Insurance Exam

Front 1

Risk:

Back 1

uncertainty in situations with two or more outcomes

Front 2

Hazard

Back 2

Condition that increases chances of a loss

physical hazard: material or structural ex: bald tires

moral hazard: illegal or unethical actions ex:fraud

morale hazard: carelessness or improper maintenance ex: unlocked door

legal hazard: court actions - tendency of courts to interpret policy language diff. than agent intended

Front 3

Peril

Back 3

cause of a loss

fire, water, lightening, theft, etc.

Front 4

economic loss

Back 4

decrease in value, quality, or quantity of assets

could result from death, injury, property damage, stolen property, etc.

Front 5

Indemnity

Back 5

principal stating insured cannot profit from a loss and should be returned to same financial status as right before loss occurred

Front 6

Deductible

Back 6

Amount of monetary loss an insured must take before policy will pay toward loss

higher the deductible lower the premium

Front 7

Misrepresentation

Back 7

oral or written misstatements of fact concerning insurance transaction

if deemed material, it could void a policy

Front 8

Breach of Warranty

Back 8

warranty is a statement made on insurance application that is GUARANTEED to be true - if untrue that is a breach of warranty

NC policies are representations (true to the best knowledge) not warranties

Front 9

Concealment

Back 9

misrepresentation by silence

must be material to void policy

Front 10

Negligence

Back 10

Failure to act with reasonable care in order to avoid harm - omission or commission

Negligence occurs when:

1. legal duty owed

2. breach of legal duty

3. proximate cause - damage is connected to breach of duty

4. damages have occurred -- no damage no negligence

Front 11

Liability

Back 11

when one is liable for damage resulting in their negligence causing harm to another

3rd party cov.

Front 12

Supplementary Payments

Back 12

paid in addition to limits of liability and include payments for defense cost, bail bonds, loss of earning

Front 13

Bodily Injury

Back 13

Injury, sickness, or disease sustained by anyone during the policy period - including death

Front 14

Property Damage

Back 14

damage to tangible property during policy period - and includes loss of use as a result

Front 15

Personal Injury

Back 15

injuries other than bodily harm

ex: slander, libel, false arrests, etc.

covered under CGL policies

Front 16

Accident/Occurence

Back 16

unplanned event which occurs suddenly and can be identified by place and time

Front 17

Liability Limits

Back 17

max amount the policy will pay under conditions listed in policy

Single limit: one amount for BI and PD together

Split limits: diff. amounts for BI pp/BI po/PD po

NC requires 30/60/25

Front 18

COI

Back 18

a certificate of insurance is evidence to show policy is written and in effect

Front 19

Binder

Back 19

statement that provides temporary insurance coverage for specify period of time

written or oral

Front 20

Endorsements

Back 20

documents attached to policy that changes policy provisions in some way

restricts or broadens coverage

Front 21

Liberalization Clause

Back 21

states that if Rate Bureau makes change in law that broadens cov. then all similar policies will reeve that broadened cov.

only applies when no premium increase is involved

Front 22

First named insured

Back 22

first name on dec page - highest level of rights on policy and receives notices

Front 23

Monoline v. package policies

Back 23

monoline: protects against one type of loss ex:liability only

package: combines more than one type of coverage under one policy. ex: home policy includes liability, prop. damage, and med pay

Front 24

Major Classes of Policy Provisions

Back 24

statements in policies that explain conditions

1. Dec page: cntains name, adress, policy period, amounts of ins. and limits, and premium

2. definitions section: spells out meanings of certain words and phrases to get everyone on the same page

3.insuring agreement: lists perils covered under policy and insured agreement to pay for covered losses

4. exclusions/waivers: states what policy will not cover. Exclusions used to eliminate cov. for catastrophic events like nuclear war. Waiver is the intentional giving up of known right

5. Conditions: lists the rights and duties of agent and insured. ex: what to do after a loss.

Front 25

Insurance

Back 25

social device for spreading chance of loss among large number of people reducing one persons risk of disastrous financial consequences

Front 26

Application

Back 26

document used to gather necessary info to determine if particular risk is acceptable to insurer

Front 27

adhesion

Back 27

adhesion contact = where one party writes contract and other party has no input into the language of contract

insured must adhere to insurance comp.

Front 28

subrogation

Back 28

assigning rights of indued to insurer to recover damages from 3rd party who can be found negligent for causing a loss

Front 29

Named insured

Back 29

named on dec page - makes decisions

Front 30

Insurable Interest

Back 30

Person must be in a position to suffer a financial loss if their assets suffer a covered loss

Front 31

Direct V. Indirect Loss

Back 31

Direct loss: direct loss as a result of a covered peril - collision fire damage, theft

indirect loss: consequence of a direct loss - cost of a rental car, cost of hotel (Loss of Use)

Front 32

Named Peril

Back 32

specifically names all of the perils covered under the policy

Front 33

Open Peril

Back 33

insures against all perils except for those specifically listed under exclusions

Front 34

Specific v. Blanket Coverage

Back 34

Specific coverage: provides specific amount of coverage for a specific property at a specified location.

Blanket coverage: one amount that covers multiple things (not identified by name)

Front 35

Property Loss Valuation

Back 35

ACV : Today's replacement cost - depreciation

Replacement Cost: pays the full cost to replace the item without considering depreciation

Functional Replacement Cost: used for items that are difficult or impossible to replace - antiques or items no longer available. Damaged property is replaced or repaired with less expensive but functionally equivalent property.

Stated Value: covers property for stated value that is generally more than ACV. Used to insure classic or antique cars

Front 36

Mortgagee/Loss Payee

Back 36

Mortgagee: individual, bank, credit union, etc. that has an insurable interest in the property

Loss Payee: same as above but for cars

both listed as additional insured

Front 37

Standard Fire Policy

Back 37

Monoline (property only), named peril policy that can be made for up to a 7 year term.

no definitions section

can be personal residence to commercial business risk

Front 38

Perils Covered in the SFP

Back 38

Fire, lightning, and Removal

only hostile fires

Removal (moving property to protect it from covered perl) coverage for up to 5 days

Front 39

Losses covered and excluded in the SFP

Back 39

Only direct losses are covered

excludes:

coverage for scouts, bills, currency, etc.

loss from war

civil authority

theft

neglect

explosion.riot

Two conditional exclusions:

if insured can control situation

if property is vacant. Vacancy coverage lasts for 60 days

Front 40

Inception/expiration for SFP

Back 40

policy begins and ends at 12:01 am

Front 41

Limitations on amount payable SFP

Back 41

Policy will pay smallest amount of

Policy limit - amount on dec page

ACV

Replacement Cost

Interest of the insured - amount equal to insured incurable interest in property at time of loss

Pro Rata

Front 42

Pro Rata Formula

Back 42

use when loss is being shared by two companies

A pays: Policy A's limits of liability/ A+B X AOL

B pays: Policy B's limits of liability/A+B X AOL

ex:

A = 25,000

B = 75,000

loss = 60,000

A = 25,000/25,000+75,000 X 60,000 = 15,000

Front 43

Loss Settlement Options (claims) SFP

Back 43

1. Insurer can take damaged property, write a check and keep the salvage

2. Insurer can repair, rebuild, or replace property with similar quality materials

Insurer must notify client of decision within 30 days

Front 44

Concealment, misrepresentations, fraud SFP

Back 44

voids policy

Front 45

In the event of a loss SFP

Back 45

Insured must:

Give immediate notice

protect property from further damage

separate damaged an undamaged property

furnish a complete inventory of property and costs

submit signed proof of loss within 60 days

produce records ro be examined under oath

Front 46

Appraisal SFP

Back 46

If claim is approved but insured and insurer can't agree on an amount they can each select an appraiser within 20 days

Front 47

Subrogation SFP

Back 47

condition stating the insured is required to give all rights of recovery from negligent party to insurer

Front 48

Suit against company SFP

Back 48

insured can bring suit against insurer after insured has met all policy conditions. Policy states that insured must file suit within one year after date of loss - NC law overrides it to 3 years

Front 49

Abandonment SFP

Back 49

can't drop damaged property off and demand money

Front 50

Waiver SFP

Back 50

waivers must be n writing and attached to policy to be valid

Front 51

Dwelling Forms

Back 51

mono-line property form that allows for additional coverages to be endorsed

DP-1 - basic

DP-2 - broad

DP-3 - special

named peril - - Special forms are open peril on A&B and named Peril on C

Front 52

Eligibility dwelling

Back 52

up to four units and no more than 5 roomers per unit. NO FARMS

renters, owners, landlords

Front 53

Coverage Items - dwelling

Back 53

Coverage A: dwelling

Coverage B: other structures

Coverage C: personal property

Coverage D: Loss of fair rental value

Coverage E: Additional living expensed (not on the DP-1)

^^Mix and match ^^

Front 54

other coverages on all three forms - dwelling

Back 54

Debris Removal

$500 Fire Department Service Charge

Reasonable Repairs - covers attempt to prevent further damage

Property Removed (removal coverage) - 5 days DP-1, 30 days DP-2 and DP-3

World Wide Coverage: 10% of coverage C is protected anywhere in the world

Improvements alterations and additions: only for tenants. 10% of coverage C

Other structures - 10% of coverage A

Rental Value: 10% of A - payable at 1/2 the 10% per month

Front 55

DP -1 - Basic Form

Back 55

named peril - fire, lightning, internal explosion

pays for losses on an ACV basis

Includes coverages A-D

Coverages that can be endorsed to a DP-1

Coverage E - additional living expenses

Extended Coverages (WC SHAVVER)

V&MM (up to 30 days vacant)

excludes ordinance or law, earth movement, water damage, power failure, neglect, war, nuclear hazard, plants, and intentional losses

Front 56

Extended Coverages

Back 56

WC SHAVVER

Wind

Civil Commotion

Smoke

Hail

Aircraft

Vehicles

volcanic Eruption

Explosion

Riot

Front 57

DP-2 - Broad Form

Back 57

Named Peril - fire lightning, EC, V&MM and burglar damage, weight of ice, sleet, or snow, artificially generated electrical current, falling objects, freezing, accidental discharge, tearing, cracking, burning, or bulging

other coverages:

Trees, shrubs, and plants - %% of Coverage A up to $500

Collapse

Glass

Exclusions:

everything under DP-1 except for plants

Front 58

DP-3 Special Form

Back 58

Open Peril A&B

Named Peril C - same perils as DP-2

same other coverages

same exclusions as DP-2 plus:

weather conditions

acts or decisions,

faulty, defective, inadequate

Front 59

Other conditions and Provisions

Dwelling Forms

Back 59

DP-1 Loss Settlement: ACV but not more than amount required to repair or replace

DP-2 and DP-3: Coverage C is covered at ACV, Coverage A&B is covered at emplacement cost

1. if insured to at least 80%, the policy will pay replacement cost with no deduction for depreciation. Smallest amount from limit of liability on policy, replacement cost, amount required to repair or replace.

2. If not insured to 80% policy will pay larger amount from ACV or Coinsurance Formula

Front 60

Coinsurance Formula

Back 60

only used when property is not insured to 80% of value

Insurance carried/insurance required X RC

Value = 250,000

Insurance = 150,000

RC =100,000

150,000/(.80 X250,000) X 100,000 = 75,000

Front 61

Personal Liability Coverages - Endorsements for dwelling

Back 61

Coverage L: Personal Liability. provides $100,000 per occurrence ( higher limits available for higher premium). Negligence must be proven

Coverage M: Med pay to others. $1,000 per person (high limits available for higher premium)

Coverages

1. Claims expenses

2. First Aid expenses

3. Damage to property of others

Front 62

Theft Coverage endorsements for dwelling

Back 62

Broad Theft Endorsement: owner occupied dwellings, coverage for theft/attempted theft and V&MM

only covers vacant property for up to 30 days

will pay $1,000 for all theft except for $200 on money, $2,000 on firearms, and $2,500 on silverware

broad theft exclusions: aircrafts, motor vehicles and stuff inside motor vehicles, property for delivery or sale, business property, animals, property of others who are not related to insured, credit cards

Limited Theft Endorsement: tenant coverage. Only offers on premise coverage. Only insured is covered.

Front 63

Homeowners Policy Sections

Back 63

Package Policy

Section 1: Property

A: Dwelling

B: Other Structure

C:Personal Property

D:Loss of Use

Section 2: Liability

E: Personal Liability

F: Med Payments

*HO-4 (tenants) does not include A&B

*HO-6 (condo) does not include B

Front 64

HO forms

Back 64

HO-1 Basic

HO-2 Broad (owner occupied)

HO-3 Special (owner occupied)

HO-4 Tenants

HO-5 Comprehensive (owner occupied)

HO-6 Condominium

HO-8 Modified form for special risks (owner occupied)

Front 65

HO Eligibility

Back 65

1-4 units

2 families per unit

must purchase full package

dwelling only used for residential purposes

HO 4 Eligibility: rental of a single family residence

HO 6 Eligibility: owner of a condo unit

HO 8 Eligibility: owner of an older or unusual construction - replacement cost exceeds market value

Front 66

Definitions (same in all HO policy forms)

Back 66

Defines:

aircraft, hovercraft, and motor vehicle liability

Bodily injury (bodily harm)

Business (over $2,000 a year means business)

Employee

Insured: named insured, residents, relatives, someone in your care under 21 yrs old, student enrolled in school full time,

Insured Location:residence, other structures, where insured is residing, pretty much anywhere the insured is thats not being used for business

motor vehicle

occurrence

property damage

residence employee

residence premise: dwelling where you reside

Front 67

Section 1 of HO

Back 67

f