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42 Cards in this Set
- Front
- Back
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What is insurance? |
Insurance is a device for the transfer of risk from an individual to a large group with similar risk. |
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What is risk? |
Risk is the uncertainty regarding financial loss.
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What are the two types of risk? |
Speculative - involves the possibility of a gain or loss. i.e. Gambling. Traditional insurance policies cannot be used to cover this type of risk. Pure - involves only the possibility of a loss. |
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4 ways insurance benefits society |
Helps people - in terms of financial stability during a crisis. Works to prevent losses - buy insurance to protect companies losses, some insurance policies protect against losses by offering discounts for certain safe behaviors. Helps communities prosper - i.e. fire destroys local business. No insurance and owners lose everything and the community loses that business and jobs. With insurance, the company can reopen. Helps people obtain credit - allows people to buy goods and services in the economy that they otherwise wouldn't be able to. |
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4 reasons people purchase insurance |
To Transfer Risk Peace of mind Required by law Required by a vendor |
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3 types of insurance companies by domicile |
Domestic - incorporated and is formed under the laws of the state in which it is domiciled. Foreign - a company domiciled and organized under the laws of another state, but licensed to do business in Texas. i.e. Farmers Alien - a company formed under the laws of another country, other than the US. |
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6 essential elements of a contract |
Offer - to present for acceptance or rejection Acceptance Consideration - insured's consideration is payment. insurer's consideration is the promise to pay claims Competent Parties - legally competent Legal Purpose - the purpose must be lawful Insurable Interest - exists when the applicant for insurance stands to suffer a loss or injury as a result of an event. |
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6 distinct characteristics of an insurance contract |
Contract of Adhesion - drafted by the insurer without involvement from the insured. Accept or reject approach. Any ambiguity is the policy has to favor the insured. Aleatory Contract - based on the exchange of unequal amounts or events Personal Contract - The person who accepts the policy cannot transfer it to someone else without express written consent. Conditional Contract - has rules that both parties must follow Indemnity - promise to restore the customer to the same financial condition they were prior to the loss. Good Faith - is expected of both the customer and the insurer. |
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Representation? Peril? |
written or verbal station the applicant makes that is true to the best of their knowledge. actual cause of loss |
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2 types of loss |
Direct loss - actual physical loss i.e. fire damage to a roof Indirect/Consequential loss - not a direct result of a covered peril. i.e. loss of business income after a covered peril |
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3 types of Hazard |
Moral - customer exaggerates or lies in order to collect money i.e. lying about the date the loss occurred Morale - customer is careless or irresponsible since they know they have insurance i.e. not locking car doors Physical - exists due to the nature of the property itself i.e. dead tree, slick floors, potholes |
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6 components of an insurance policy |
D.D.I.C.E.E. Declarations, Definitions, Insuring agreement, Conditions, Exclusions, Endorsements |
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6 items found on the Declarations page |
Who (is insured), What (is insured), How much (premium cost), How much (limits of liability), How much (deductible), How long (term) |
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What is found on the definitions page? What is found on the insuring agreement? What is found on the conditions page? |
explains important terms used throughout the policy states what the insurer promises to do for the insured outline of what the insured must do in order to make use of the policy |
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10 common policy conditions (page 1 of 2) |
Assignment - insured cannot transfer policy to someone else Liberalization - changes made to policy i.e. state law now requires all policies to include ____ Duty to Defend - insurer must help protect insured in case of lawsuit Appraisal - When insured or insurer disagree with payout amount, a 3rd party decides Subrogation (right to recovery) - pursuit of the responsible party for payment of damages |
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10 common policy conditions (page 2 of 2) |
Abandonment - Insured cannot just surrender property and demand payment Vacancy - insured has moved out (along with contents) for more than 60 days, coverage is denied. Different than being unoccupied (such as when whole family is at work and house is empty) Salvage - insurer owns the property after a total loss claim has been paid. Insured can option to buy it back at salvage value. Mortgage clause - when more than 1 person has insurable interest, all payments are made to all parties. No benefit to Bailee - a bailee cannot collect money on a loss of another party's property (car is in repair shop, shop owner damages your car, they can't file a claim, but you can. |
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What are exclusions? |
specifies what the policy will not cover. examples are intentional acts and wear and tear. |
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What are endorsements? |
used to add to, delete from, or otherwise change an insurance policy. |
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What are some common Auto endorsements? Property endorsements? |
Rental car coverage, tow coverage, glass breakage uninsured motorist property damage, customized equipment. Contents replacement cost coverage, personal articles floater, home child care extension |
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5 steps of determining coverage |
-SOK or OOF (status OK or Out of Force)? -Is the person entitled to coverage? -Is the property involved listed as insured? -Does the loss situation fit into the coverage framework? -Determine the amount of damages owed |
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Key Terms: Non-concurrency Primary and Excess (secondary) Pro Rata Contribution by Equal Shares Binder Waiver Estoppel |
-some policies prohibit a customer from having dual coverage -some policies specify if they are either the primary insurer or secondary insurer -method of dividing and sharing a loss proportional to responsibility -some policies will equally share the loss with a second policy -is the immediate but temporary coverage while the full policy is finalized -deliberately giving up a known right -no take backs on a waiver |
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You are driving your neighbors car. You are in an accident. Describe whose insurance is primary and whose is secondary |
Primary insurance always follows the car. If there are further costs, the driver's insurance is the secondary, and the driver is responsible personally for any excess beyond that. |
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3 main divisions of Tort Law |
Intentional, Absolute, Negligence |
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Do liability insurance policies cover intentional torts? |
No. |
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What are some examples of Absolute liability? |
without regards to negligence or fault because the activity is inherently dangerous. handling wild animals, handling hazardous materials |
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What is the most common area of tort law? |
Negligence |
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What is negligence? |
failure to act as a reasonable and prudent person would act under the same or similar circumstances |
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Define Reasonable Care and Degree of Care |
Reasonable care is the amount of due care that a reasonable person uses to help prevent harm to others. Degree of Care is how much reasonable care you demonstrate. i.e. Pedro uses due care by driving the speed limit to avoid an accident. Pedro must use a higher degree of care and drive slower than the speed limit when there are icy roads. |
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What are the 4 steps in establishing negligence? |
L.B.A.P. Legal Duty Owed - homeowners need to keep their property in reasonably good condition to prevent injuries to visitors Breach of Legal Duty - withholding information that could have prevent harm. Actual Damages - damage or loss must have already occurred. Proximate Cause - unbroken sequence of events that caused the loss. |
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3 defenses against negligence |
Assumption of Risk - if the injured party knowingly exposes themselves to danger or injury. i.e. sporting events Last Clear Chance - If the other party had the final opportunity to prevent the loss but failed to do so Avoidable consequences - denies recovery for damages that could have been avoided by reasonable conduct by the person who suffered the loss. |
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What is the difference between contributory and comparative negligence? |
Comparative negligence - the % of fault from each party is determined, and the other party can be subject to subrogation (so the paying insurer and insured can be reimbursed) Contributory - If both parties have at least 1% fault, neither can college damages |
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What is vicarious liability? |
When a person or company is held accountable for the negligence of another person. i.e. Employee is negligent while driving a company vehicle on company time. The company will be held accountable. |
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What are the two types of damages? |
Compensatory (reimbursement for losses actually sustained. Punitive - arbitrary amount used to punish the wrongdoer and make an example of them. |
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What are the two types of compensatory damages? |
Special - these are normally exact amounts i.e. medical bills, car repair, lost wages, towing bills General - arbitrary amount used to compensate for pain/suffering and disfigurement |
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4 departments of Farmers Insurance Group |
Marketing, Underwriting, Actuaries, Claims |
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What is a solicitor? |
is like an agent in that they can sell insurance and may be authorized to collect premiums, however they cannot issue or countersign policies. |
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What is the initial report of a claim called? |
Loss report |
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When we begin taking phone calls, whom might we be speaking to? |
insured's, claimants, body shops, lawyers |
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What is the difference between staff, Independent, and Public adjusters? |
Who hires them. staff and independent adjusters are hired by the insurer. Public adjusters are hired by the insureds. |
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Examples of company names Farmers Insurance writes business under |
Farmers Insurance Company, INC Fire Insurance Exchange Mid-Century Insurance Company Mid-Century Non-Auto Company Zurich Farmers New Century Texas County Mutual Bristol West Farmers Specialty (Foremost) |
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What department is responsible for deciding which applicants for insurance are accepted or rejected? |
Underwriting
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Which of the following is not a step in determining negligence? Moral Hazard Legal duty owed Legal duty breached Proximate cause |
Moral Hazard |
