the value of property by comparing it to the cost of property that can perform the same function even if it is not identical.
Pair or set clause
A policy provision that indicates how values will be determined when part of a pair or set is lost, damaged, or destroyed.
Specific limit
The maximum dollar amount the insurer will pay, per item or per occurrence, for each loss of a particular item or class of property.
Blanket limit
The maximum dollar amount the insurer will pay for two or more items or classes of property at one or more locations.
Sublimit
A policy provision that imposes smaller limits for certain kinds of property or lines of insurance.
Inflation guard protection
A method of protecting against inflation by increasing the applicable limit for covered property by a specified percentage over the policy period.
Peak season endorsement
A commercial property endorsement that covers the fluctuating values of business personal property by providing differing amounts of insurance for certain periods during the overall policy period.
Deductible
A portion of a covered loss that is not paid by the insurer.
Dollar trading
An insurance premium and loss exchange in which the insured pays the insurer premiums for low value losses, and the insurer pays the same dollars back to the insured, after subtracting expenses.
Per event deductible
A deductible that applies to each item, each location, each claim, or each occurrence.
Aggregate deductible
A deductible that applies collectively to all losses occurring during a specific period, typically a policy year.
Straight deductible
A dollar amount the insured must pay toward a covered loss.
Split deductible
A deductible provision that applies one deductible for most causes of loss but a different, higher deductible for other specified causes of loss.
Percentage deductible
A deductible expressed as a percentage of some other amount, such as the amount of insurance, the covered property's value, or the amount of the loss.
Time deductible
A deductible expressed in terms of the time delay between when a loss occurs and when coverage begins.
Amount payable = ?
Amount payable equals "did over should times loss"
Flat policy
A property insurance policy without a coinsurance clause.
Monthly limit of indemnity
A limit in business income policies on the amount of insurance that can be collected during any thirty-day period, subject to the limit of insurance.
Maximum period of indemnity
An option in business income policies in which the insurer agrees to pay the amount of covered losses and expenses sustained during a 120-day period, up to the limit of insurance.
Appraisal clause
A policy provision that prescribes a method for resolving a disputed claim about the value of property or the amount of a property loss.
Subrogation
The process by which an insurer recovers payment from a liable third party who has caused a property or liability loss that the insurer has paid to, or on behalf of, an insured.
Salvage
The process by which an insurer takes possession of damaged property for which it has paid a total loss and recovers a portion of the loss payment by selling the damaged property.
Recovered property provision
A policy provision that clarifies the insured's options when a claim based on the loss of property has been settled but the property is later recovered.
Single limit
A limit that applies to all bodily injury and property damage for a single occurrence, a single person incurring a loss, or a single claim.
Split limits
Separate limits for bodily injury claims and for property damage liability claims.
Aggregate limit
A specific limit on the maximum amount an insurer will pay for total damages from all covered occurrences during the covered period.
Primary coverage provision
An other-insurance provision that specifies that the policy pays the loss amount before other applicable policies until its own limits have been exhausted.
Excess coverage provision
An other-insurance provision that specifies that the policy pays any remaining loss amount, up to its policy limits, after the primary policy's coverage limits have been exhausted.
Proportional other-insurance provision
A policy provision that limits the insurer's obligations to a portion of the overall loss.
Contribution by equal shares
A method of paying losses in which both policies pay the loss equally until the limits under one policy have been exhausted; thereafter the other policy alone pays.
Escape clause
An other-insurance provision that relieves the insurer of any obligation to pay a claim for which other insurance applies.