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266 Cards in this Set

  • Front
  • Back
Domestic Insurer
An insurer organized under the laws of this state, whether or not it is admitted to do business in this state. (p.6)
Foreign Insurer
An insurer not organized under the laws of this state, but in one of the other states or jurisdictions within the United State, whether or not it is admitted to do business in the state or jurisdiction. (p.6)
Alien Insurer
An insurer organized under the laws of any jurisdiction outside the United States, whether or not it is admitted to do business in this state. (p.6)
Actuarial Department
Gather and interpret statistical information used in rate making; determine the probability of loss and sets premium rates. (p.7)
Underwriting Department
Responsible for the selection of risks (persons and property to insure) and rating that determines actual policy premium. (p.7)
Claims Department
Assists the policyholder in the event of a loss. (p.7)
Express Producer Authority
Authority that is written into the producer's agency contract. An Example would be the producers binding authority if written in the contact. (p. 8)
Implied Producer Authority
Authority the public assumes the producer has. An example would be the business activities of providing quotes, completing applications and accepting premiums on behalf of the insurer. (p.8)
Apparent Producer Authority
Authority created when the producer exceeds the authority expressed in the agency contact. This occurs when the insurer does nothing to counter the public impression that such authority exists. An example would be the producer's acceptance of premiums on a lapsed policy. (p.8)
Fair Credit Reporting Act (FCRA)
Protects consumer privacy by ensuring that any data collected by an insurer remains confidential, and is accurate, relevant, and used for a proper and specific reason. (p.9)
The Jones Act
(a.k.a. Merchant Marine Act of 1920 - Allows insured seamen to make claims for injuries suffered during the course of employment. It also regulates maritime commerce in U.S. waters, transportation of cargo, and the rights of seamen. (p. 10)
Gramm-Leach-Bliley Act
(GLBA, a.k.a. the Financial Services Modernization Act of 1999) - It repealed part of the Glass-Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. (p.10)
Terrorism Risk Insurance Act and it's extensions of 2005, 2007
(TRIA) - Enacted in direct response to terrorist attacks in NYC and DC on 9/11/01. Congress provided temporary financial compensation to insured parties during its crisis of recovery from the terrorist attacks. (p.10)
Risk Management
Uncertainty concerning a loss. A condition where the chance, likelihood, probability or potential for a loss exists. (p.12)
Speculative Risk
Situations where there is a chance for loss, gain, or neither loss nor gain to occur. An example of speculative risk is gambling. Speculative risk cannot be insured. (p. 12)
Pure Risk
Situations where there is no chance for gain; the only outcome is for nothing to occur or for a loss to occur. Pure risk can be insured. (p. 12)
Loss
Reduction, decrease of disappearance of value. The basis of a claim for damages under the terms of an insurance policy. (p. 12)
Peril
The cause of loss (must be specified). (p.12)
Hazard
A specific condition that increases the probability, likelihood, or severity of a loss from a peril. (p. 12)
Physical Hazard
A physical condition that increases the probability of loss; use condition or occupancy of property. (p. 13)
Moral Hazard
Dishonest tendencies that increase the probability of a loss; certain characteristics and behaviors of people. (p. 13)
Morale Hazard
Attitude that increases the probability of loss. (p. 13)
Loss Exposure
The condition of being at risk of loss. Purely by existing, property and people are at risk for loss. (p. 13)
Adverse Selection
An imbalance created when risks that are more prone to losses that the average (standard) risk are the only risks seeking insurance within a specific marketplace. For example, only those living in earthquake-prone areas seek to buy earthquake insurance. (p. 13)
Managing Risk
S.T.A.R.R. (Sharing; Transfer; Avoidance; Reduction; Retention) (p. 13)
Law of Large Numbers
As the number of units in a group increases, the more likely it is to predict a particular outcome. (p. 13)
Insurable Risk must include:
Large number of homogeneous units or groups with same perils; The chance of loss must be calculable; the must be measurable; the premiums must be affordable; the loss must be accidental in nature; catastrophic perils are not covered. (p. 13)
The Insurance Contract
Purchased to indemnify the insured against a loss, damage or liability arising from an unexpected event. The exchange of a relatively small and definite expense for the risk of loss that, if it occurs, may be large or small; Designed to transfer risk from the insured to the insurer. (p.14)
Principal of Indemnity
Insured is restored to the same financial or economical condition that existed prior to the loss. Insured should not profit from an insurance transaction. (p.14)
Insurability
The ability of an applicant to meet an insurer's underwriting requirements. (p.14)
Underwriting
The process of selecting, classifying, and rating a risk for the purpose of issuing insurance coverage. (p. 14)
Insurable Events
Any event, past or present, that may cause loss, or damage or create legal liability on the part of an insured. (p. 14)
Insurable Interest
Must exist in every enforceable insurance contact. Depending upon the contract, it must exist at the time of application or at the time of loss. Requires the potential for an insured to suffer financial or economic hardship in the event of a loss. (p. 14)
Contract Law
Pertains to the formation and enforcement of contacts. (p. 15)
Tort Law
Torts are civil wrongs; they're not crimes or breaches of contract. They result in injuries or harm that constitute the basis of a claim by a third party. (p. 15)
Contract of Utmost Good Faith
Both parties bargain in good faith when forming and entering into the contract. The two parties rely upon the statements and promises of the other and assure no attempt to conceal or deceive has been made. (p. 15)
Hold Harmless Agreement
A contractual agreement that transfers the liability of one party to another party; it is used by landlords, contractors, and others as a way to avoid or reduce risk. (p.15)
Four Elements of a Legal Contract
Competent Parties; Legal Purpose; Agreement; Consideration (p. 15)
Contract of Adhesion
One party writes the contact without input from the other party. ("take-it-or-leave-it" basis) (p. 16)
Aleatory Contract
The exchange of value is unequal. Insured's premium payment is less than the potential benefit to be received in the event of a loss. (p. 16)
Valued Contract
A contract that pays a stated amount in the event of a loss. (p.16)
Indemnity Contract
An agreement to pay on behalf of another party under specified circumstances, such as when a loss occurs. (p.16)
Endorsement
A policy form that alters or adds to the provisions of a property and casualty insurance contract. (p. 16)
Personal Contract
Owner cannot transfer or assign ownership of an insurance policy (P&C) to another person.(p. 16)
Assignment
Policy owners may not assign or transfer their rights under an insurance contract without the written consent of the insurer. (p. 16)
Unilateral Contract
Only one party is legally bound to the contractual obligations after the premium is paid to the insurer. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract. (p. 16)
Conditional Contract
Both parties must perform certain duties and follow rules of conduct to make the contract enforceable. The insurer must pay claims if the insured has complied with all the policy's terms and conditions. (p. 16)
Reasonable Expectations Doctrine
What a reasonable and prudent policy owner would expect; the reasonable expectations of policyowners are honored by the courts although the strict terms of the policy may not support these expectations. (p. 17)
Representations
Statements made by the applicant on the application that are believed to be true to the best of knowledge and belief of the applicant; may be withdrawn prior to policy issuance. (p. 17)
Misrepresentations
A false statement contained in the application.; usually does not void coverage or the policy. If material to the issuance of coverage, meaning the insurer would not have issued coverage had the misrepresentation not been made, coverage does not apply. In some cases, a material misrepresentation may void the policy. (p. 17)
Concealment
The willful holding back or secretion of material facts pertinent to the issuance of insurance (or a claim), even if the applicant or insured was not about the subject. Concealment results in denial of coverage and may void the policy. (p. 17)
Warranties
Statements in the application or stipulations in the policy that are guaranteed true in all respects. If warranties are later discovered untrue or breached (past, present, or future), coverage (and sometimes the contract) is voided. (p. 17)
Fraud
Intentional deception of the truth in order to induce another to part with something of value or to surrender a legal right. (p. 17)
5 Elements of Fraud
1) False Statement 2) Disregard for the victim 3) Victim believes the false statement 4) Victim makes a decision and/or acts based on the belief in, or reliance upon, the false statement 5) the victim's decision and/or action results in harm. (p. 17)
Void Contract
An agreement without legal effect because it was made illegally or it was declared void by the courts because it doesn't contain all the elements of a legal contract. (p. 17)
Voidable Contract
A valid contract that for reasons satisfactory to a court, may be set aside by one of the parties. An example is an insurer may void or revoke coverage for misrepresentation or fraud. (p. 17)
Underwriting Factors
1) Nature of Risk 2) Hazards that are present 3) Claims History 4) Other factors that depend upon the type of risk being insured. (p. 18)
Rate
The dollar amount charged for a particular unit of insurance, such as $5 per $1,000 of insurance. (p. 18)
Premium
The total cost for the amount of insurance purchased. ($50,000 of coverage = $5 rate x 50 (per $1,000 of insurance) for a $250 premium. (p. 18)
Class Rating
A rate based on the policyholders who have similar exposures and experience. (p. 18)
Experience Rating
A rate based on the policyholder's actual loss history when compared to the loss history of similar risk. (p. 18)
Individual Rating
A rate used for a policyholder because a large enough pool of similar risks is not available to any other type of rate. Primarily used for commercial any specialty risks because of the number of unique variables involved. (p. 18)
"A" Rating or Judgment Rating
An individual rate that doesn't use loss history as a component and that is derived largely from the underwriter's evaluation and best judgment the risk poses to the insurer. (p. 18)
Loss Cost Rating
A rating organization provides insurers with the portion of a rate that does not include provisions for expenses or profit. (p. 18)
Manual Rating
The use of rates contained in a manual published by the insurer or those of the rating organization of which it is a member. (p. 18)
Merit Rating
The use of rates that rewards a policyholder that takes measures to decrease the probability of loss by the implementation of safety programs, loss control programs, ect. (p. 18)
Retrospective Rating
The use of rates that adjust the policy premium to reflect the current loss experience of the policyholder. Premium adjustments are subject to minimums and maximums. (p. 18)
Schedule Rating
A method of rating property and liability risk by using charges and credits to modify a class rate based on the nature of the particular risk being rated. (p. 18)
File and Use
Rates must be filed with the state insurance regulatory authority (Department of Insurance) and may be used as soon as they are filed. (Illinois is strictly this) (p. 18)
Prior Approval
Insurers cannot use rates until approved by the Department of Insurance, or until a specific time period has expired after the filing. (p. 18)
Mandatory Rates
Some states require that mandatory rates be used for certain lines of insurance. (p.19)
Open Competition
A state relies on competition between insurers to produce fair and adequate rates. (p. 19)
Loss Reserves
The net premiums plus interest reflects possible future contract obligations. An accounting measurement of an insurer's future obligation to its policyholders. (p. 19)
Loss Ratio
Determined by dividing Paid Losses + Loss Reserves by Total Earned Premiums (p. 19)
Expense Ratio
Determined by dividing an insurer's Total Operating Expenses by Written Premiums. (p. 19)
Combined Ratio
Sum of the loss ratio and expense ratio. (p. 19)
Reisurance
The transfer of risk between insurance companies. The reisurer assumes some or all of the risk of the ceding, or primary, insurance company. (p. 20)
Admitted Insurer
Authorized to do insurance business in the state and is issued a Certificate of Authority by the state's Department of Insurance. (p. 20)
Accident
A sudden, unforeseen, unintended, and unplanned event from which loss or damage results. (p. 21)
Occurrence
An accident includes continuous or repeated exposure to the same general harmful conditions. (p. 21)
Cancellation
The termination of an insurance policy before its expiration date. Once cancelled, a policy provides no coverage. A policy may be cancelled by the insured or insurer. (MIDTERM) (p. 21)
Pro Rata Cancellation
A proportionate cancellation of insurance that refunds premium to the insured based on the precise number of days coverage was in effect. The earned premium is the premium charged and retained by the insurer for the number of days coverage was in place; the unearned premium is the premium refunded to the insured for the number of days coverage was not in place. (p. 21)
Short Rate Cancellation
A cancellation of insurance that incurs a financial penalty. Sometimes when the insured cancels the policy before it's expiration date, a short-rate cancellation is issued. The insurer retains a portion of the unearned premium to cover costs. (p. 21)
Flat Cancellation
A cancellation of insurance that is retroactive to the effective date of the policy. No coverage is provided and the insurer must refund the policy premium paid by the insured. (p. 21)
Non-Renewal
The termination of a policy at the expiration of its term. The policy does not renew and no coverage is provided after the expiration date. (p. 21)
Proximate Cause
The primary cause of loss. If only one peril caused the loss, the proximate cause is the first event in the unbroken chain of events that resulted in loss. If more than two perils caused or contributed to the loss, the proximate cause is the peril having the most significant impact in generating the loss or damage. (p. 21)
Hostile Fire
A fire burns outside its intended boundaries, or becomes uncontrollable. Examples of a hostile fire include a wildfire or a fire that damages a home when a spark from a fire in the fireplace ignites a piece of furniture. (p. 21)
Friendly Fire
A fire that was intentionally set and stays within its intended boundaries (e.g. fireplace) and results in smoke damage to the inside of a fireplace. Property insurance does not cover damage from a friendly fire. (p. 21)
Inherent Vice
A quality within property that causes it to damage or destroy itself. Examples include rust, rot and fading of paint. Inherent vice is not covered by a property policy. (p. 22)
Binder
A legal agreement issued by an insurance company or a producer that provides temporary proof of insurance until the insurer is able to issue an insurance policy. Binders are issued for specific time periods (Maximum of 60 days) and automatically end when the policy is issued. Binders contain the name of the insurer, the amount and type of insurance, and the perils insured against. (p. 22)
Arbitration
Process whereby a disputed claim is decided by a neutral third party. The disputing parties choose the impartial third party and agree in advance to accept the final decision of the arbitrator, who makes a decision after a hearing where both parties offer evidence. (p. 22)
Right of Salvage
The right of the insurer to take possession of damaged property after paying for its loss. The salvage belongs to the insurer. (p. 22)
Salvage Value
The amount for which property can be sold at the end of its useful life. In property insurance, the salvage is the scrap value of damaged property. (p. 22)
Concurrent Causation
A principle holding that when two perils simultaneously cause a loss (i.e. they are both considered the proximate cause of loss) the insurer must pay the loss even if one of the perils is excluded by the policy. (i.e. earthquake) (p. 22)
Concurrency/Concurrent Policies
The existence of two or more policies covering the same exposures, having the same policy periods, and the same coverage triggers. For example, if an auto policy and an umbrella policy are written with the same policy dates, they are considered to be concurrent. (p. 22)
Non-Concurrency/Non-Concurrent Policies
The existence of two or more policies covering the same exposures that don't have the same policy periods. Non-concurrency may create a coverage gap when underlying liability policies and an umbrella policy are non-concurrent because if an underlying liability policy exhausts its aggregate, it may violate the umbrella's underlying limits requirement. (p. 22)
Deductible
The specified amount of each loss that the insured must bear. In property insurance (and with a per claim, or per occurrence, deductible), the insurer subtracts the deductible from the amount of loss when making payment. By accepting a larger deductible, the insured's premium may be reduced. An insurer may require a large deductible as an underwriting tool to limit small claims. (p. 22)
Definitions
Words, terms, and phrases that are clearly described and used in an insurance policy for the purpose of clarifying the intent of the insurer and to avoid coverage disputes with respect to the extent of coverage provided by the policy. (p. 23)
Bailee
A person or any organization to which property has been entrusted, usually for repairs, servicing or storage. Because bailees are legally responsible for property in their care, property insurance policies specifically exclude coverage for property in the care of a Bailee. (p. 22)
Bailor
A person or organization that entrusts property to a Bailee. (p. 22)
Primary Insurance
Any type of coverage that responds to a loss before all other coverage responds. (p. 22)
Excess insurance
Any form of insurance coverage that provides protection against certain perils or causes of loss ONLY after loss or damage exceeds a stated amount or the limits stated in specific policies or self-insurance. Excess insurance may be written over primary, excess, or umbrella insurance. (p. 22)
Unoccupancy
A property that contains personal property but has no occupants. (p. 22)
Vacancy
A provision in a property policy that eliminates or limits coverage for buildings that don't contain sufficient personal property to support intended occupancy or use. (p. 22)
Burglary
The taking of property from inside the premises or a locked safe or vault by a person who commits forcible entry into, or exit from, the property of another while trespassing. (p. 23)
Robbery
The taking of property from the care and custody of a person who has been caused or threatened with bodily harm. (e.g. At least 1 person present) (p. 23)
Theft
The broadest of the crime coverages, theft includes any act of stealing. (p. 23)
Mysterious Disappearance
The loss of property when the cause of loss is not known. This is NOT theft, burglary or robbery. (Not covered) (p. 23)
Direct Property Loss
A loss that causes direct damage to property without an intervening cause. (p. 23)
Indirect Loss or Consequential Loss
A loss that is not the direct result of a peril. (p. 23)
Named Perils (Scope of Coverage)
This type of property coverage only provides insurance for the cause of loss, or perils, listed. If a peril is not "named" in the policy, no coverage applies for loss or damage caused by that peril. Typical "named perils" are fire and theft. Named Perils may contain coverage for up to 16 named perils; coverage for additional perils may be added by endorsement (Fire, wind, hail, ect.). (p. 23)
Open Perils (Scope of Coverage)
This type of property coverage provides insurance for all causes of loss that are not specifically excluded under the policy. Typical exclusions in an "open perils" policy are flood and earthquake. (p. 23)
Replacement Value
The cost to replace property with property of like kind and quality, at current pricing, without deduction for depreciation. Many property policies providing loss valuation at replacement value require covered property to be insured to a certain percentage of its replacement value, such as 80% or 90%. (p. 23)
Actual Cash Value (ACV)
The cost to repair or replace property at its replacement value, minus depreciation. (p. 24)
Agreed Value
The insurance company and insured agree to specific value of a particular property before the policy is issued. If a total loss occurs, the insurer will pay the Agreed Value. (p. 24)
Stated Value
A valuation method that states the value of a particular property on the declarations page, but provides for the insurer to pay the lesser of the stated value or ACV of the property following a loss. (p. 24)
Valued Policy
A policy that states the value of property as the amount shown on the Declarations page and will pay that full face value in the event of a total loss, regardless of the actual cash value. (IL) (p. 24)
Market Value
The price a willing buyer would pay for property purchased from a willing seller. Example: Goods and commodities whose value fluctuates with market conditions; namely agricultural products. (p. 24)
Specific Limit (Methods of Writing Property Insurance Limits)
Insures a single item of property for a single limit of insurance. For example, a fire policy insures one dwelling for $100,000. (p. 25)
Scheduled Limit (Methods of Writing Property Insurance Limits)
Insures one or more items of property on a single policy and the amount of insurance applying to each item is shown on a schedule. For example, one farm policy insures a home for $100,000 and a barn for $200,000. (p. 25)
Blanket Limit (Methods of Writing Property Insurance Limits)
Insures property located at more than one location OR more than one type of property at the same location OR both. For example, the $1 million blanket limit applies to two separate buildings at two separate locations, as well as the business personal property contained in each building. (p. 25)
Standardized Policy Structure
D.I.C.E. (Declarations, Insuring Agreement, Conditions, Exclusions) + Additional Coverages and/or Endorsements (when applicable) (p. 25)
Declarations (Policy)
Describes basic information about the policy including: Who, What, Where, When, How Much. (p. 25)
Insuring Agreement (Policy)
The insuring agreement states the insurance company's promise to pay the insured. This promise is usually broad and the other sections of the policy restrict or limit the scope of coverage provided by the policy. Property insurance policies state in the insuring agreement what perils are covered. (p. 25)
Conditions (Policy)
Policy Period, Concealment or Fraud, Liberalization Clause, Cancellation, Nonrenewal, Assignment, Subrogation, Changes, Insurable Interest and Limit of Liability, Restoration/Non-reduction of Limits, Duties in the Event of Loss, Loss Settlement, Appraisal, Other Insurance, Legal Action Against Us, Loss Payment, Abandonment of Property, Mortgage Clause, No Benefit to Bailee, Recovered Property, Bankruptcy, Death, Loss Payable Clause (p.26)
Exclusions (Policy)
Perils that are NOT covered by the policy are listed in the exclusions section. Other perils may be excluded in provisions stated elsewhere in the policy. Common property exclusions include: Ordinance of Law, Earth Movement, War, Water Perils that are NOT covered by the policy, Utility failure, Neglect of the insured to protect covered property from further loss, Intentional Loss, Nuclear Hazard, Military Action, Government Action, Fungus, Wet Rot, Dry Rot, and Bacteria (e.g. Mold). (p. 27)
Additional Coverages (Policy)
Are automatically included in property policies without an additional premium. They type of additional coverages depends upon the type of policy. Additional coverages are paid in addition to those stated in the insuring agreement and include debris removal, collapse, and fire department service charges. (p. 27)
Liberalization Clause
Specifies that if the insurer broadens coverage with no increase in premium, that broadening of coverage will apply to existing policies without the need for an endorsement. (p. 26)
Subrogation
States the insured must transfer to the insurance company its right of recovery against any party causing a loss after it accepts payment from the insurer for a loss. Subrogation allows the insurer to recover from the party that caused a loss any amounts paid to an insured. It also: 1) Prevents the insured from collecting twice for the same loss. 2) Helps the insurer control expenses and premiums 3) Ultimately holds the responsible third party accountable for the loss. (p. 26)
Appraisal
Addresses disputes about the amount of a loss. If the insurance company and insured cannot agree on the amount of a loss, either party may request an appraisal. Each party selects its own appraiser and the appraisers select an umpire. Agreement by any two parties settles the loss. Each party pays the cost of its own appraiser and shares the costs of the umpire and the appraisal. Appraisal is a dispute resolution method and is not used to determine whether the policy provides coverage for a loss. (p. 26)
Mortgage Clause
Specifies how the policy protects the mortgagee's financial interest. (A mortgagee has insurable interest in real property.) Payment is made to mortgagees only up to its insurable interest in covered property and in order of precedence. The mortgagee must comply with requirements if the insured's claim is denied and the mortgagee wishes to collect under the policy. 1) Must pay any premium 2) Notify insurer of changes in ownership, occupancy, or substantial change in risk 3) Submit proof of loss (p. 27)
Bankruptcy
Specifies that bankruptcy or insolvency of the insured does not relieve the insurer of any of its duties or obligations under the policy. (p. 27)
Loss Payable Clause
Specifies how the policy protects the interests of a loss payee. A loss payee has insurable interest in personal property. (p. 27)
Named Insured
The person or organization designated on the Declarations page of the policy. If property is being insured, the named insured should be the owner of the property. If vehicles are being insured, the named insured should be the party or entity to which the vehicle is titled and registered. The named insured receive the broadest coverage of all persons or organizations protected by a policy. (p. 28)
Insured
A person or organization protected by an insurance contract. (p. 28)
First Named Insured
The person or organization whose name appears first on the Declarations. The First Named Insured is granted rights and responsibilities by the policy that are not granted to other insureds. In commercial lines, many policies spell out those duties and responsibilities. (p. 28)
Coinsurance
A provision contained in most policies insuring commercial property and is used to encourage the insured to purchase and maintain insurance to value, and to establish the basis of payment in the event the insured fails to maintain a specified percentage of that value. The higher the coinsurance percentage the insured agrees to purchase, the lower the rate that the insured pays for the insurance. Consinsurance applies only in the event of a partial loss, as total losses typically are paid in accordance with the Valued Policy Law. (p. 28)
Tort
A wrongful act other than a breach of contract, that violates a duty or the rights of another and for which compensation may be sought from the responsible party. Torts may be either criminal or civil. Torts are either intentional or unintentional. An intentional tort is a deliberate act that harms another and for which the injured party is permitted by law to sue the wrongdoer. An unintentional tort, also known as negligence, is an act, or failure to act that is committed without the same level of care a reasonable individual would have exhibited given the same knowledge and set of circumstances. Liability insurance provides coverage for most unintentional torts and excludes intentional torts. (p. 30)
Vicarious Liability
The liability assigned to one party for the conduct of another, based solely on a relationship between two. Examples include employer/employee relationships and parent/child relationships. (p. 30)
Negligence
Failure to use ordinary care. For example, running a red light. (p. 30)
Gross Negligence
Failure to exhibit any sort of care through recklessness or deliberate indifference to the well-being of others. (p. 30)
Attractive Nuisance
An artificial condition on land that attracts children, such as a swimming pool, and requires the owner to exhibit a special duty of care. Legally, children are considered invitees to the premises if it contains an attractive nuisance even when they are not expressly invited. (i.e. Trampoline) (p. 30)
Loss of Consortium
Compensation to a husband or wife for the loss of companionship of a spouse. (p. 30)
Compensatory Damages
Awarded to the injured party for the actual loss sustained. Damages are Special or General. (p. 30)
Special Damages
Are an award to an injured party for actual and known expenses such as bills, loss of earnings, and the costs of repairing or replacing damaged property. Special damages are paid for tangible loss or damage. (p. 30)
General Damages
Are an award to an injured party for pain, suffering, mental anguish, disfigurement, and similar types of losses. General Damages are paid for losses that cannot be calculated objectively and assigned a specific dollar value. (p. 30)
Punitive Damages
An award to an injured party, in addition to compensatory damages, to punish and discourage a wrongdoer from repeating negligent acts or omissions. Most liability policies do not provide coverage for punitive damages. (p. 31)
Bodily Injury Liability
Legal liability arising from physical injury, including sickness, disease, and death caused by the acts or omissions of an insured. Bodily injury liability expenses include medical bills, lost wages, mental anguish, pain and suffering, ect. (p. 31)
Property Damage Liability
Legal liability arising from physical damage to tangible property, including loss of use of that property, caused by the acts of an insured. Property damage liability expenses include the actual cost of repair or replacement of the damaged property as well as the inability to use damaged property (loss of use). (p. 31)
Medical Payments Coverage
Coverage for the bodily injury of third parties sustained on an insured location or as a result of the insured's activities. Coverage is provided for the payment of necessary medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, and funeral expenses. Payments are made regardless of the insured's negligence. This coverage is provided to discourage liability claims and lawsuits and, when payments are made, are not an admission of liability. (p. 31)
Personal Injury Liability
legal liability arising from specific offenses committed by an insured that results in injury other than bodily injury or property damage. Examples of personal injury include libel, slander, false arrest, invasion of privacy, and copyright infringement. Personal injury is generally understood to affect one's reputation or emotional well-being and is not bodily harm or property damage. (p. 31)
Notice of Loss
Insured must notify the insurer in writing as soon as possible in the event of any loss or occurance. The written notice should include the named insured, policy number, and details about the time, place, circumstances of the occurrence, and names and addresses of any claimants and witnesses. (p. 31)
Proof of Loss
A formal statement made by the insured and provided to the insurer that provides necessary details for the insurer to determine its liability under a policy. (p. 31)
Certificate of Insurance
A document that shows evidence that specific types of insurance were purchased by the insured, at certain limits, and that they were in place on the date the certificate of insurance was issued. A certificate of insurance is not proof of insurance as a binder is. (p. 31)
Common Law
Law practiced as the result of judicial or court decisions (i.e. case law and defenses) (p. 32)
Contributory Negligence
Prevents recovery for damages caused by a negligent party if the claimant was negligent to any extent. For example, if the claimant is 5% negligent and the wrongdoer is 95% negligent, the claimant is not permitted to collect damages. (Defense - Common Law) (p. 32)
Assumption of Risk (Negligence)
Prevents recovery if the claimant knowingly assumed the risk. (Defense - Common Law) (p. 32)
Intervening Cause (Negligence)
Prevents or limits recovery from the wrongdoer when a second, distinctly separate negligent act occurs after the original negligent act, but before damage occurs, and interferes with the chain of events that brings about the loss. The intervening cause must be unexpected and unforeseen. (p. 32)
Statutory Law
Written law enacted by legislatures. (p. 32)
Comparative Negligence
Damages are reduced in proportion to the degree of the claimant's negligence. For example, if the claimant is 5% negligent and the wrongdoer is 95% negligent, the claimant may only recover 95% of damages. (IL) (p. 32)
Statue of Limitations
The length of time during which legal proceedings may be initiated. This time period is established by federal or state law and usually begins on the day an event occurs. (p. 32)
Absolute Liability
Most often associated with dangerous animal ownership, abnormally dangerous activities, and employers liability for injuries sustained by their employees. Dangerous animals include: lions, bears, and certain dog breeds such as pit bulls and rottweillers. Absolute liability applies to the storage of explosives, highly flammable material and weapons or firearms. (p. 33)
Strict Liability
Applies to Products - If a claimant can prove that a product caused the injury, the manufacturer will be held liable whether or not the product was defective. (p. 33)
Pro Rata Liability
Specifies the process to be followed when more than one policy covers the same loss. Each policy pays no more than its share of the loss and the method of sharing varies by contract. Some policies require sharing of losses by the ratio of applicable limits of insurance each insurer writes with respect to the total of all limits available for the loss (pro rata). Other policies require the insurers to share the loss by contributing equal shares until each insurer has paid its limit of insurance (contribution by equal shares.) (p. 34)
Limit of Liability/Limits of Insurance
Are shown on the policy declarations page and are the most paid by the policy regardless of the number of insureds, claims made, lawsuits filed, or parties making claims or filing lawsuits. (p. 34)
Per Occurance Limit (Limit of Liability)
The most the policy will pay for all losses arising our of any one occurrence, regardless of other policy limits. (p. 34)
Per Person Limit (Limit of Liability)
The most the policy will pay for loss to any one person injured in any one loss, regardless of other policy limits. (p. 34)
Aggregate Limit (Limit of Liability)
The most the policy will pay for losses submitted during the policy period, regardless of other policy limits. Each loss payment made under a per occurrence limit or per person limit reduces the aggregate limit of liability. (p. 34)
Split Limits (Limit of Liability)
The most the policy will pay for loss of different types that occur as a result of any one loss, regardless of other limits. For example, the limits of liability on an auto policy for bodily injury might be represented as 100/300/100 ($100,000 is the per person limit for bodily injury liability, $300,000 is the per occurrence limit for bodily injury, and $100,000 is the per occurrence limit for property damage liability). (p. 35)
Combined Single Limit (Limit of Liability
The most the policy will pay for all losses of all types resulting from any one occurrence, regardless of their limits. For example, the per occurrence limits on homeowners and general liability policies coverage for the sum of all bodily injury liability and property damage liability claims that arise from one occurrence. (p. 35)
Assignment (Named Insured Provisions)
The owner of a liability policy cannot transfer policy ownership without the insurer's written consent. For example, a business owner cannot sell his business and then transfer ownership of the business', Sue's insurance company may seek reimbursement from Bob for the claim payments it made to Sue. (p. 35)
Subrogation (Named Insured Provisions)
After an insurer pays a loss, it is granted the insured's rights to seek recovery from the party responsible for the loss. For example, if Bob is legally responsible for injuring Sue in a car accident, Sue's insurance company may seek reimbursement from Bob for the claim payments it made to Sue. (p. 35)
Liberalization (Named Insured Provisions)
When coverage under a particular form of insurance issued by an insurer is broadened without an additional premium charge, it automatically applies to all policies currently in effect. For example, Carrier A adds coverage enhancements to its Special Form homeowners policy, without an additional charge. Those changes automatically apply to all policies currently in effect. (p. 35)
DP-1
Basic Form (Dwelling Policy) - The perils insured against are fire, lightning, and internal explosion. (May include Extended Coverage (EC) and/or vandalism or malicious mischief (VMM).) Losses to the dwelling, other structures, and contents are paid on an actual cash value basis (ACV). (p. 38)
DP-2
Broad Form (Dwelling Policy) - The perils insured against are the DP-1 perils, the EC perils, VMM and the following: Damage by Burglars, Falling Objects, Weight of Ice, snow or sleet, Accidental discharge or overflow of water or stream, Sudden and accidental tearing apart, cracking, burning, or bulging, Freezing, and Sudden and accidental damage from artificially generated electrical current. Losses to the dwelling and other structures are paid on a replacement cost basis, and losses to personal property are paid on an actual cash value basis. (p. 39)
Damage by Burglars (DP-2 Coverage)
This does not include theft coverage nor does it apply if the dwelling was vacant for 60 or more consecutive days immediately before a loss. It includes damage to the covered property caused by the burglar, but not theft of property. (p. 39)
DP-3
Special Form (Dwelling Policy) - Coverage for the dwelling and other structures is provided on an open perils basis, meaning coverage is provided for all causes of loss except for those perils specifically excluded. Losses to the dwelling and other structures are paid on a replacement cost basis, and losses to personal property contents are paid on an actual cash value basis to the insured. (p39)
Dwelling Coverages
Coverage A - Dwelling; Coverage B - Other Structures; Coverage C - Personal Property; Coverage D - Fair Rental Value; Coverage E - Additional Living Expenses (p. 41)
Coverage A - Dwelling (Dwelling Coverages)
Coverage applies to the dwelling described in the declarations, used primarily for residential purposes, including structures attached to the dwelling, such as an attached garage, carport, breezeway or deck. Also includes materials and supplies on or next to the described location used to construct, alter, or repair the dwelling or other structures. No coverage applies to land, including land on which the dwelling is located. (p. 41)
Coverage B - Other Structures (Dwelling Coverages)
Applies to other structures on the described location if they are separated or detached from the dwelling by clear space, a fence, or a utility line. No coverage is provided for structures rented to others who were not a tenant of the dwelling before residing in the other structure. No coverage is provided for other structures used in whole or in part for commercial, manufacturing or framing purposes. The Coverage B limit of insurance is up to 10 % of the Coverage A limit and is automatically provided under each of the dwelling forms. (p.41)
Coverage C - Personal Property (Dwelling Coverages)
Coverage applies to household and personal property usual to the occupancy as a dwelling if it is owned by the insured or by members of the insured's family who reside with the insured. Coverage only applies while insured property is located at the described location. After a loss and at the insured's request, Coverage C will also apply to personal property of a guest or servant while located on the described location. Personal property of a tenant or boarder is not covered. As a coverage giveback, the insured may use up to 10 % of the Coverage C limit of insurance for loss caused by an insured peril to covered property anywhere in the world. (p. 41)
Coverage D - Fair Rental Value (Dwelling Coverages)
Provides insurance for indirect losses that occur as a result of direct losses to property insured under Coverages A, B, or C that are covered by the policy. The policy pays the fair rental value of that part of the described location that is rented to others, at the time of loss. Limit of insurance is up to 20 % of the Coverage A limit and is automatically provided under each of the dwelling forms. (p. 42)
Coverage E - Additional Living Expense (Dwelling Coverages)
Provides insurance for indirect losses that occur as a result of direct losses to property insured under Coverages A, B, or C that are covered by the policy. It is automatically included in the DP-2 and DP-3 forms; it's not included in the DP - 1 form. Limit of insurance is up to 20 % of the Coverage A limit and is an additional charge. (p. 42)
Debris Removal (Dwelling)
The policy pays the insured's reasonable expenses for the removal of debris of covered property if the property is damaged by an insured peril. (p. 44)
Improvements, Alterations, and Additions (Dwelling)
If the insured is a tenant, he or she may use up to 10 % of the Coverage C limit of insurance for a covered loss to improvements, alterations, and additions made or acquired at the insured's expense to that part of the described location only occupied by the named insured. (p. 44)
World-Wide Coverage (Dwelling)
The insured may use up to 10 % of the Coverage C limit of liability for a covered loss to property insured under Coverage C while it's located anywhere in the world. This does not apply to rowboats, canoes, or property owned by guests or servants. (p. 44)
Reasonable Repairs (Dwelling)
If covered property is damaged by an insured peril, the policy will pay the reasonable costs incurred by the named insured for necessary measures taken to protect covered property from further damage. (p. 44)
Property Removed (Dwelling)
If property is being removed from the described location to protect it because it is endangered by a covered peril, coverage is provided for direct loss by any peril while removed. Under the DP-1 form, coverage is provided for 5 days while removed; under the DP-2 and DP-3 forms, coverage is provided for 30 days while removed. (p. 44)
Trees, Shrubs, and other Plants (Dwelling)
Coverage is provided for loss caused by the following perils: fire or lightening, explosion; riot or civil commotion; aircraft; vehicles not owned by the named insured or by a resident of the described location; vandalism or malicious mischief; and damage caused during a burglary or an attempted burglary. Damage to trees, shrubs, plants, or lawns caused by the following perils are NOT covered: wind, hail, weight of snow, ice, or sleet; and loss by theft. The limit of insurance for this coverage is up to 5% of the Coverage A limit, with a maximum of $500 applying to any one tree, shrub or plant. (p. 44)
Fire Department Service Charge (Dwelling)
Under each of the dwelling forms, the policy will pay up to $500 for the named insured's liability assumed by contract or agreement for fire department charges incurred when the fire department is called to save or protect covered property from an insured peril. Coverage does not apply if the property is located within the limits of the city, municipality, or protected district furnishing the fire department response. (p.45)
Collapse
The abrupt falling down or caving in of a building, or any portion of a building, but only if it cannot be occupied for its current intended purpose. If a building or any portion of the building, is in danger of falling down or caving in - or if it's standing; it is NOT in a state of collapse. (p. 45)
Ordinance or Law (Exclusions)
Increased costs due to the enforcement of any ordinance or law regulating the use, construction, demolition, remodeling, renovation, or repair of property - including removal of debris. Under DP-3 form, this exclusion doesn't apply to the Other Coverage, Ordinance or Law. (p. 46)
Earth Movement (Exclusions)

Earthquake, including land shock waves or tremors before, during or after a volcanic eruption; landslide; mudslide or mudflow; subsidence or sinkhole, earth sinking; rising; or shifting. Coverage is excluded whether the earth movement is caused by human, animal, or natural forces. If a direct loss by fire or explosion ensues from earth movement, it is covered. (p. 46)
Water Damage (Exclusions)
Flood, surface water waves, tidal waves, tidal water, overflow of a body of water, water or waterborne material that backs up through sewers or drains or overflows from a sump or sump pump, water or waterborne material below the surface of the ground--including water that exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool, or other structure (such as basement walls). If a direct loss by fire or explosion results from water damage, it is covered. (p. 46)
Power Failure (Exclusions)
The failure of power or other utility service if it takes place off the described location. Power failure occurring on the described location is covered. (p. 46)
Neglect (Exclusions)
The insured's neglect to use all reasonable means to save and preserve property at and after the time of a loss. (p. 46)
War (Exclusions)
Ware includes undeclared war, civil war, insurrection, rebellion, revolution, or any warlike act by a military force. The discharge of a nuclear weapon will be deemed a warlike act, even if accidental. War also includes any consequence of the preceding. (p. 46)
Nuclear Hazard (Exclusions)
Any nuclear reaction, radiation, or radioactive contamination - whether controlled or uncontrolled, except that fire resulting from the nuclear hazard is covered. (p. 46)
Intentional Loss (Exclusions)
Loss arising out of any act commited by or at the direction of the named insured or any additional insured, with the intent to cause a loss. Coverage is excluded for any insured committing the intentional loss, even those who did not commit or conspire to commit the act that causes the loss. (p. 46)
Non-concurrent Exclusions
The following exclusions apply, however, if an ensuing loss is otherwise covered by the policy, it will not be excluded: weather decisions; acts or decisions, including failure to act or decide, of any person, group, organization, or governmental body; workmanship, repair, construction, renovation, remodeling, grading, compaction, materials used to repair, and maintenance. (p. 46)
Broad Theft Coverage Endorsement
Provides insurance for the perils of theft, attempted theft, and vandalism or malicious mischief that results from theft or attempted theft. It may only be added to policies insuring owner occupied dwellings. (p. 47)
Personal Liability Endorsement
Provides coverage for personal liability and medical payments to others and may be added to any of the dwelling forms of coverage. (p. 48)
HO-2
(Broad Form - Home) This form provides named perils coverage for the dwelling (Coverage A), other structures (Coverage B), and personal property (Coverage C). The 16 named perils are: Fire or Lightning; Windstorm or hail; Explosion; Riot or civil commotion; Aircraft; Vehicles; Smoke; Vandalism or malicious mischief; Theft; Falling Objects; Weight of ice, snow, or sleet; Accidental discharge or overflow of water or steam; Sudden and accidental tearing apart, cracking, burning or bulging; Freezing; Sudden and accidental damage from artificially generated electrical current; and Volcanic eruption (p. 51)
HO-3
(Special Form - Home) The dwelling and otehrs structures (Coverages A & B) are insured on an open perils basis, meaning all perils are insured if they aren't specifically excluded in the policy. Losses to the dwelling and other structures are valued on a replacement value basis just as they are in HO-2. (p. 52_
HO-4
(Contents Broad Form - Renters) Designed for tenants of a residential unit and provides no coverage for buildings and other structures. (p. 53)
HO-5
(Comprehensive Form - Home) Insures the dwelling, other structures, and personal property on an open peris basis. Loss valuation for the dwelling and other structures is on a replacement cost basis and loss valuation for personal property is on an actual cash value basis. (p. 53)
HO-6
(Unit-owners Form - Condo) Designed for the owners of condominium and cooperative units. Coverage is provided for the building and personal property; other structures coverage is included Coverage A - Dwelling. (p. 53)
HO-8
(Modified Coverage Form - Special Home) Used when insuring older homes where replacement value and market value are disproportionate or when a moral hazard would be created if insurance were written in an amount equal to 100% of a dwelling's replacement value. (p. 53)
Residence Employee
An employee of, or leased under an agreement to, an insured, whose duties are related to the maintenance or use of the residence premises. The duties include household and domestic services, such as those of a gardener or nanny. (p. 56)
Residence Premises
A one family dwelling where the named insured resides; 1-2-3 or 4 family dwelling in which the named insured resides in at least one of the units; or the part of any other building where the insured resides. The residence premises includes any structure and the grounds at that location. (p. 56)
Standard HO Deductible
Answer: $250 (p. 56)
Coverage A - Dwelling (Section I - Property Coverages (HO))
Dwelling on the residence premises shown in the declaration, including structures attached to the dwelling. (p. 57)
Coverage B - Other Structures (Section I - Property Coverages (HO))
Does not provide insurance for other structures that are rented or held for rental to anyone who isn't a tenant of the dwelling, from which business is conducted, or in which business personal property is stored. (p. 57)
Coverage C - Personal Property (Section I - Property Coverages (HO))
Personal property owned or used by an insured while it is anywhere in the world. Special Limits of Liability apply to certain categories. Property specifically described and insured elsewhere, such as on another policy or by endorsement to the HO policy are not covered. (p. 57)
Coverage D - Loss of Use (Section I - Property Coverages (HO))
Pays for any necessary increase in living expenses required by the named insured to maintain the household's normal standard of living. Coverage is also provided for the fair rental value of the portion of the dwelling rented to others and in the event a civil authority prevents the use of the residence premises. (p. 59)
Coverage E - Personal Liabilities (Section II - Property Coverages (HO))
Insurance is provided for claims made and suits brought against an insured because of bodily injury or property damage caused by an occurrence for which the insurance applies. The policy pays up to the limit of liability for the damages for which an insured is legally liable, including prejudgment interest awarded against an insured. (p. 66)
Coverage F - Medical Payments to Others (Section II - Property Coverages (HO))
Pays for the necessary medical expenses incurred within 3 years from the date of an accident causing bodily injury without regard to fault. Coverage is provided for injury to a person on the insured location with permission, or off the insured location if the injury is caused by the insured or a residence employee in the course of employment, or by an animal owned by or in the care of an insured. (p. 66)
Section I - Additional Coverages (HO)
Include debris removal; reasonable repairs; trees, shrubs, and plants; fire department service charge; property removed; credit card, electronic fund transfer card or access device, forgery, and counterfeit money; loss assessment; collapse, and glass or safety glazing material. (p. 61)
Section I - Exclusions (HO)
include ordinance or law, earth movement, water damage, power failure, neglect, war, nuclear hazard, intentional loss, and government action.(p. 63)
Section I - Endorsements (HO)
Include Mobile Home Insurance, Increased Limit - Other Structures on the Residence Premises, Water Back Up and Sump Discharge or Overflow, Personal Property Replacement Cost Loss Settlement, and Scheduled Personal Property. (p. 64)
Section II - Additional Coverages (HO)
Includes Claim Expenses, First Aid Expenses, Damage to Property of Others, and Loss Assessment. (p. 66)
Coverage E Exclusions (HO)
Include loss assessment, damage to property owned by an insured; damage to property tin the insured's care, custody, or control, injury to anyone eligible to receive worker's compensation and similar benefits; injury and damage covered by a nuclear energy liability policy; and bodily injury to an insured. (p. 68)
Coverage F Exclusions (HO)
Include bodily injury to a residence employee when not working and away from an insured locaiton; anyone eligible to receive worker's compensation and similar benefits; coveredby a nuclear energy liability policy; to a resident of the insured location (p. 69)
Insurance Director - General Duties and Powers
Apointed by the Governor; Make reasonable rules/regulations; Conduct investigaitons; Conduct Examinations; Subpoena and Examine witnesses under oath; institute any action or legal proceeding to enforce laws; issue licenses; request the Attorney General enforce an order or decision; Issue and Serve a Cease & Desist Order (p. 204)
Cease & Desist Order
Can be issued and served by the Insurance Director without notice and before a hearing (Guilty until proven innocent) on any person or company whose action(s) are illegal, threaten it's solvency, shows hazard to the policyholders, creditors or the public. A person violating the order must pay a fine of $100/day up to $5,000. (p. 204)
Refuse to co-operate with Director (Fine)
Answer: $2,000
Misrepresentation (Violation of Ins. Code) (Fine)
Answer: $100 to $5,000
Violation of Cease and Assist order pertaining to Unfair Trade Practice (Fine)
Answer: $1,000 per violation
Disciplinary Actions involving examinations (Fine)
Answer: Penalty up to $5,000 for EACH cause not to exceed $20,000 in addition to, or instead of denial, suspension or revocation.
Violation of written order by Director (Fine)
Answer: Civil penalty $100 a day for up to a max of $5,000
Violation of Cease and Desist Order has been given (Fine)
Answer: The Director must issue and serve notice of a hearing to be held no less than 20 days or not more than 30 days after being served.
Time Period: Examination of books, records, or documents of anyone by the Director of Director's appointee
Answer: As often as necessary
Time Period: Findings of examinations must be disclosed to examinee before making it public. The examinee has ______ to state written objection and ask for a hearing.
Answer: 14 days
Time Period: Advance notice of hearing by the director to the examinee
Answer: 20 days
Time Period: Advance notice of time and place of hearing
Answer: 10 days
Time Period: Within _______ of filing a report, Director must issue written notice.
Answer: 90 days
Time Period: Collision losses settled within ________ notice "unless a written notice is received as to the delay."
Answer: 30 days
Time Period: Property damage losses settled with _________ "unless… delay"
Answer: 30 days
Time Period: Period of time to take Licensing exam after prelicensing completed
Answer: 1 year from date of completion of prelicensing
Time Period: If convicted of a Felony while licensed, you must notify the Director with ____________
Answer: 30 days of conviction
Time Period: License denied or revoked must wait _________ before re-applying
Answer: 3 years
Time Period: Temporary license as a NEW AGENT is good for ___________ ONLY. (no renewal of license) (New Business Commissions will be payable)
Answer: 90 days
Time Period: Temporary License to an executor, administrator or next of kin when agent dies or becomes disabled --- _________ renewed at the discretion of Director for an additional ___________ (no renewal.
Answer: 180 days
PFTA (Premium Fund Trust Accounts) must be opened if Producer holds clients money more than _________. Accounts must be reconciled (balanced) every ________. Account records must be maintained for ________.
Answer: 15 days/30 days/7 years
Defensive Driver Discount (55&Alive) allowed for ________. (must be 55 and no tickets/accidents within the time frame and show completion of course certificate).
Answer: 3 years
Workers Comp Assigned Risk Pool - must have been rejected by ______ insurance companies with _________.
Answer: 2/60 days
Change of home address must be in writing to the Director within __________.
Answer: 30 days
Bond Requirements (Surety Bond - Producer)
Answer: Minimum $2,500 of 5% of previous years prem. Maximum $50,000.
Continuing Education Requirements (Time Frame)
Answer: 24 hours biennially is manditory - no bonus hours - each course is assigned hours by the Director. Maximum hours allowed in a reporting period is 25 hours. Any excess, up to 15 hours will carryover into next reporting period.
Continuing Educaiton Requirements - Monitored classroom (Time Frame)
Answer: 3 hours of 24 must consist in classroom on ethics.
Rebating (Law)
Offering any rebate, premium discount, or anything of value not specified in the policy. (Class B Misdemeanor) Does not include: A bonus a non-participating insurer pays to policyowners from accumulated surplus; A return of savings to industial policyholders that represents the amount the insurer saved by having premiums paid directly to the insurer; An insurer's payment of any premium, with a 6% annual percentage rate (APR). (p. 209)
Misrepresentation (Insureds) (Law)
An insured's misrepresentaiton or breach of a condition shall void a policy only if the misrepresentation is part of the entire contract and either was intended to deceive the insurer or materially affects the risk;s acceptance. (Exception: This does not apply to marine or transportation insurance.) (p. 210)
Misrepresentation (Producers and Companies) (Law)
Fine: $100 tp $5,000 1) Misrepresenting a policy's terms, benefits, or dividends. 2) Misrepresenting companies or policies to induce a policyowner to change or surrender exisiting insurance, whether on a temporary or permanent plan. 3) Creating the impression that a governmental agency guarantees or approves a company's policies, financial conditions, or claims payment procedure (medical) 4) Referring to a security deposit with the Director. (p. 210)
Defamation (Law)
False or maliciously critical statements made with the intent to injure any company doing business in Illinois. Defamation is punishable by a fine of $100 to $5,000 (P. 210)
Twisting (Law)
Encouraging a client to lapse a policy to his/her detriment and replace it with another. (p. 210)
Boycott, Coercion, or Intimidation (Law)
Agreeing to any action unreasonable retraining, or creating a monopoly in, the insurance business. For example, making an insurance purchase from a particular source the condidtion for another type of business transaction. (p. 210)
Other Unfair Practices (Law)
Falsifying records, False Advertisment, Dicriminating, Refusing to provide or continue life insurance solely because an individual is a member of the armed forces. (p. 210)
Fiduciary Responsibilities (Law)
1) Must hold premiums in a fiduciary capacity 2) Any insurer issuing a policy is deemed to have received the premium if the insured pays any producer for the coverage. The insurer is responsible to the insured for any return of premium 3) A producer may add late charge of up to 1.5% per month 4) A producer knowingly misappropriating funds held in a fiduciary capacity is guilty of: a) Class A misdemeanor (1st time) and a felony for subsequent offenses; if $150 or less per offense b) Class 3 felony if over $150 (p. 210)
Premium Fund Trust Account (Account) (Law)
1) With a financial institution in Illinois 2) Subject to the jurisdiciton of Illionis' courts 3) Designated "Premium Fund Trust Account," and those words must be displayed on the face of all checks of the account 4) Maintained for 7 years (p. 211)
Premium Fund Trust Account (Producer) (Law)
1) Maintain for 15 or more days 2) Keep records 3) Maintain balance in the account at least equal to the deposit amounts less the amount of lawful withdrawls. Failure contitutes missappropriation 4) Get insurer's authorization in writing 5) Pay any return premiums within 15 days after receipt (p. 211)
Reporting A Felony (Law)
A licensee must report being convicted of a felony, and give a copy of the judgement, probation or sommitment order, and any other relevant documents, to the Director with 30 days after the judgement's entry date. (p. 212)
Chartered Property and Casualty Underwriter (CPCU Designation) (Law)
CPCU courses cover property and casualty insurance broadly. Most courses are mandatory, but producers must elect some courses based on a focus in personal line or commercial lines in order to complete the series. (p. 212)
Certified Insurance Counselor (CIC Designation) (Law)
CIC courses are based on the producer's choice of institute. For property and casualty lines, thse include the personal lines, commercial property, commercial casualty, and agent management institutions. After completing an institute's series of courses, the producer must take and pass a comprehensive exam. (p. 212)
The Illinois Guaranty Fund (Law)
Pays covered claims under certain policies if an insurer becomes insolvent. All authorized insurers in Illinois must be members of the fund. The fund's liability for covered claims is limited to the liability of the insolvent insurer. The fund must pay: 1) For a covered WC claim, the full amount of the claim 2) For any other type of claim, the claim amount, up to the lesser of the policy's limits or, subject to a $100 deductible, $300,000. (p. 212)
Consumer Affairs and Information Department (Law)
1) Each admitted insurer writing auto, fire, or extended coverage must establish a consumer affairs and information department to respond to policyholder inquiries and complaints. 2) The department must be located in the insurer's home, regional, or branch office and be competently staffed during regular business hours. The insurer must provide a toll-free telephone number to policyholders. The insurer must respond in writing to a written inquiry or complaint wiht 21 days. (p. 212)

Cancellation & Nonrenewal (P&C Only Law)

1) An insurer may not cancel or nonrener a policy because the producer has left the insurer. 2) An insurer may not deny, cancel, or nonrenew a policy solely because another insurer has denied, cancelled, or nonrenewed a policy with the same applicant. 3) Every property and casualty policy issued in Illionis must explain how the policy may be cancelled. (Exception: This law does not apply to ocean marine and suplus lines insurance and reisurance.) (p. 212)