3/4 Flashcards
Ch 10: Analysis of Insurance Contracts
In an insurance contract, ___ are statements that provide information about the particular property or activity to be insured. They’re usually on the first page of the policy. In property insurance, it contains the name of the insured, the location of the property, the period of protection, the amount of insurance, and the premium and deductible information.
Declarations
In an insurance contract, the ___ summarizes the major promises of the insurer.
Insuring Agreement
Name the two basic forms of insuring agreements in property insurance.
- Name Perils Coverage, where only those perils specifically named in the policy are covered.
- Open-Perils, or Special Coverage, where all losses are covered except the losses that are specifically excluded.
An insurance contract contains which 3 major exclusions?
- Excluded perils
- Floods, intentional act
- Excluded losses
- Professional liability loss not covered by homeowners policy
- Excluded property
- Pets are not covered as personal property in homeowners insurance
Why are exclusions necessary in insurance contracts?
(6 points)
- Some perils aren’t commercially insurable
- Extraordinary hazards are present
- Coverage is provided by other contracts
- Moral hazards are present
- Attitudinal hazard problems
- Some coverage isn’t needed by typical insureds
___ are provisions in a policy that qualify or place limitations on the insurer’s promise to perform.
Conditions
Ex: cancellation, subrogation, grace period, misstatement of age
The ___ is the person(s) named in the declarations section of an insurance contract.
Named Insured
The ___ has certain additional rights and responsibilities that don’t apply to other named insureds.
First Named Insured
In property and liability insurance, a(n) ___ is a written provision that adds to, deletes from, or modifies provisions in the original contract.
Endorsement
In life and health insurance, a(n) ___ is a provision that amends or changes the original policy.
Rider
A(n) ___ is a provision by which a specified amount is subtracted from the total loss payment that otherwise would by payable.
Deductible
Name the three main purposes of a deductible.
- Eliminate small claims that are expensive to handle and process
- Reduce the premiums paid by the insured
- Reduce moral hazard and attitudinal hazard
With a(n) ___, the insured must pay a certain number of dollars of the loss before the insurer is required to make a payment.
Straight Deductible
A(n) ___ means that all losses that occur during a specified time period, usually a year, are accumulated to satisfy the deductible amount.
Aggregate Deductible
A(n) ___ is a type of aggregate deductible that is found in basic medical expenses and major medical insurance contracts.
Calendar-Year Deductible
A(n) ___ is a stated period of time at the beginning of a loss during which no insurance benefits are paid.
Elimination (Waiting) Period
A(n) ___ in a property insurance contract encourages the insured to insure property to a stated percentage of its insurable value.
Coinsurance clause
What happens if the coinsurance requirement isn’t met at the time of the loss?
The insured must share in the loss as a coinsurer.
Regarding coinsurance, how is the amount of recovery by insurance after a loss calculated?
(Amount of insurance carried) / (Amount of insurance required) x (Loss)
What is the fundamental purpose of coinsurance in property insurance?
To achieve Equity in Rating
A(n) ___ in a health insurance contract requires the insured to pay a specified percentage of covered medical expenses in excess of the deductible.
Coinsurance clause
What are the two main purposes of coinsurance in health insurance?
- Reduce premiums
- Prevent overutilization of policy benefits
The purpose of ___ is to prevent profiting from insurance and violating the principle of indemnity.
Other-Insurance Provisions
Under a(n) ___ provision, each insurer’s share of loss is based on the proportion that its insurance bears to the total amount of insurance on the property.
Pro Rata Liability
Under ___, each insurer shares equally in the loss until the share paid by each insurer equals the lowest limit of liability under any policy, or until the full amount of the loss is paid.
Contribution by Equal Shares
Under a(n) ___ provision, the primary insurer pays first, and the excess insurer pays only after the policy limits under the primary policy are exhausted.
Primary and Excess Insurance
The ___ in group health insurance is designed to prevent over insurance and the duplication of benefits if one person is covered under more than one group health insurance plan.
Coordination of Benefits Provision
