Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
77 Cards in this Set
- Front
- Back
|
Insurance |
The transfer of the possibility of risk from an insured to an insurance company. |
|
|
Indemnity |
a "contract" to put you back to where you were or make you "whole" again. No better, no worse. |
|
|
Risk |
The uncertainty or chance of loss. |
|
|
Hazard |
3 Types of hazards Physical - determined by the senses, like steps with no handrails. Moral - dishonest predisposition like falsifying a claim. Morale - flippant attitude, leaves their jewelry out because they've got insurance. careless. |
|
|
Peril |
A cause of loss. |
|
|
Loss (Direct & Indirect) |
A Direct loss is a loss that actually happens to the property. (Cov A, B, C) An Indirect loss is the financial loss (consequential) loss of the direct loss. (Cov. D) |
|
|
Named Peril vs. Open Peril |
A Named Peril policy is an insurance policy that insures only against perils that are specifically named or listed on the policy. An Open Peril policy insures against all risk, except those specifically excluded. (Special=all risk) |
|
|
Specific Coverage vs. Blanket Coverage |
"Specific think Scheduled" because it schedules or list specific property. Blanket coverage covers more than one type of property or multiple locations. |
|
|
Actual Cash Value (ACV) vs. Replacement Cost (RC) |
ACV=RC (replacement cost) - depreciation We like RC, which = today's value to replace |
|
|
Mortgagee/Loss Payee |
additional insured, they have the right to know about cancellation or change notices. |
|
|
Application |
a questionnaire completed by the insured and a licensed agent, which is the primary source for underwriting |
|
|
Elements of a Contract - CLOCK |
Competent Parties Legal Purpose Offer & Acceptance Consideration Key to compliance is you |
|
|
Representations |
statements that are believed to be true |
|
|
Misrepresentations |
"material fact" policies can be VOIDED if found material |
|
|
Negligence an unintentional tort |
The failure to use care, legal duty owed to another, breach of that duty and resulting bodily injury, property damage or personal injury. (Ex. no fence around pool.) unintentional tort |
|
|
Personal Injury Liability |
must be endorsed on a HO policy |
|
|
Limits of Liability |
Per Occurence - (accident) pays losses each time a loss occurs. Per Person - max amt of BI to one person Aggregate - the total available to be paid for the year regardless Split - Auto liability limits 30/60/25 Combined Single - a single dollar limit applying to the total of damages. |
|
|
Certificate of Insurance |
proof. "it's done" - mainly used by contractors |
|
|
Binders - 60 days |
Temporary proof of coverage, good for 60 days, can be oral or written. Binders do NOT guarantee coverage. Agents and insurers can provide binders. |
|
|
Endorsement Rider - means a change to a policy, any change |
Liberalization Clause means immediate coverage |
|
|
First Named Insured |
usually on Commercial policies, this is who they contact or pay attention to, a higher level of duties, they can cancel and change policy, and it's premiums. |
|
|
Know Parts of an Insurance Contract - DICED Declarations Insuring Agreement Conditions Exclusions Definitions |
Declarations is the info page of the policy. Insuring Agreement all about the perils , the P's and promise to pay. Conditions describes the right and responsibilities duties. Exclusions are not covered and Definitions clarifies the meaning. Ex: what part of the policy contract includes the perils? Ans. Insuring Agreement Ex: prompt notice and proof of loss = Conditions Ex: War, nuclear, intentional=Exclusions |
|
|
Subrogation |
A transfer of the rights, takes away your right to sue. If it is covered the insuring company will take away your right to sue, after paying you, they go after the other party. (Ex: auto crashing into a house.) |
|
|
Proof of Loss |
A sworn statement completed by the insured and given to the insurer when there has been a loss. It must be in writing. |
|
|
Other insurance provision means you cannot collect from 2 policies, rather you will be paid by the best one. |
Sources of Insurability Info: this is where insurance companies share info. (Ex: CLUE -Comprehensive Loss Underwriting Experience, and MVR's) application is the primary source. |
|
|
Cancellation - termination of a policy Non-Renewal - not renewing the policy, notice given 45 days. Notice given for any reason - 60 days Notice given for non-payment -15 days |
Vacancy - No people, no property, NADA nothing! Unoccupied - property, but no people (like this office building at night) |
|
|
Adhesion - take it or leave it, a contract between two parties Consent to rate - a form the is completed by the insured if the company charges above the Bureau rate, which everyone is getting now. Law of large numbers- the more people contributing the better. Unilateral - one party make a legally enforced promise. |
Spread of risk- the selling of insurance in multiple areas to multiple policyholders to minimize danger. Adverse selection- decisions that the insured would not find favorable (declination, cancellation, non-renewal) however they have to give you a reason. Unilateral - one party make a legally enforced promise. |
|
|
When must insurable interest exist? |
at the time of loss. |
|
|
In a liability loss, the person to whom the insured caused damage is referred to as the third party. |
Personal injury liability coverage includes protection against liability arising out of libel and slander, defamation, false arrest, and wrongful entry or eviction. |
|
|
Standard Fire Policy |
covers fire, lighting, and removal of property written for 7 years and forms the basis for all property insurance policies. Perils Excluded (NOT covered) |
|
|
Perils covered |
The Standard Fire policy includes fire, lighting, and removal. BASIC form or named perils includes fire, lighting, and internal explosion & if the Extending Coverage endorsement is attached, WHARVES-Wind, Hail, Aircraft/vehicles, Riot, Volcano, Explosion, Smoke......also Vandalism+Malicious Mischief (V+MM) |
|
|
Broad Form (named perils) policy includes all of the Basic form perils plus BIG AFFECT |
BIG AFFECT Burglar damage Ice, snow, or sleet Glass breakage Accidental discharge of water Falling objects Freezing pipes Electrical damage Collapse Tearing Apart |
|
|
Special Forms (Open Perils) |
All types of loss are covered, unless the policy specifically excludes the peril. |
|
|
Inception Date - date coverage begins (at 12:01am-1 minute after midnight) Expiration Date - date coverage ends (at 12:01am-1 minute after midnight) |
Fraud: a deliberate misrepresentation that causes harm; an all-out effort by one party to deceive & cheat the other. Is it material is the question. |
|
|
Requirements in the Event of Loss Things the insured must do.... |
give prompt notice protect the property from further damage complete a detail proof of loss form make the property available for inspection submit to examination under oath assist the insurance company as need during investigation. |
|
|
Appraisal |
The condition of the policy that states when the insured and the insurer cannot agree on the amount of a property loss to be paid, either party can make a written request for an appraisal. Each party selects an appraiser, if they cannot agree, then an umpire is consulted......... |
|
|
Economic Loss |
Financial loss or hardship, which means in order for a loss to be insurable it must cause financial or economic loss. |
|
|
Deductible - also means Self Insured Retention or SIR |
the amount that the insured must pay when there has been a loss, before the insurance company will pay. The higher the insured's deductible, the lower the premium. |
|
|
Breach of Warranty - The insurer can deny the claim because the insured breached their warranty (did not keep their warranty/word.) |
warranties are statements made by the insured to the insurer upon which the policy is issued. An example is a warranty to the insurer that the insured will install a security system, since they live in the country & theft is a concern for the insurer. The insurer issues the policy. The insured fails to have the security system installed & the insured experiences a theft loss. |
|
|
Concealment |
The applicant intentionally withholds or "conceals" a "material fact" when applying for an insurance policy. The info withheld must be information that would have changed an underwriter's decision to issue the policy. |
|
|
Liability |
The responsibility we have to others. It includes Bodily Injury (BI), property damage (PD), and personal injury (PI). |
|
|
Supplementary Payments Claim Expenses=supplementary payments |
These coverages provide additional amounts of coverage for no additional premiums. Examples are claim related expenses, defense cost, and reasonable expenses incurred by the insured to protect the property from further damage. |
|
|
Accident/Occurrence - unplanned event |
A sudden, unplanned, and unexpected event. It results in the injury or damage that is neither expected, nor intended, by the insured. |
|
|
PRO RATA METHOD The insured has two separate Dwelling policies that cover that same property: Policy A for $30,000 and Policy B for $60,000. The insured has a $12,000 loss. If both policies use the pro rata method to handle other insurance, how much will Policy B pay for this loss? |
PRO RATA METHOD First add up both the coverages, then use that amt as the should for each of the did, then times the loss and that will be the answer. Pay attention to the question, when they ask which Policy will pay for this loss. 30,000 ----------- X 12,000 = 4,000 Policy A 90,000 60,000 ----------- X 12,000 = 8,000 Policy B 90,000 |
|
|
Bodily Injury Liability |
Known as BI. Includes bodily injury, sickness, disease, and death caused by the insured to someone else. |
|
|
Property Damage Liability |
Known as PD. Includes damage to property caused by the insured to someone else's property. |
|
|
Personal Injury Liability |
Known as PI. Includes libel , slander, defamation of character, invasion of privacy by the insured to someone else. It does NOT include bodily injury. |
|
|
HO-2 BROAD named peril policy, where your water perils start. *includes everything from HO-8 (WHARVES, V+MM) plus the BIG AFFECT. ALE is 20% on LOSS OF USE - Coverage D |
Burglary Ice, Snow, Sleet Glass Breakage Accidental Discharge (pipe leaks) Freezing Falling Objects Electrical Collapse Tearing Apart |
|
|
Deposit Premium Audit |
Premium paid at the beginning of the policy period that is based on an estimate of what the final premium will be. This premium is adjusted based on reports submitted by the insured to the insurer. It is also called an estimate premium. Examples: autos, CGL's are usually audited and Worker's Comp. |
|
|
Limits of Liability Per Occurrence - (Accident) pays losses each time a loss occurs Per Person - the max. amt available for payment of BI to one person in an accident. Aggregate - the total available to be paid during a policy year, regardless of how many occurrences there are. |
Split - separate stated limits (Auto Liability limits 30/60/25) Combined single - a single dollar limit applying to the total of damages for bodily injury BI & property damage (PD), combined that results from one accident or occurrence. |
|
|
FLOOD INSURANCE This program is managed by the FEDS or FIA (Federal Insurance Administration), a branch of FEMA. 2 TYPES OF FLOOD PROGRAMS Emergency-Building $35,000 Contents $10,000 Regular - Building $250,000 Contents $100,000 |
Emergency is used when communities are establishing their rates. Two DEDUCTIBLES on Building and Content Removal of property is covered for 45 days DEFINITION OF FLOOD -overflow of inland or tidal waters -mudslides caused by accumulations of water on the ground or underground and collapse of land as a result of excessive erosion due to flood. |
|
|
If asked on a Test? Federal gov maintains and rates however they turned it over to private insurance companies. RC= replacement cost Sewer back-up is NOT covered, has to be endorsed. When thinking Water Damage, remember Flood=Policy, Backup=Endorsed |
Flood Application Procedure must be fully completed and full payment of the gross policy premium. There is a 30 day waiting period for coverage to be effective. Agents are not allowed to bind coverage. Residential and Commercial available |
|
|
Commercial Insurance 2 Types of Policies -Business Owners Policy (BOP) -Commercial Package Policy (CPP) |
BOP is used for small to medium sized businesses -prepackaged policy, includes both property and liability Eligible Risks -office bldgs. not exceeding 6 stories or 100,000 square feet -Apts/Condos NOT exceeding 6 stories or 60 units |
|
|
BOP Eligible Risks continue...... -Mercantile, Processing, and & Service establishments NOT exceeding 25,000 sqft or annual gross sales of $3 million. -Contractors like carpenters, electricians etc -Restaurants limited to beer/wine sales no more than 25% of gross sales -Convenience stores limited to 50% gross sales in gas. |
INELIGIBLE Risks -Auto sales & servicing operations -Manufacturing operations -Financial Institutions or Banks -Household personal property -1 or 2 family dwellings |
|
|
2 BOP Coverage Forms (Standard & Special) Standard- coverage is identical to the perils covered in the Commercial Property Basic form causes of loss, with the exception of transportation perils unique to BOP's. |
Special BOP form -coverage is provided on an open peril basis, unless excluded. Deductibles -the deductible does NOT apply to the FD service charge, Business Income, Extra Expense, or Civil Authority Coverages |
|
|
BOP - Optional Coverages or Endorsements -Outdoor Signs - limit $1,000 -Money & Securities - "Crime" policy -tracking -Employee Dishonesty - "Crime" policy - very important to have -Mechanical Breakdown - example boiler or pressure vessels or a/c units |
Hired Auto & Non-Owned Auto Liability Endorsement - this is a Commercial Auto Policy Endorsement. -provides coverage for liability arising out of the use of a hired or non-owned auto. *employee has an accident in their personal vehicle on company time and business* |
|
|
Commercial Package Policy CPP almost all commercial risk are eligible for coverage under the CPP. Can include almost any comm. cov except Ocean Marine and Aviation Insurance. |
Can include the following: Commercial Building & Personal Property BPP Commercial General Liability CGL Commercial Auto Coverage Commercial Crime coverage Commercial Inland Marine coverage Boiler & Machinery coverage (B&M) Employment Practices Liability coverage |
|
|
A CPP consist of the Common Policy Dec, Common Policy Conditions, and two or more coverage parts. |
Common Policy Declarations contain info about who is insured, name and mailing address of named insured policy period, description of covered business, part and premiums, and list of form applicable. |
|
|
Common Policy Conditions certain responsibilities & obligations are assigned to the first name insured, who is the most important person. The FNI also can cancel and make changes and premiums. |
180 days, If the NI or FNI dies his or her rights transfer to the legal representative in order to carry out the duties. |
|
|
Commercial Building and Personal Property Form BPP -used with CPP -this is the main form used to cover commercial building, business personal property, and property of other on the insured's premises. (Example: drycleaners) |
Test ? What is the difference between Additional Coverage vs. Coverage Extensions? Answer: You can only get this when you are co-insurance compliant. Must have 80% or more coinsurance. |
|
|
Builders Risk Coverage -provides coverage for loss to a building that is under construction & to temporary structures, materials, and supplies used in the construction. |
Which of the following are contained in the Common Policy Declarations? Answer: The policy period, the name and mailing address of the insured, a description of the business being covered, and the insured's premium for each coverage part purchased |
|
|
BUSINESS INCOME COVERAGE separate but works together with a BPP |
This is known as "business interruption" coverage. It pays for the consequential financial loss of business income that occurs when a business must suspend operations. Key: pays normal operating expenses like payroll and fixed expenses during the period of restoration. |
|
|
Business Income Coverage has a 72 hour Deductible |
Restoration Period can be 30 days or longer, can pay for another "extended" 30 days. up to 60-90 days. |
|
|
3 ways to WRITE 1. Maximum Period of Indemnity 120 day limit 2. Monthly Limit of Indemnity, each 30 day period 3. Agreed Value *Tammy's FAV* It shows the business financial data for a year or 12 months and an estimate for he next 12 months. |
"It is like a disability coverage for the business!" |
|
|
Extra Expense Coverage - Indirect Coverage -additional costs to continue operations -pays for necessary extra expenses -shortens the period of restoration Examples: advertising, additional phone lines, hiring extra people, leasing a temporary location. |
Loss Conditions - Extra Expense Coverage 1st % - 30 days or less 2nd % - 31-60 days 3rd % - 61 days or more For example, if the percentages are 40/80/100 & the policy limit is $150,000, and it takes 50 days to restore, 80% would apply. 80% of 150,000 is 120,000, so the that is what is paid. |
|
|
Commercial Inland Marine Floaters which are purchased by businesses that have customer property in their care, custody, or control. (ie. Drycleaners) -written on a named peril basis, you can do Open Perils as well. -Also called a Bailee Policy, care, custody, and control. |
Certificate of Insurance - written proof that a policy has been written, issued, and in effect. It includes the amounts and types of coverage provided. |
|
|
Endorsement Rider |
A document attached to an insurance policy that changes the policy in some way. |
|
|
Personal Auto Policy consist of a Declarations page & a Policy Form. The insured is not required to have each coverage. NO Motorcycles, NO Motorhomes, NO Golf Carts. |
Nature and Eligibility 2 major auto exposures people want protection against: Liability & Damage to their own auto. |
|
|
The auto policy is a package policy b/c it can provide coverage for both property and liability. |
Insured: the insured is the name insured NI, family members of the name insured and permissive drivers of the auto. |
|
|
Covered Automobile: includes any vehicle listed in the declaratio, includes private passenger autos which have 4 wheels, pickup trucks, vans, and farming vehicles. (NO Business USE - however Farming is not considered a business) -includes any vehicle acquired during the policy period. |
Covered Autos cont'd ......... Includes any trailer owned by the named insured, while it is being towed by the auto. Includes Temporary substitutes and non-owned autos (neither of which are owned by the insured) |
|
|
Temporary Substitute Auto: a replacement vehicle for a vehicle listed on the declarations, such as a rental car, a loaner car while the insured's vehicle is being repaired or serviced; usually used for a specific time. |
Non-Owned Auto: a vehicle owned by your employer or your relative/friend that is provided for business or pleasure use; a borrowed vehicle for regular use. |
|
|
Personal Auto Insurance Coverages Cov. A - Liability Cov. B - Medical Payments Cov. C - Uninsured/Underinsured Motorist (UM/UIM) Cov. D - Damage to your auto (physical) Cov. E - Insured's Duties Cov. F - General Provisions |
Cov. A - Liability liability coverage will pay for BI or PD which the insured becomes legally obligated to pay b/c of an auto accident caused by the insured. Will also pay to defend the insured up to the policy limit. CGL = has unlimited defense. |
|
|
NC is a Financial Responsibility Law State. This means that all drivers are required to have Liability insurance. |
Out of State Coverage this is when your insurance will go UP to meet another States basic requirements. Other Insurance Clause: states that the insurance co. will only pay its portion of a loss if the auto is also insured by another insurance co. (Pro-rata liability) |
|
|
30/60/25 BI BI+2 PD |
Exclusions: Not paid for: -intentional losses -damage to property the insured owns or transports, as this would go under WW coverage for HO policy. -Worker's Comp losses -use as a taxi or delivery service vehicle -less than 4 wheels -pre-arranged racing |
|
|
Insurance Always Follows The Vehicle!! |
***Therefore , the vehicle's insurance is Primary (pays first) & the driver's insurance is excess (pays additional amount up to their policy limit once the primary limit is exhausted).*** |
|
|
Cov. B - Medical Payments all about the insured and their occupants in the insured's car only!! -Medical Payments will pay for expenses incurred within 3 years from the date of the accident. Med Pay is referred to as 1st party coverage b/c it pays the insured, who is considered the 1st party in the insurance contract. |
Medical Payments pay for necessary Medical and Funeral expenses b/c of BI caused by an auto accident, sustained by an insured/occupants per person. It does NOT pay for the other car struck! |
|
|
Cov. C - UM/UIM Uninsured/UnderInsured Motorist Insuring Agreement: will pay for compensatory damages (BI/PD) which an insured is legally entitled to recover from the UM/UIM driver. Punitive damages (damages to punish) are NOT payable under UM/UIM! |
4 Conditions must be met: 1. Loss must be caused by an auto accident 2. Loss must be sustained by an insured. 3. Insured must be legally entitled to recover for damages. 4. Other vehicle must meet the definition of an uninsured vehicle. |
