Ch 2 - Insurance Basics - 15% of exam Flashcards
How many test questions on Ch 1?
?
Do we accept oral agreements?
No
What are the four elements for a Contract to exist?
Agreement, Consideration, Competent Parties, Legal Purpose.
Test: Competent parties
Legal Capacity. That is, neither party being restricted by minority (age 18), insanity or intoxication. Both parties must be of sound mind. (Look at the context, ie: someone in hospital can’t make a deal.)
Legal purpose
The contract is free from illegality, and consistent with public policy. ie: owner of a casino applies for coverage, but has no gambling license, or if a property was stolen.
Law of Contracts
Since an insurance policy is a legal contract, it’s subject to the Law of Contracts.
Indemnification
The responsibility of the insurer to return the property to a pre-loss condition.
Repeated misreps
Fraud
Concealment
Partial truth
Hazards
Any condition or exposure that increases the possibility of loss.
The 3 types of hazards
Physical, moral, morale.
Physical hazards
Physical in nature, include conditions such as storing of explosives in a bldg, or a loose railing.
Moral hazards?
A person with a poor financial history, or police record.
Morale hazards?
A person with an “I don’t care attitude” since the insured is covered.
Test: Aleatory Contract
Pay small, potentially receive large.
Personal Contract
Betwn two parties, requiring highest degree of good faith. Cannot be transferred.
Unilateral Contract
An act is exchanged for a promise. Payment of premium is exchanged for a payment of claims in the event of a loss.
Conditional Contracts
Contingent upon certain acts by the insured or claimant. ie: payment of premium required for coverage.
Subrogation
The insurer’s right to subrogate against 3rd parties who, due to their negligence, caused the insurer to pay a claim. (ADD EXAMPLE)
Material misrep
The insurer withholds info that if revealed would likely cause the prospect to reject coverage.
HO1 aka
Basic (called “Fire Policy”, no water damage cov, except water from fire hoses.)
HO2 aka
Broad
HO3 aka
Special
HO1’s Named Perils (11 of them)
Fire, Lightning, Explosion, Windstorm/Hail, Smoke, Aircraft or Vehicles, Riot or Civil Commotion, Vandalism, Sprinkler Leakage, Sinkhole Collapse, Volcanic. (CHECK ON VANDALISM)
HO2’s Named Perils (14 of them, HO1’s + which new 3?)
Falling objects, weight of ice/snow/sleet, water damage (acc. discharge, never flood which is sep. policy.)
HO3 (15 of them, HO2’s + which new one?)
Special/Open Peril Coverage
How is HO5 the Rolls Royce of HO3’s if HO3’s already cover everything? (What’s the difference?)
I think it’s: in the event of there being damage and no visible open source of the damage, the property is covered anyway, but not personal property in such a case. (So it’s always better for the insured of there’s a visible source.)
HO4 covers:
Condos
HO6 covers:
Renters (is therefor a dwelling policy, covering investment properties)
HO8 covers:
Historic Properties
Open peril
Covers anything, except exclusions. (Ask how exclusions are defined.)
Read Ch2 Page 5: Named perils vs. Open perils
-
Test: Actual Cash Value (ACV)
Replacement costs minus depreciation. (What consumer paid for the insured item is irrelevant to the calculation.)
Do Ch 2 Prac Test (ask if this Prac Test is helpful?)
-
In NJ do all contracts have to be in writing?
Yes
Contract of adhesion
Drawn up by one party (ins co) and presented to a a second party (insured) to be adhered to or rejected. Ambiguities are in favor of the insured since no opportunity to change any ambiguous verbiage.
What is something to remember whenever determining the value of a property?
Don’t pre-judge it’s value (ie: based on location)
APC 215
I think: is an HO3 policy (from AllState) - CHECK THIS
Blanket policy
covers say 3 Wendy’s fanchise locations.
Blanket vs. special (ASK ABOUT)
-
What is another name for an Endorsement?
A rider.
