Property Insurance - Sections I-Il

Front 1

Punitive Damages

Back 1

awarded over and above compensatory damages to punish a negligent party.

Front 2

Implied Authority

Back 2

authority that the public may reasonably believe the agent to have.

Front 3

Utmost Good Faith

Back 3

acting in fairness and equity with a sincere belief that the act isn't bad.

Front 4

A Fiduciary

Back 4

a person holding the property of another in a position of trust. Ex. Attorney, bank trustee, etc.

Front 5

Physical Hazards

Back 5

arise from the material, structural or operational features of the risk.

Front 6

Liberalization Clause

Back 6

a clause in property insurance contracts that provides that if policies are broadened by legislation and no additional premium is required, then all similar policies will include the broadened coverage.

Front 7

Insurable Interest

Back 7

any interest that a person has and if the property is damaged, that person will suffer a real financial loss.

Front 8

Contributory Negligence

Back 8

happens when an injured party contributes to their injury with negligence.

Front 9

Loss Payable Clause

Back 9

a provision in property insurance contracts that authorizes payment to persons other than the insured. Protects lenders.

Front 10

Legal Liability

Back 10

under the law instead of from contracts.

Front 11

Personal property

Back 11

property other than dwelling and other structures.

Front 12

Loss of Use

Back 12

financial losses when an insured residence is uninhabitable.

Front 13

Named Perils

Back 13

listed in the policy.

Front 14

Open Perils

Back 14

not excluded by the policy.

Front 15

HO-2

Back 15

Named perils

Front 16

HO-3

Back 16

Open perils

Front 17

HO-4

Back 17

Renters

Front 18

HO-5

Back 18

Open perils

Front 19

HO-6

Back 19

Condos

Front 20

HO-8

Back 20

Antique homes

Front 21

Co-owners of home policies also have an insurable interest.

Back 21

x

Front 22

Coverage A

Back 22

Dwelling.

Front 23

Coverage B

Back 23

Other Structures. 10% standard.

Front 24

Coverage C

Back 24

Personal Property. 50% standard.

Front 25

Coverage D

Back 25

Loss of use. 20% standard.

Front 26

Coverage E

Back 26

Liability Coverage.

Front 27

Coverage F

Back 27

Medical Payments. Does not apply to owner or inhabitants, except employees (i.e. maids.)

Front 28

Real Property

Back 28

Buildings and structures, does not include land.

Front 29

Personal property does not include built-in property.

Back 29

x

Front 30

Losses not covered: Catastrophes (tornado, war, etc.), off-premises power failure, neglect.

Back 30

x

Front 31

Valued Policy

Back 31

provides for payment of the full policy amount in the event of a total loss. Without regard to Actual Cash Value or depreciation.

Front 32

Pair and Set Clause

Back 32

A set can be worth more than the sum of its pieces. The value of the loss of one part of a pair is not equal to 50% of the value of the complete pair.

Front 33

The insured may be able to take advantage of an appraisal condition in the policy if they and the insurance company cannot come to an agreement on the value of something. Then two appraisers come in and make a decision. If they don't agree, it's up to an umpire.

Back 33

x

Front 34

Home policies do not cover criminal lawsuits.

Back 34

x

Front 35

Insured

Back 35

The name insured, spouse, residents of household. For liability, includes any person/organization legally responsible for animals or watercraft owned by a household member.

Front 36

If insured/spouse dies, household members continue to be covered. Only property coverage continues for legal representatives, not liability.

Back 36

x

Front 37

Civil liability

Back 37

bodily injury or loss of use.

Front 38

Occurrence

Back 38

means an accident (including continuous or repeated exposure to conditions) that results in bodily injury or property damage, neither expected nor intended by an insured person.

Front 39

A situation must be deemed an occurrence before insurance will apply.

Back 39

x

Front 40

Liability coverage under homeowners includes personal liability and medical payments to others.

Back 40

x

Front 41

Away from insured's home, coverage only applies to people who suffer bodily injury by:

Back 41

* the insured * an animal owned by the insured * a residence employee * a condition in the insured location

Front 42

Sometimes insurance companies pay medical costs as a goodwill gesture to avoid bigger lawsuits.

Back 42

x

Front 43

All obligations of insurance company end when it pays damages equal to the policy limit for one occurrence.

Back 43

x

Front 44

Insurance

Back 44

transfers the risk of loss from an individual or business entity to an insurance company, which in turn spreads the costs of unexpected losses to many individuals.

Front 45

Risk

Back 45

the uncertainty or chance of a loss occurring.

Front 46

Pure Risk

Back 46

refers to situations that can only result in a loss or no change. No opportunity for financial gain.

Front 47

Speculative Risk

Back 47

involves the opportunity for either loss or gain. Ex. Gambling. Not insurable.

Front 48

Exposure

Back 48

a unit of measurement used to determine rates charged for insurance coverage. A large number of units having the same or similar exposure to loss are referred to as homogeneous. The basis of insurance is sharing risk between a large homogeneous group with similar exposure to loss.

Front 49

Hazards

Back 49

conditions or situations that increase the probability of an insured loss occurring.

Front 50

Perils

Back 50

the causes of loss insured against in an insurance policy.

Front 51

Loss

Back 51

the reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril.

Front 52

Insurance provides a means to transfer loss.

Back 52

x

Front 53

Avoidance

Back 53

means eliminating exposure to a loss. Effective but seldom practical.

Front 54

Risk retention

Back 54

the planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance. It is known as self-insurance when the insured accepts the responsibility for the loss before the insurance company pays.

Front 55

Sharing

Back 55

a method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within that group.

Front 56

Reduction

Back 56

lessening the possibility of severity of a loss.

Front 57

Transferring risk

Back 57

makes it so the loss is borne by another party.

Front 58

Pure risks

Back 58

risks that involve only the chance of loss with no chance of gain.

Front 59

Insurable risks involve the following losses:

Back 59

* Due to chance * Definite and measurable * Statistically predictable * Not catastrophic * Randomly selected and large loss exposure

Front 60

Adverse selection

Back 60

the insuring of risks that are more prone to losses than the average risk.

Front 61

To protect themselves from adverse selection, insurance companies have an option to:

Back 61

refuse (or restrict) coverage (for bad risks,) or charge a higher rate.

Front 62

The law of large numbers

Back 62

a principle stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss.

Front 63

An insurer

Back 63

any person or company engaged as the principal party in the business of entering into insurance contracts.

Front 64

Stock companies

Back 64

owned by the stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses. Issue non-participating policies, in which policy-owners do not share in profits or losses. No dividends except to stockholders.

Front 65

Mutual companies

Back 65

owned by the policy-owners and issue participating policies. Policy-owners entitled to dividends.

Front 66

Fraternal benefit society

Back 66

an organization formed to provide insurance benefits for members of an affiliated lodge. Since fraternals are considered charitable institutions, not subject to regulations that apply to insurers that offer coverage to public at large.

Front 67

Before insurers can transact business in a specific state, they must apply for a license or Certificate of Authority from the state department of insurance and meet any financial requirements set down by the state. Considered authorized or admitted. Those who aren't approved are considered unauthorized or nonadmitted.

Back 67

x

Front 68

The law of agency defines the relationship between the principal/insurer and the agent/producer. In this relationship, it is a given that:

Back 68

* An agent represents the insurer, not the insured. * Any knowledge of the agent is presumed to be knowledge of the insurer. * If the agent is working within the conditions of their contract, the insurer is fully responsible. * When the insured submits payment to the agent, it's the same as paying the insurer.

Front 69

The agent is responsible for

Back 69

completing applications for insurance, submitting those applications for underwriting, and delivering the policy to the policy-owner.

Front 70

The insurer is also known as the:

Back 70

principal.

Front 71

Express authority

Back 71

the authority a principal intends to rant to an agent by means of the agent's contract. Written in the contract.

Front 72

Implied authority

Back 72

authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal.

Front 73

Apparent authority

Back 73

the appearance or the assumption of authority based on the deeds of the principal or because of circumstances the principal created.

Front 74

Because an agent handles the funds of the insured and insurer, they have:

Back 74

fiduciary responsibility.

Front 75

(A) fiduciary

Back 75

somebody in a position of trust.

Front 76

Commingling is:

Back 76

illegal, duh.

Front 77

Market conduct describes the way that companies and producers should conduct their business. A code of ethics. Some regulations include:

Back 77

* Conflict of interest * A request of a gift/loan as condition to complete business * Supplying confidential information.

Front 78

Producers are required to be professional at all times.

Back 78

x

Front 79

Professionalism

Back 79

can be defined as a person in an occupation requiring an advanced level of training, knowledge, or skill.

Front 80

For insurance contracts to be legally binding, they must have 4 essential elements:

Back 80

* Agreement * Consideration * Competent parties * Legal purpose.

Front 81

There must be a definite offer by one party, and the other party must accept this offer in its exact terms.

Back 81

x

Front 82

The binding force in any contract is the consideration, something of value that each party gives each other.

Back 82

x

Front 83

The parties to a contract must be capable of entering into a contract in the eyes of the law. Must be of legal age, mentally competent to understand the contract, and not under the influence.

Back 83

x

Front 84

The legal purpose of the contract:

Back 84

must be legal and not against public policy.

Front 85

A contract of adhesion

Back 85

is prepared by one of the parties (insurer) and accepted or rejected by the other party (insured). An insured has little to say about the policy and the contract is offered on a "take it or leave it" basis.

Front 86

Insurance contracts are aleatory, which means that:

Back 86

there is an exchange of unequal amounts or values. The premium paid by the insurer is small in relation to the amount that will be paid by the insurer in the event of a loss.

Front 87

Most insurance contracts are personal contracts, because they're between the insurance company and an individual. The insured cannot be changed to somebody else without written consent of the insurer. Life insurance is an exception.

Back 87

x

Front 88

(In a) unilateral contract:

Back 88

only one of the parties to the contract is legally bound to do anything. The insured makes no legally binding promises, but an insurer is legally bound to pay losses covered by a policy in force.

Front 89

A conditional contract requires that certain conditions must be met by the policy owner and the company in order for the contract to be executed. The insured must pay the premium and provide proof of loss in order for the insurer to cover a claim, for example.

Back 89

x

Front 90

Because the insurance company has the right to draw up the contract, the courts have held that any ambiguity in the contract should be interpreted in favor of the insured.

Back 90

x

Front 91

If an agent implies something, the insured could reasonably expect coverage.

Back 91

x

Front 92

Indemnity (or reimbursement)

Back 92

is a provision in an insurance policy that states that in the event of a loss ,an insured or beneficiary is permitted to collect only to the extent of the financial loss and is not allowed to gain financially because of the existence of an insurance contract. If insurance covers $200 and medical costs are $150, the insurer will not pay $200.

Front 93

Utmost good faith implies that there will be no fraud, misrepresentation, or concealment between the parties.

Back 93

x

Front 94

Representations

Back 94

statements believed to be true to the best of one's knowledge, but they're not guaranteed to be true. Misrepresentations could void the contract.

Front 95

(A) material misrepresentation

Back 95

a statement that, if discovered, would alter the decision of the insurer. If intentional, it's considered fraud.

Front 96

(A) warranty

Back 96

an absolutely true statement upon which the validity of the insurance policy depends.

Front 97

Concealment

Back 97

the legal term for the intentional withholding of information of a material fact that is crucial in making a decision.

Front 98

Fraud

Back 98

the intentional misrepresentation or intentional concealment of a material fact used to induce another party to make or refrain from making a contract, or to deceive or cheat a party.

Front 99

Unlawful insurance fraud

Back 99

willfully, with the intent to deceive, making any oral or written statement that contains either false statements or omissions of material fact.

Front 100

Waiver

Back 100

the voluntary act of relinquishing a legal right, claim, or privilege.

Front 101

Estoppel

Back 101

a legal process that can be used to prevent a party to a contract from re-asserting a right or privilege after that right or privilege has been waived.