Basic Principles Flashcards
An insurance policy
Is a social device (legal contract, or policy) for the transfer of financial risks.
Pooling Of Risks
Is when a large group of people contributes money to a fund out of which their losses can be paid.
Premium
Is the money paid by the insured to the insurance company in exchange for the insurance policy.
Endorsement
Is a form added to an insurance policy. Usually added for an additional premium charge to add additional coverage. Sometimes it can be added to limit (or restrict) coverage.
Peril
Is an actual cause of loss that can be insured against.
A Hazard
Is a condition or operation in property which either creates or increases the chance of loss by a covered peril.
i.e frayed wiring
Risk
Is the likelihood, probability or degree of uncertainty that a covered peril will cause a loss.
i.e Exposure
Actuarial Tables
Are statistical tables used in calculating premium rate tables.
Insurable Interest
Is a financial interest (risk) which the insured(s) must posses at the time of loss
Entities that have insurable interest could be:
•Owner
•Mortgagee- Bank, finance co.,lender
•Lien-holder
Indemnity (reimbursement)
Is the legal concept of one party (insurance company) standing in the place of or making good for another (insured).
Deductible
Is an initial amount of loss which the insured has to pay before the insurance company begins to indemnify.
Limits Of Liability A.K.A “Face Amount or Amount Carried”
Are the maximum amounts which the insurance company will pay under each coverage.
Aggregate Limit
A maximum limit of liability that the policy will pay to all persons who are injured or who incur property damage in an occurrence.
Specified Peril (Named Peril) Coverage.
Protects the insured property only against loss caused by perils specifically named in the policy.
All Risk (Open Peril) Coverage
It protects insured property against all perils except those specifically excluded.
