Pca Ch 3

Front 1

insurable interest

Back 1

in a word, ownership. policy cannot be transferred to another person just because they bought your property, after you sell your property, you cannot file a claim on it either. Insured must have financial interest, either full or partial in the subject of insurance.

Front 2

underwriting

Back 2

hazard recognition and evaluation, risk selection, pricing and determination of policy terms and conditions. they underwrite apps and accept those apps that can make the insurance company money.

Front 3

loss ratio

Back 3

the sum of all premiums divided by the number of losses. it's the percent of premiums used to pay claims.

Hint 3

determined by adding the premium on policies divided by the number of losses.

Front 4

rates

Back 4

- regulated
- price of insurance for each unit of exposure...
- based on stats and cost of exposure of each unit.

Front 5

what are the 2 types of rates?

Back 5

class and judgement

Front 6

class rates

Back 6

- apply to all members of a wide group having similar exposures.

Front 7

judgement rates

Back 7

- partially or exclusively based on judgement... when there are no distinguishable classes that are similiar, so no stats.
ex. surplus lines.

Front 8

Rating Organizations and Rating Bureaus

Back 8

gather and analyze stat data and compile contracts that smaller ins companies can use who don't want to spend on their own attornies or accuaries.

EX ISO - insurance service offices

Front 9

independent filings

Back 9

companies that prefer to make their own rate filings

rates are middle of the road (benchmark rate)

Front 10

Deviate (rates) -

Back 10

companies charging higher or lower rates than recommended benchmark rate.

Front 11

Hazard

Back 11

any condition that increases the chance of a loss or increases the frequency or severity of loss.

3 types.

Front 12

physical hazard

Back 12

something that increases the probability of loss, or severity of loss, that can be seen, touched or felt

Front 13

moral hazard

Back 13

your past equals your future

characteristic of an insured person usually based on past actions that may tend to increase the probability or severity of a loss...

felony history with arson would make it tough to get property protection.

Front 14

Morale hazard

Back 14

something happening in the present that may affect the future.
characteristic of an insured based on their present actions that display an indifferent or an "i don't care attitude".

ex.
inspection of home turns up bad conditions. would be a morale hazard.

Front 15

Property vs casualty insurance

Back 15

Property (people's stuff) VS. Casualty ( people's liability because of the stuff they own)

liability - it is my stuff but it could cause damage to someone else. ->
the property portion of the the ins actually protects the insured for direct losses to the property they own.
the casualty portion of the ins protects the policyholder for damages doen to others in relation to the property being insured.

Front 16

negligence

Back 16

the failure to exercise the standard of care required by law to protect others from harm.

the process of determining who was negligent.

Front 17

4 elements used to consider negligence

Back 17

- legal duty to act
- breach of that duty
- resulting damage & injury
- proximate cause

Front 18

the first element of considered for negligence is what?

Back 18

1. the existence of a legal duty to act or a standard of care.

do you meet certain standards of care? did you do something to prevent

Front 19

the second element of considered for negligence is what?

Back 19

breach of that duty

Front 20

the third element of considered for negligence is what?

Back 20

resulting damage and injury

Front 21

the fourth element of considered for negligence is what?

Back 21

proximate cause ( where there is an unbroken connection between the peril and the loss without the intervention of a new and independent cause. vs an intervening cause

Front 22

assumption of risk

Back 22

you can't collect for an injury you got from doing something risky or dangerous.

Hint 22

racecar driver

Front 23

comparative negligence

Back 23

laws permit the injured person to collect even though he contributed to the accident.

Hint 23

like in the state of texas

Front 24

contributory negligence

Back 24

no fault - a person can't collect if they contributed in any way to the accident.

Hint 24

like in the state of colorado

Front 25

intervening cause

Back 25

breaks the chain of an accident... an independent cause of injury or damage that intervenes bet the orig wrongful act or omission and produces a result that would not have otherwise followed.

Hint 25

contractor left bucket and you tripped on it while running from a fire. ... 2nd contributor.

Front 26

statue of limitations

Back 26

withing 2 years and 1 day of the occurance is statue of limitation for tort law in Tx. any legal action must be brought against insurer within this time frame.

Front 27

Compensatory damages

Back 27

paying both special and general damages together.

Front 28

Special Damages

Back 28

awarded to compensate the victim for itemized losses like med bills, loss of earnings, and property damage.

Front 29

another word for special damages

Back 29

Specified damages

Hint 29

if it can be documented it's special damages

Front 30

General damages

Back 30

damages that cannot be itemized such as pain and suffering.

Hint 30

contested alot ... people argue over this all the time.

Front 31

Punitive damages

Back 31

awarded for gross negligence. Done to punish the wrongdoer for reckless disregard for the safety of others.

Hint 31

big $ to make headlines and send a message to the public- that we will punish you!

Front 32

Absolute (strict) Liability

Back 32

extra hazardous or dangerous situations where insured takes a certain standard of care because there is no defense of negligence

Hint 32

ex of risks here are: dangerous animals, explosives,aircraft, intentionally set fire.

Front 33

Vicarious Liability

Back 33

someone takes responsibility for someone elses action.

Hint 33

ex child to parent; emloyer for employee

Front 34

limits of liability

Back 34

how much protection you need for your liability. usually expressed in BI - bodily injury and PD - property damage

Front 35

Split limits

Back 35

these types used in auto insurance... seperate limits apply to BI and PD

Front 36

Difference between accident and occurrance

Back 36

The diff is in the duration of the event. acci is sudden and unexpected. occurrance is a single event that can happen over a period of time.

Hint 36

earthquake and aftershocks would be an occurrance.

Front 37

Combined limits

Back 37

one policy limit amount applies to both BI and PD from a single accident

Hint 37

usually on a commercial auto and homeowners policies because this is expensive!

Front 38

Aggregate limit

Back 38

max amount that can be paid during the policy term for 1 or more occurances... Possible to run out of money!

Hint 38

only found on commercial lines of insurance. Commercial policies are good for a 1 year basis.

Front 39

Peril

Back 39

any event that causes a loss. The words peril and loss are interchangeable.

Front 40

Perils that are always grouped together

Back 40

fire and lightning.

Front 41

Friendly fire

Back 41

a fire that stays within it's bounds and is under control.

Hint 41

ex: fireplace

Front 42

Hostile fire

Back 42

a fire that is one that is out of any boundary and out of control

Hint 42

ex: house on fire

Front 43

another term for group of basic perils

Back 43

extended coverage perils

Hint 43

Rev. C. H. Shaw

Front 44

Rev. C. H. Shaw stands for what perils?

Back 44

riot, explosion, vehicle, civil commotion, hail, smoke, hurricane, aircraft, windstorm

Front 45

3 basic peril exclusions

Back 45

* wind driven rain damage only covered if through a hole in the blding roof or window

*explosion - equipment cannot be owned or operated by the insured.

*vehicle cannot be owned or normally operated by insured or insured family member

Front 46

Another term for named perils

Back 46

specified

Front 47

another term for all risk perils

Back 47

open

Front 48

named (specified) perils

Back 48

insurance company will list the covered perils on the policy. *MUST BE LISTED TO BE COVERED*

Front 49

All risk (open) perils

Back 49

all causes of loss covered unless specifically excluded in the policy

Hint 49

perils of flood, war, and nuclear hazard are normally always excluded.

Front 50

Direct loss

Back 50

damage to property caused as a direct result of the peril.

Hint 50

ex in a home fire, all items burnt or smoked out inside are direct losses.

Front 51

another term for indirect loss

Back 51

consequential loss

Front 52

indirect or consequential loss

Back 52

after the direct loss is over, these losses then happen

Hint 52

fire is over that destroyed the home, but insured has to stay at hotel... eat out,

Front 53

basic types of contruction?

Back 53

Frame, Masonry, or fire resistive

Hint 53

frame combustible
masonry brick stone concrete
fire resistive steel frame fire walls

Front 54

specific insurance

Back 54

most familiar type... one object is insured under the policy.. home ... auto

Front 55

blanket policy

Back 55

covers multiple properties
money is dispersed pro rata

Hint 55

normally commercial like several whataburger locations.

Front 56

pro rata

Back 56

percentage wise

Front 57

loss valuation

Back 57

how much am i gonna get paid after my loss.

Front 58

Actual Cash Value (ACV)

Back 58

todays replacement value less depreciation

Hint 58

generally used on home or auto policies

Front 59

Replacement Cost

Back 59

coverage on the basis of full value without consideration of depreciation or deduction

Hint 59

don't depreciate my burned home, give me my home back!

Front 60

Functional replacement cost

Back 60

property becomes obsolete due to design or technological advances (think 8 track tape). provides replacement based on market value.. or will give you the closest existing equivalent available.

Hint 60

ex cassette player = cd player

Front 61

market value

Back 61

amount a willing buyer would pay a willing seller for the property... subject to geographical changes.

Hint 61

ex a pickup truck isn't as valuable in Boston as it would be in Dallas.