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116 Cards in this Set
- Front
- Back
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3 elements of loss exposures |
asset exposed to loss
peril
financial consequence |
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3 financial consequences of property loss exposure |
reduction in value of property
increased expenses (eg hotel)
lost income (eg rental) |
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define tort |
wrongful act or omission that invades a legally protected right |
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3 kinds of tort |
negligence
intentional tort
absolute liability |
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4 things to be proven for negligence |
duty
breach of duty
injury/damage occurred
breach of duty was direct cause |
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6 types of intentional tort |
libel--written slander--oral assault battery trespass nuisance |
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4 personal financial planning loss exposures |
retirement
premature death
health and disability
unemployment |
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6 steps of risk management process |
1. identify loss exposures 2. analyze loss expoures 3. examine feasibility of risk management techniques 4. select appropriate technique(s) 5 implement the selected technique(s) 6. monitor results and revise as needed |
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4 parts of analyzing loss exposures |
frequency severity total dollar loss timing |
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6 risk control techniques |
avoidance prevention reduction separation duplication diversification |
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3 layers of personal insurance |
social--government provided group--such as employer individual |
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2 ways insurance can finance retirement loss exposures |
social security
turn savings into annuities |
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2 valuation methods for life insurance |
needs-based--estimate future financial needs to determine how much compensation is required
human life value--based on the insured's financial contribution to the family |
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why is health/disability insurance more important than life insurance? |
costs of healthcare need to be covered |
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why might state-provided unemployment benefits be extended? |
depending on economic conditions or unemployment rates in the state |
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6 common policy provisions |
declarations definitions insuring agreement conditions exclusions miscellaneous provisions |
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2 things insured considers in pre-loss policy analysis |
past loss experience
answers to questions by insurance producer or customer service rep |
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method used by insurers in post-loss policy analysis |
DICE
Declarations Insuring agreement Conditions Exclusions
then determine amount payable |
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2 advantages of the tort liability system |
remedy for victims
incentive to drive responsibly |
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3 disadvantages of tort liability system |
time delay in reaching settlment
legal and administrative costs
punitive damages may be considered excessive |
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contrast financial responsibility laws with compulsory insurance laws |
financial responsibility need not be proven until after it is needed
compulsory insurance required before vehicle can be licensed or registered |
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3 scenarios where motorist must provide proof of financial responsibility |
after auto accident involving bodily injury or property damage beyond a certain amount
after conviction for certain offenses such as drunk or reckless driving
upon failure to pay judgment |
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3 disadvantages of financial responsibility laws |
only effective AFTER accident, conviction, or judgment
does not compensate victims of uninsured drivers, hit-and-run, or stolen cars
minimum requirements maybe insufficient |
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6 disadvantages of compulsory insurance |
does not compensate victims of uninsured, hit-and-run, stolen, or fraudulently registered vehicles
minimum requirements may be insufficient
people might let insurance lapse after achieving registration
restricts insurer freedom to select profitable insureds
increased rates to compensate for accepting bad drivers--too high for good drivers
does not reduce the number of accidents |
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3 responses to disadvantages of compulsory insurance |
low-cost policies no pay, no play laws unsatisfied judgment funds |
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purpose and exclusions of low-cost policies |
minimal liability coverage at reduced cost
excludes: UM, UIM, and physical damage coverage |
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2 times no pay no play might prevent drivers from suing for general damages, even if they have insurance |
driving under the influence
using the vehicle while committing a felony |
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3 characteristics of unsatisfied judgment funds |
injured receives compensation after having obtained a judgment against a negligent driver and proving that judgment cannot be collected
max amount paid usually limited to state minimum requirements
negligent driver's license revoked until they reimburse the fund |
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What does UM stand for |
uninsured motorist coverage |
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3 scenarios covered by UM |
uninsured motorist hit-and-run negligent driver's insurer is insolvent |
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4 disadvantages of UM |
might not fully compensate
before injured can collect, they must prove the uninsured was legally responsible. Costly and lengthy
excludes property damage
victim is paying for what the negligent driver should be paying for |
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what does UIM stand for |
underinsured motorist coverage |
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2 triggers for UIM |
damages trigger: losses greater than at-fault driver's liability limits
limits trigger: negligent driver's limits are lower than injured person's UIM coverage |
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2 disadvantages of UIM |
all costs still might not be covered
victim paying to protect against others' irresponibility |
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what does PIP stand for |
Personal Injury Protection |
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3 types of no-fault laws |
modified add-on choice |
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right to sue? under true, modified, and add-on no-fault laws |
true: cannot sue modified: restricted add-on: unrestricted right to sue |
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how much may a victim sue for economic damages under modified no-fault plan? |
economic losses that exceed the no-fault coverage limits
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when can a victim sue for non-economic damages under a modified no-fault plan? |
if their economic damages exceed a certain threshold |
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2 possible thresholds that economic damages exceed to be able to sue for pain/distress/etc under modified no-fault plan |
monetary: if injuries exceed a dollar amount
verbal: if injuries meet a verbal description. might include minimum disability time period or words like "permanent", "disfigurement" |
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2 options in a choice no-fault plan |
modified--lower premium but restricted right to sue
add-on--default if modified not picked. Higher premium, but unlimited right to sue |
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6 benefits required by no-fault plans |
medical expenses rehab expenses loss of earnings essential services (eg. nurse, housekeeper) funeral expenses survivors' loss benefits |
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4 typical characteristics of voluntary market programs for high-risk drivers |
limits meet minimum state required coverage
medical coverage may be limited
collission insurance only available with high deductible
higher premiums than for average or above average drivers |
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What is SDIP |
safe driver insurance plan
offer premium credits to insureds with no accidents or traffic convictions within a specified time period |
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3 kinds of residual market programs |
automobile insurance plan
JUA
reinsurance facility |
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what is an automobile insurance plan |
all auto insurers in a state are assigned their proportionate share of high-risk drivers based on their proportion of the total auto insurance written in that state |
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what is a JUA |
Joint Underwriting Association
designates a limited number of insurers to service the high-risk business, but all insurers share the costs and expenses, in proportion to how much business they write in the state |
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what is a reinsurance facility? |
insurers accept all applicants with a valid license, but premiums and losses from high-risk drivers are shared by all insurers in the reinsurance facility, proportionally |
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5 primary rating factors |
territory use of the auto age gender marital status |
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9 'other' rating factors |
driving record
driver education
good student
multi-car policy
years of driving experience
credit-based insurance score
type of auto
deductible--higher deductible might receive discount since they are retaining more
liability limits |
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5 common discounts/credits |
anti-theft devices passive restraints (airbags) reduced auto use multi-policy or multi-account renewal or anniversary |
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3 rating categories applicants are sorted into based on loss exposures |
preferred standard non-standard |
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How does competition affect rate regulation |
lower rates to be competitive, but still must remain adequate |
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how does the rising cost of healthcare affect rate regulation |
rates increase to cover it |
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how does environmentalism affect rate regulation |
state emissions regulations increase auto costs and result in higher claims |
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4 ways vehicle modification affects rates |
impact safety
increase auto value
attract thieves
improved performance can result in more severe accidents |
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2 benefits of no-fault laws |
avoid lengthy and expensive legal proceedings
compensation received quicker |
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how are rates monitored |
rate filings |
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10 things in declarations |
Insurer Named insured and address Policy period Description of insured autos (year, make, model, VIN) Schedule of coverages (limit and prem for each auto) Applicable endorsements Leinholder (financer until loan is paid) Garage location Rating information (rate class and applicable credits/discounts) Signature of legal representative of insurer |
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Physical damage coverage of newly acquired autos, according to definitions |
If at least one listed car is covered, then broadest coverage applies to newly acquired car for fourteen days.
If no collision or OTC exists on policy, then newly acquired car is automatically covered for four days |
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In a liability case... What is prejudgment interest? Will insurer cover it? |
interest that accrues on damages while awaiting judgment
included in damages limit |
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In a liability case... Are defense costs subject to limits? |
No. But obligation to pay defense costs ends when limits are exhausted by payments of judgments or settlements |
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4 classes of people insured under Part A (Liability) |
named insured and family members
any person using covered auto
any person or organization legally responsible for the acts of a named insured while using a covered auto
any person or organization legally responsible for the named insured or family member while using a borrowed car (loaner of car must use own policy for defense) |
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define supplementary payments |
expenses the insurer agrees to pay under a liability policy in addition to the limits |
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4 types of supplementary payments |
bail bonds
appeal bonds
post-judgment interest
loss of insured's earning bc of attendance at trial |
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define split-limit basis for liability limits
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separate coverage limits for bodily injury to each person. a total limit also applies
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define single-limit basis for liability limits
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one limit that applies to all damages arising from bodily injury or property damage or both, resulting from a single accident
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What happens to liability limits when out of state?
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automatically increases if that state's financial responsibility law requires higher limits than what are on the PAP
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What happens when more than one auto policy covers a liability claim?
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each insurer pays its pro rata share:
insurer's share = (that insurer's limit/total limit) x damages |
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when do medical payments end?
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when either
limit is reached or three years after accident |
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two classes of covered persons under Part B: Medical Payments
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named insured and family members
any other person while occupying a covered auto |
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11 exceptions for part B: Medical Payments
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fewer than four wheels
public or livery conveyance vehicles used as residence or premises injury during course of employment owned by insured or available for regular use owned by family member (named insured and spouse still covered) occupied without reasonable belief of entitlement vehicles used in business bodily injury from nuclear weapons or war nuclear radiation inside racing facility |
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what damages are covered by Part C: UM?
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compensatory.
not punitive usually only bodily injury, not property damage without a deductible |
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three classes of covered persons under Part C: UM
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named insured and family members
any other person occupying a covered auto any person legally entitled to recover damages because of bodily injury to above classes. ex) surviving spouse |
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4 ways a vehicle might be uninsured
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no bodily injury liability insurance
hit and run insured for less than legal minimum insurer denies coverage or is insolvent |
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6 types of cars that are not included in definition of uninsured motor vehicle
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owned by or for use by insured
owned/operated by self-insurer that is able to pay owned by government unit or agency operated on rails or crawler treads designed mainly for use off public roads located for use as residence or premises |
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what does "no benefit to workers comp" mean with regards to UM?
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workers comp may recover benefits paid from negligent third party, but not from injured's UM
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what happens when different parts of the same policy can cover the same loss?
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no duplicate payments
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there is a UM exception for owned vehicles with primary UM elsewhere.
what if the vehicle is not owned, but still has primary UM elsewhere? |
The PAP serves as excess basis of coverage
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what is the process for arbitration?
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each party picks an arbitrator
the two arbitrators pick a third majority vote |
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is the arbitration decision binding?
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binding if amount of damages determined does not exceed state minimum limit
if damages do exceed state minimum limit, then either party may demand trial within 60 days |
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is stacking ever allowed?
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some states allow by endorsement, but comes with higher premium
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when is a leased vehicle considered an owned vehicle?
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leased under written agreement for continuous six months
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when is an unnamed spouse considered "you?"
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living together and not named on another policy
if they move out, they are still "you" for 90 days, or until they have their own policy |
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a bail bond is a supplementary payment. Is there any limit?
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not subject to liability limits
subject to separate $250 limit |
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four kinds of physical damage coverage
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comprehensive, aka OTC
collision specified cause of loss towing and labor |
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three reasons for deductibles
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keep premiums low
reduce number of small claims encourage loss prevention |
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is contact with an animal collision or OTC?
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OTC
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is glass breakage collision or OTC?
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either, insured can choose
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what happens when two or more autos with collision coverage under the same policy are in the same accident?
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only the highest deductible applies
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Does a PAP cover physical damage (part D) for a non-owned vehicle? How much?
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only if not furnished for regular use by insured
apply broadest coverage of any vehicle on decs page. This is in excess over the primary coverage the vehicle already has |
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3 things transportation expenses include? (part D)
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rental fees, taxi fare, etc
cost of repair of stolen car is returned with damages loss of income to owner of car if rental car is damaged |
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What is the max amount paid for transportation expenses? (part D)
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$20/day
up to $600 total |
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What deductible applies to transportation expenses? (Part D)
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no money deductible
waiting period of 48 hours for theft, 24 hours for other loss |
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what does "no benefit to bailee" mean?
Part D: Physical damage |
insurer has the right to recover from a bailee: someone who assumes custody of other people's property for business purposes
ex) valet, parking attendant |
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What happens when a loss is covered by other sources of recovery, with all on a primary basis?
ex) house fire damages car in the garage. Both homeowners and PAP cover the loss |
They each cover their proportion of losses based on the proportion of total limits
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Describe the appraisal process
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each party selects appraiser
two appraisers select an "umpire" if the two appraisers cannot agree, then it goes to the umpire any two out of three make a binding decision |
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who pays for an appraisal process?
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each party pays for their selected appraiser.
the rest is split |
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7 general duties after an accident or loss
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promptly report to insurer, include witness/injured name and address
cooperate with insurer submit legal papers to insurer submit to physical examination agree to examination under oath authorize release of medical records submit proof of loss (statement of facts) |
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2 additional duties when seeking UM coverage
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notify police of hit and run
submit legal papers if insured decides to sue the uninsured motorist |
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3 additional duties for physical damage coverage
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prevent further loss
notify police of stolen auto permit inspection and appraisal |
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What does the bankruptcy of the insured provision say?
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even if the insured declares bankruptcy, the insurer is still obligated to pay their share
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4 types of changes in a policy that result in premium increase or decrease
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number, type, use of insured vehicles
operators using the vehicles place of principal garaging coverage provided, deductibles, limits |
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What does the liberalization clause say?
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If a policy form is broadened at no additional premium, the broadened coverage automatically applies to all existing policies of the same type
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When and how does an insured cancel a policy?
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whenever they want
give advance written notice of cancellation date |
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How does an insurer cancel a new policy? How much notice must they give?
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within 60 days
mail a cancellation notice 10 days notice if non-payment 20 days for all other reasons |
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3 times when is an insurer allowed to cancel a policy that is older than 60 days?
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nonpayment of premium
insured's drivers license revoked or suspended policy obtained by giving false information |
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How much notice must an insurer give for a nonrenewal?
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20 days
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When can an insurer nonrenew?
hint: based on length of policy period |
<6 months--can nonrenew every 6 months
6-12 months--can nonrenew at end of policy period >12 months--can nonrenew on anniversary of beginning of original effective date |
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2 times when automatic termination occurs
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insurer offers to renew but insured does not accept or fails to pay premium
insured takes out PAP elsewhere. automatic termination once second one is effective |
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under what circumstances can a PAP be transferred?
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insured dies.
legal representative and surviving spouse may take over PAP |
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What does the "two or more auto policies" provision say?
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when two policies from the same insurer apply to the same accident, the highest limits apply
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3 exclusions to snowmobile endorsement
and 1 optional exclusion |
used in business
any racing anybody not named on policy may opt out of bodily injury coverage in exchange for lower premium |
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difference between extended non-owned coverage and named non-owner coverage
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name non-owner does not apply to family
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what does the endorsement for auto loan/lease coverage do. any exclusions?
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pays full amount still owed, even if greater than the ACV
does not include penalty costs, security deposits, or costs for extended warranties or anything else purchased along with car |
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What does Limited Mexico coverage include and what does it require?
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covers within 25 miles of US border on a trip of 10 days or less
must also have primary policy purchased form licensed Mexican insurer |
