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9 Cards in this Set

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Basic Parts of an insurance contract

1. Declarations (Information about the particular property or activity to be insured)




2. Definitions




3. Insuring Agreement (Summarize major promise by insurer) - All risk / Named perils coverage




4. Exclusions - Exluded perils / losses / property




5. Conditions




6. Miscellaneous provisions

Reasons that exclusions are necessary

1. Uninsurable perils by commercials insurer




2. Extraordinary hazards are present




3. Coverage may better provided by other contracts, avoid duplication of coverage




4. Moral hazard / difficult in determining and measuring the amount of loss




5. Do not need some coverage -> lower the premium



Definition of the insured

1. One person


2. Named insured


3. Additional insured

Definitions of endorsements and riders

Definition: Written provision that adds to, deletes from, or modifies the provisions in the original contract




- take precedence over any conflicting terms in the policy



Purpose of deductibles

1. Reduction in premium (eliminate large number of small claims)




2. Insurance goal (cover large losses)




3. Reduction of moral and morale hazard (not profit if loss occurs, encourage more careful with respect to the protection of their property and prevention of a loss as insured bear part of the loss)

Types of deductibles in


i) property insurance


ii) health insurance

i)


1. Straight deductible


2. Aggregate deductible




ii)


1. Calendar-year deductible (aggregate deductible)


2. Corridor deductible (used to integrate basic + supplemental medical expense plan)


3. Elimination period





Definition of coinsurance

Definition: Contractual provision clause requires the insured to insure the property to a stated percentage of its insurable value (ACV / replacement cost)



Amount to be paid =


insurance carried / required x loss

Purpose of coinsurance in


i) Property insurnace


ii) Health insurance

i)


Achieve equity in rating


- losses are partial


- inequitable premium rate to insured who wish to insure full value




ii)


- Reduce premiums


- Prevent over-utilization of policy benefits





Types of Other-Provisions applied when more than one contract covers the same loss


1. Pro Rata Liability (Proportion of the insurance)



2. Contribution by equal shares



3. Primary and excess coverage (whose car is the primary coverage)