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Idaho Property Insurance > 2- Property Insurance Basics > Flashcards

2- Property Insurance Basics Flashcards

1
Q

Depreciation

A

reduction in value due to wear and tear

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2
Q

Earned Premium

A

the portion of premium paid in advance that now belongs to the insurer for providing coverage for a specified period of time

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3
Q

Exposure units

A

used as a measure of the rating units or the premium base of a risk .

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4
Q

Homogeneity

A

the degree to which items are similar

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5
Q

implied warranty

A

a legal term meaning that a product is suitable for its intended purpose and that it fits an ordinary buyer’s expectation

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6
Q

Inception

A

the date at which the insurance policy goes into affect

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7
Q

Negligence

A

the failure to use the care that a reasonable, prudent person would under similar circumstances

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8
Q

Obsolescence

A

depreciation in the value of a property due to it becoming outdated.

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9
Q

Statute

A

a written law passed by a legislative body

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10
Q

3 Elements of Insurable Interest

A
  1. Financial ($$$)
  2. Blood (a relative)
  3. Business (business partner)
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11
Q

When must insurable interest exist in order to be utilized?

A

At the time of loss.

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12
Q

Accident

A

A sudden, unplanned & unexpected event resulting in injury or damage

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13
Q

Occurrence

A

Broader than accident. Losses caused by continuous or repeated exposure to conditions resulting in injury to persons or property.

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14
Q

What are the two causes of loss?

A

Named and open

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15
Q

Named peril

A

Listed and specific perils that are covered by a policy. The is no coverage for unlisted items.

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16
Q

Open peril

A

Protects against any risk of loss that isn’t specifically excluded

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17
Q

Direct loss

A

Physical damage to building or/or personal property. Includes damage from proximate cause of loss

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18
Q

What is an example of proximate cause of loss?

A

Water damage from putting out a fire.

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19
Q

Blanket policy

A

single policy that covers everything at once (ex: everything on one property is covered)

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20
Q

Specific policy

A

Covers specific pieces of property with specific amounts for each.

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21
Q

Basic types of construction are

A

Fire-resistive, frame, masonry, noncombustible, and joisted masonry.

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22
Q

Fire- Resistive Construction

A

building constructed entirely of masonry

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23
Q

Modified F.R. Construction

A

Buildings constructed with masonry and other materials

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24
Q

Masonry/ Noncombustible Construction

A

FR walls, with noncombustible (steel) roof and floors

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25
Q

Noncombustible Construction

A

constructed of materials that won’t ignite (steel)

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26
Q

Joisted-Masonry Construction

A

Masonry walls with combustible floors and roof.

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27
Q

Frame Construction

A

made with mostly combustible materials

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28
Q

Which are the best and worst rated types of Construction?

A

Best= Fire-resistive, worst= Frame

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29
Q

Loss valuation

A

a factor in determining the premium charged and the amount of insurance required

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30
Q

Actual Cash Value

A

Current replacement cost- Depreciation= ACV

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31
Q

Replacement cost

A

the cost to replace damaged property with like kind and quality at today’s cost, with no deduction for depreciation.

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32
Q

Functional Replacement cost

A

Replaces the damages property with less expensive and more modern construction or equipment

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33
Q

What is an example of functional Replacement cost?

A

Replacing a building with lath and plaster walls with drywall.

Just as functional, lower repair cost.

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34
Q

Market value

A

Value based on amount a willing buyer would spend. Seldom-used.

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35
Q

Agreed Value

A

provision agreed on by insured and insurer to amount insurance will pay.

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36
Q

Stated amount

A

Amount of insurance scheduled in a property policy. Is max insurer will pay.

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37
Q

When is Valued policy used?

A

When value is difficult to establish after a loss occurs.

38
Q

Valued policy

A

Pays out full amount in event of a total loss without regards to actual value & depreciation.

** used in marine policies because it’s hard to quantify amount lost.

39
Q

Underwriting

A

risk selection and evaluation process

40
Q

Underwriter

A

evaluated applications and establishes terms, rates, and conditions

41
Q

Loss ratio

A

(Incurred losses + adjusting expense)/ earned premium

42
Q

Insurance rate

A

amount charged for a specific amount of coverage

43
Q

Types of insurance rates

A

Class and Individual

44
Q

Class rates

A

priced per unit based on a given set of characteristics (ex. age/gender of driver). Most common

45
Q

Judgement rating

A

Used when there is a lack of statistics, often in Ocean Marine insurance.

46
Q

Schedule rating

A

Applies a schedule of charges and credits to determine appropriate rate for individuals.

47
Q

Experience rating

A

past-loss premium used as a factor to determine final premium

48
Q

Retrospective rating

A

self-rating plan, where actual losses determine final premium

49
Q

Merit rating

A

Common in auto. Based on probability of loss (using driving record)

50
Q

What is included in the Declarations section of a policy structure?

A

Basic information, like names, addresses, amount of coverage and descriptions of locations.

51
Q

What is included in the Definitions section of a policy structure?

A

Clarification of terms used in the policy.

52
Q

What is included in the Agreement or Clause section of a policy structure?

A

Lists parties to the contract, renewal dates, perils, and obligations of insurance co.

53
Q

What is included in the Additional/Supplementary Coverage section of a policy structure?

A

Provides additional amount of coverages for specific loss expenses at no additional premium.

54
Q

What is included in the Conditions section of a policy structure?

A

Generals rules of procedures an insurer and insured agree to follow under terms of the policy

55
Q

What are examples of conditions of a policy?

A
  • Inspections of location or books

- Changes to the policy made in writing

56
Q

What is included in the Exclusions section of a policy structure?

A

States perils that are not insured against in the policy.

Ex: earth movement and water damage

57
Q

What is included in the Endorsements section of a policy structure?

A

Printed addendums that change the policy’s original terms.

58
Q

Named insured

A

Individual(s) whose name appear on the policy.

59
Q

First named insured

A

Individual whose name appears first on the policy and is the only one who may cancel or change the policy.

60
Q

Cancellation

A

Termination of an insurance policy by either insurer or insured before the expiration date shown on the policy

61
Q

Nonrenewal

A

Termination of insurance policy at the expiration date

62
Q

What is a deductible?

A

The dollar amount an insured must pay on a claim before the insurance policy provides higher coverage.
Higher deductible = lower premium

63
Q

What is the coinsurance clause?

A

States that insured agrees to maintain a minimum amount of insurance on property. In event of loss, insurance only pays the amount they cover, instead of the amount that should have been carried.

64
Q

Coinsurance Formula

A

(Insurance carried/Insurance required) X Loss amount = Loss payment

65
Q

Noncurrency

A

refers to other insurance written on the same risk, but not on the same coverage basis.

66
Q

Pro Rata

A

Provision found in some policies the provide for sharing loss with other insurance

67
Q

Limits of Liability

A

The maximum amount of money an insurance company will pay for a particular loss or within a period of time.

68
Q

Per Occurence

A

A sublimit of liability that puts a limit on payment for all claims that arise from a single occurrence

69
Q

Per Person

A

A sublimit of liability that puts a limit on payment of bodily injury to a single person in an accident

70
Q

Aggregate Limit

A

The maximum limit to coverage available under a liability policy during a policy year, regardless of the number of claims made or the number of accidents that occur.

71
Q

Split Limit

A

separately stated limits of liability for different coverages. Common in auto policies.

72
Q

Policy limits/limitations

A

the maximum amount an insured may collect or for which an insured is protected

73
Q

Vacancy

A

refers to insured structure in which no people have been living or working and where no property has been stored for a period of time stated in a policy (60 days typical)

74
Q

Unoccupancy

A

insured structure in which no people have been living or working, but where property has been stored.

75
Q

What are the insured’s duties after loss?

A
  • Protect the damaged property from further damage;
  • Prepare an inventory of damaged property;
  • Cooperate with insurer;
  • Notify police in the case of theft;
  • Submit signed sworn proof of loss
76
Q

Assingment

A

the transfer of a legal right or interest in an insurance policy

77
Q

Abandonment

A

the relinquishing of insured property into the hands of another

78
Q

Liberalization clause

A

allows for adjustments to be made to existing coverage in order to comply with changes to relevant laws and regulations

79
Q

Subrogation

A

Insurer’s legal right to seek damages from third parties, after is has reimbursed the insured for the loss.

80
Q

Salvage

A

The amount of money realized from the sale of damaged merchandise

81
Q

What are the four claim settlement options?

A
  • Value of the lost of damaged property
  • Cost of repairing
  • Cost of appraised value
  • Cost of repairing/replacing with other property same value
82
Q

Third Party Provisions

A

address the rights of a third part that may have secured financial interest in the insured propertyq

83
Q

Standard Mortgage clause

A

In event of damage to real property, insurance pays to both insured and mortgagee as their insurable insurance appears.

84
Q

Loss Payable Clause

A

used to cover the interest of secured lender in personal property.

85
Q

Damages

A

comprised of bodily injury or property damage

86
Q

Special damages

A

out-of-pocket expenses for medical, misc., or loss of wages expenses

87
Q

General damages

A

compensate for pain and suffering, mental anguish, or disfigurement

88
Q

Punitive damages

A

punishment for extreme behavior, gross negligence, or willful intent

89
Q

Strict liability

A

liability assigned without regard of negligence or fault (ex. Manufacturers)

90
Q

Vicarious liability

A

liability imposed on one party as a result of another

91
Q

Binder

A

A temporary agreement issued by an agent to provide temporary coverage

92
Q

The pro rata liability clause is designed to protect the principle of what?

A

Indemnity.

Each policy pays a percentage of a loss directly to the amount of insurance that was provided.

Idaho Property Insurance (9 decks)

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