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93 Cards in this Set
- Front
- Back
CONTRACT OF UTMOST FAITH |
Both insurer and insured must know all material facts and relevant information; neither may attempt to conceal facts or deceive the other party. |
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UNILATERAL CONTRACT |
one in which only one party makes a legally enforceable promise |
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CONDITIONAL CONTRACT |
the insurer's consideration is a promise to pay only if a certain condition is met. If the condition is not met, the insurer does not have to pay. |
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PERIL |
Fire, Wind, Hail or collision. |
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HAZARD |
Situation or Condition that increases the possibility of a loss. (a material, structural or operational feature) |
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MORAL HAZARD |
Dishonest or character/ personality defects |
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MORALE HAZARD |
Attitude of the insured. (carelessness) |
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RISK |
Uncertainty regarding the occurrence of financial loss. |
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REASONABLE EXPECTATION |
States that the insured should recover what a reasonable person would expect to recover under similar circumstances. - giving someone a false sense of what and what amount would be covered |
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BINDER |
Written statement that provides immediate insurance protection for a temporary period. |
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IDEMNIFICATION |
Process by which an insured is restored to a pre-loss condition. As a legal principle, it states that a person should not profit or collect more than the value of a loss but restored to the same financial position. NO MORE / NO LESS. |
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CONTRACT OF ADHESION |
The insurance company writes the contract to be accepted or rejected. Courts generally hold that any ambiguity in contracts should be interpreted for insured to understand. |
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IMPLIED AUTHORITY |
XYZ Insurance has allowed agents to bind coverage with past dates therefore making agents believe they have the authority to do that continuously because Authority was implied. |
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ALIEN |
An alien insurance company is incorporated or organized under the laws of any foreign nation, province or territory. |
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PURE RISK |
Pure risk involves only the chance of loss (not gain) ONLY PURE RISKS ARE INSURANBLE. |
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SPECULATIVE RISK |
Involves chance of both gain and loss. (stock market ventures) NOT INSURABLE |
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RETENTION |
When an individual retains the risk and must accept the economic loss if the risk becomes a reality. (self-insurance) |
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SURPLUS LINES |
A nonadmitted or unauthorized insurance company that has not been authorized to transact business in a particular state. Brokers use this to obtain policies when an authorized company cannot provide coverage. |
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FIDUCIARY |
Involving trust. An agent must trust both insured and insurer, act in good faith and preserve confidential info. |
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MISREPRESENTATION |
Twisting...inducing a policyholder to cancel, lapse, forfeit or surrender an existing policy in order to purchase a similar policy from the selling agent. In which case, cancellation or change are not warranted. |
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REINSURANCE |
The spreading or sharing of a risk too large for one insurer by ceding part of the risk to another company or insurer. |
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RECIPROCAL EXCHANGE |
An unincorporated mutual organized for the mutual protection of its members. An association of subscribing members who exchange contracts of indemnity with each other. |
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UNILATERAL CONTRACT |
Only 1 party (the insurer) makes any kind of enforceable promise to pay benefits when a certain event occurs (death or disability) |
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MUTUAL INSURANCE COMPANY |
Owned by its policy owners from whom its resources are derived. Its assets and income are held for the benefit of policy holders who as contractual creditors have the right to vote for directors / trustees |
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INSURABLE INTEREST |
Any property that will result in financial loss to an insured is an insurable interest. |
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AVOIDANCE |
Avoiding having the risk of a loss by not engaging in a certain activity or owning property. |
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FOREIGN COMPANY |
A foreign company operates within a state in which it is not chartered and in which its home office is not located. |
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REDUCTION |
May be accomplished through loss prevention and loss control. (ex: A burglar alarm) |
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EXPRESS AUTHORITY |
The insurer gives the agent through means of the contract. This explicitly appoints the agent to act on behalf of the insurer. |
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LAW OF LARGE NUMBERS |
Operates under the principle that the larger the number of similar risks combined into one group, the less uncertainty there will be to the amount of loss the group will incur. |
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WORKERS COMPENSATION |
No-Fault insurance. Injured workers may receive benefits without having to prove that their employer was negligent. Provides compensation for injuries arising out of their employment. It is State regulated. |
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OCCUPATIONAL DISEASE (WC) |
a disease that is not peculiar to the employment exposure will not be covered by WC. (ex: Chicken Pox) |
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MONOPOLISTIC METHOD (WC) |
When insurance must be purchased from the state-run insurer. 5 Monopolistic states: North Dakota, Ohio, Washington, West Virginia and Wyoming. |
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SURETY BONDS |
Provides monetary compensation if the bonded party fails to perform a certain act. It guarantees that the obligor has the financial means and expertise to fulfill the obligation to which he is bonded. Protects the obligee. a contract of obligation between 2 parties. |
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PRINCIPAL (Surety Bonds) |
The one whose acts are being guarantee by the bond. The party who promises to do or not do a specific thing. |
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OBLIGEE (Surety Bonds) |
The one who collects if the principal fails to perform as guaranteed. |
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SURETY |
The one giving the guarantee. The agent is not a party to the bond. |
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RECIPROCAL EXCHANGE |
An Unincorporated mutual organized for the mutual protection of its members |
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LLOYD'S |
Voluntary organizations of individuals or groups of individuals who agree to share in insurance contracts. Each individual or syndicate is individually responsible for the amount of insurance they agree to write. |
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RISK RETENTION GROUPS |
an alternative for businesses and individuals to secure much needed insurance coverage. they must possess similar liability risks or be engaged in similar businesses. |
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FAIR PLANS |
governed by the state to help provide economic security against property losses. |
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FLOOD INSURANCE |
Emergency and Regular. The emergency goes into effect when the community applies to the NFIP and remains until the government finalizes the flood rates. Regular program provides coverage. |
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FLOOD INSURANCE COVERAGES |
the max coverage for a single-family dwelling under the regular flood program is $250,000 for the building and $100,000 for the contents w/1000 MINIMUM deduct. Under the emergency flood program, the maximum coverage is $35,000 for the building and $10,000 for the contents w/2000 MINIMUM deductible. |
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HOMEOWNERS POLICY |
A= Structure |
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UNDERINSURED |
to calculate payout: |
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PAIR & SET FORMULA |
# OF ITEMS REMAINING X VALUD OF 1 ITEM - VALUE OF SET = PAYOUT |
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COMMERCIAL AUTO COVERAGE |
includes only liability and physical damage coverage. Medical Payments can be added by endorsement. (does not cover damages caused to the insured vehicle if at fault) |
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BUSINESS AUTO EXTENSION |
Allows up to $2,000 for bail bonds as a supplementary payment. It also pays for the cost of bonds to release attachments in any suit the insurer defends. |
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BUSINESS AUTO SYMBOLS |
1. ANY auto |
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BUSINESS AUTO SYMBOLS (cont) |
8. Hired Autos. lease/rent or borrow but NOT from any of your employees. 9. Nonowned autos. this would include autos owned by your employees 19. Mobile Equipment. land vehicles. |
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HULL INSURANCE |
Protects a ship's owner against loss to the ship itself. |
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CARGO INSURANCE |
Covers property inside of a vessel |
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FREIGHT INSURANCE |
Covers income lost to the ship owner because the ship was lost or destroyed. |
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JETTISON |
The voluntary act of throwing cargo overboard to save the vessel and crew. Policy would cover losses due to jettison. |
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INDEMNITY INSURANCE (P&I) |
Provides a kind of workers compensation insurance for the vessel's crew members to protect against job related injuries. |
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BARRATRY |
Illegal acts committed willfully by the ship's master or crew for the purpose of damaging the ship or cargo. Includes hijacking, abandonment or embezzlement. |
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CEASE & DESIST |
Any insurer (company) who violates a cease and desist order may be fined up to $10,000 per violation & $500 to any individual (agent) |
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INSURANCE COMMISSIONER |
Keeps records of examinations, adopts rules and regulations, determines whether rates are excessive, inadequate or unfairly discriminatory. Has the power to conduct investigations and subpoena witnesses. |
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REPLACEMENT COST |
RC: Amount needed to replace new for old w/no deduction for depreciation. |
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ACTUAL COST VALUE |
ACV: Replacement Cost MINUS depreciation. |
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HOMEOWNERS |
Section 1. |
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BOND |
Serves as a guarantee of performance. The surety guarantees the principal's conduct & that if conduct falls short, surety is responsible to obligee. |
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OBLIGOR |
Principal whose obligation has been guaranteed |
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OBLIGEE |
Party insured whose favor the obligation & receives the benefit. |
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SURETY |
The Company guaranteed the obligation will be performed by employee. |
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THEFT/ LARCENY |
Taking of property from another person. Any act of stealing. |
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BURGLARY |
Theft of property from INSIDE premises when business is closed. *Requires visible evidence of forced entry or exit.* |
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ROBBERY |
Violent theft. Requires threat or fear. |
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MYSTERIOUS DISAPPEARANCE |
Unknown cause of loss. Theft must be ruled out. Discovery period applies to losses discovered within 12 months. |
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CRIME COVERAGE FORMS |
A: Employee Dishonesty |
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WORKERS COMPENSATION COVERAGE |
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WORKERS COMPENSATION |
Premium is based on payroll. (per $100) Needs a 4 digit job classification |
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CGL EXCLUSIONS |
Coverage A: Product Recall/ sistership. (cost of replacing or recalling customers defective product) |
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SUPPLEMENTARY PAYMENTS |
B- bonds A- aid I- interest on judgements L- loss of earnings E- expenses D- defense costs |
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TYPE OF CONTRACTS |
1. Unilateral- 1 sided. only insurer has promise to keep. |
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BUSINESS EXPOSURES |
Premises- Owned Rented or used by insured. Contractual Liability- assumed in a contract whereby 1 party assumes legal liab. Fire- by insured's negligence. |
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HAZARD |
Physical (such as a high performance engine, wood stove, pool, trampoline or old fuses) |
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INSURABLE RISK |
C- calculate A- affordable N- Non-catastrophic
H- Homogenous Exposures A- Accidental M- Measurable |
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EXPOSURE |
The more you have, the higher the risk |
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ADVERSE SELECTION |
Tendency of people with significant potential to file claims. - Agents must screen prospects because of this. |
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LAW OF LARGE #S |
Used by companies to predict potential future losses. They take on too many risks with reasonable assurance of only paying a small amount of claims. |
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POOLING |
Each person @ risk pays a smaller guaranteed payment in exchange for more expensive conditional coverage if problem occurs. |
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TORT LIABILITY |
-Intentional |
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LIABILITY |
The legal obligation to pay for damage caused by INSURED to OTHERS |
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INDIRECT LOSS |
A financial loss incurred as a result of direct damage to property. A business can suffer such a loss in the form of lost profits, rent and extra expenses required to keep business operating. |
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MEDICAL COVERAGE |
The insurer pays for reasonable expenses for necessary medical and funeral services incurred within three years from the date of an accident without regard to fault. |
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ASSIGNED RISK PLAN |
a stand-alone entity or part of the competitive state fund. All insurers writing workers compensation coverage in the voluntary insurance market must also participate in the plan. The coverage MUST BE purchased from the state run insurer. |
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EXTRA EXPENSE INSURANCE |
Pays for the necessary additional expenses the insured incurs following a loss to maintain operations at the level they were before loss. |
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LOSS OF EARNINGS |
Policy will cover up to $250 per day. |
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SHORT RATE CANCELLATION |
Method used when a policy is cancelled by the insured before it reaches its natural expiration. The company pays a return premium less than the proportionate or pro rata part that is still unearned. There is a penalty to the insured for cancelling early. |
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COLORADO INSURANCE GUARANTY ASSOCIATION ACT |
In the event an insurance company becomes insolvent, the Colorado Insurance Guaranty Association will assume the processing of all covered claims in accordance with the applicable insurance policies and the applicable Colorado statutes. |
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TERRORISM |
The federal government is responsible for reimbursing 85% of each insurer's terrorism losses above the insurer's annual deductible. |
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RATE |
Amount of dollars and cents charged for a particular amount of insurance. For example, the rate charged for a fire policy might be $.50 per $100 of value. If the insured wishes to cover property valued at $100,000, the annual premium would be $500 ($.50 × 1,000 hundreds = $500). |