2 Property Insurance Terms and Related

Question 1

Insurance - Law of Large Numbers.

Answer 1

a large group of similar risks. The larger the group becomes, the more accurate the predictions
become. These statistics allow insurance companies to more accurately predict future losses.

For example, with property and casualty insurance, the company has no idea which houses will
burn this year, but rather approximately how many house fires will occur during the year. Companies
must know this information before they can set insurance premiums. These predictions contribute
to the rates that underwriters use to calculate the premium for a specific risk.

Mathematical experts are needed in insurance to predict how much premium they need to collect to pay for claims that are expected.
The more that’s insured, the more accurate these prediction become.
This is known as the Law of Large Numbers.

Question 2

Insurance Interest

Answer 2

Insurable interest is a type of investment that protects anything subject to a financial loss. A person or entity has an insurable interest in an item, event, or action when the damage or loss of the object would cause a financial loss or other hardships.

Question 3

RIsk
pure:
speculative:

Answer 3

Pure risk
Chance of loss only. Only risks that are covered by insurance

Speculative risk
Chance of loss or gain. Not covered by insurance

Question 4

Hazard

Moral-
Morale- Physical-

Answer 4

Hazard
not causes of loss but things that increase the chance of a peril

Physical Hazard
Visisble characteristic

Moral Hazard
Dishonest tendencies

Morale Hazard
Attitude of carelessness

Question 5

Peril

Answer 5

Perils
common causes of loss such as fire, wind, lightning, and so on.

Named peril
specified peril that is listed on the policy

Opene peril
all risk: except the specifically excluded by the policy

Question 6

Loss
Direct
Indirect

Answer 6

Direct loss
immediate physical damage to property
directy dimage to propety without any intervening cause.

Indirect Loss
Loss that happens but due to the use of the property. AKA consequential
a loss that is not the drect result of a pirel.

Question 7

Loss Valuation

1 actual cash value
2 replacement cost
3 market value
4 stated/agree value
5 salvage value

Answer 7

1 actual cash value: cost to repair or replace propety at its replacement value, minus deprecation.
2 replacement cost: cost to replace property without a dedction for deprecation.
3 market value: the price a willing buger would pay for property purchased from a willing seller.
4 stated/agree value:
5 salvage value

Question 8

Proximate Cause

Answer 8

the primary cause of a loss.

n actual cause that is also legally sufficient to support liability. Although many actual causes can exist for an injury (e.g., a pregnancy that led to the defendant’s birth), the law does not attach liability to all the actors responsible for those causes.

Question 9

Deductible

Answer 9

specified amount of each lost that the insured must bear. a larger dedutible reduces the premium and the submission of small claims.

Question 10

Indeminity.

Answer 10

Indemnity insurance is a type of insurance policy where the insurance company guarantees compensation for losses or damages sustained by a policyholder. Indemnity insurance is designed to protect professionals and business owners when

Question 11

Limits of Liability

Answer 11

Liability limits are the maximum dollar amount of damages (“indemnity”) an insurance carrier will pay on your behalf. Limits are broken down into two categories: the per claim limit and the aggregate limit.

Question 12

Coinsurance to value

Answer 12

common propety policy provision that requires the insured maintain a certain limit of coverage in order to avoid a penality in the eent of a partial loss

Question 13

Occurence
Cancellation
Nonrewenal

Answer 13

occurence - an accident. continues or repeated exposure to the same general harmful
Occurrence is often associated with the term “accident”, which is a sudden and unexpected event.
For example, an auto accident (which happens at a specific place and time) is considered a single
occurrence.
However, some policies define occurrence to also include “continuous or repeated exposure which
results in bodily injury or property damage which is not expected or intended by the insured.” If you
were unaware of a slow carbon monoxide leak in your home due to a faulty CO detector, this would
be an example of an occurrence that is a continuous and repeated exposure which could cause you
bodily injury. You can’t see or smell carbon monoxide, but over a period of months you become
very ill.

conditions.
cancellation
nonrewneal

Question 14

vacancy and unoccupancy

Answer 14

Vacant means both the absence of people and personal property from the insured premises.
Unoccupancy is only the absence of people. Vacant and unoccupied property has an increased
chance of loss; therefore, most insurance policies will exclude or limit coverage for losses when
property is vacant or unoccupied.

Question 15

liability

1 absolute
2 strict
3 vicarious

Answer 15

absolute:
strict:
vicarious:

Question 16

insurance limits

Answer 16

1 specific: single item of property for a single limit of insurance.
2 scheduled: 1 or more items of preopty on a single policy.
blanket: located a more than 1 location or more than one type of property at the same location or both.

Question 17

negligence:
binder:
endorsements:
balnket vs spescific

Question 18

blanket vs specific

Answer 18

Blanket coverage provides coverage for different classes of property under one policy. For example,
you may insure several items, such as “all personal property located at 123 Main Street.”
Specific insurance is when you insure a specific item or specific kind of property.

Question 18

blanket vs specific

Answer 18

Blanket coverage provides coverage for different classes of property under one policy. For example,
you may insure several items, such as “all personal property located at 123 Main Street.”
Specific insurance is when you insure a specific item or specific kind of property.