Chap 5 Commercial insurance Flashcards
2 types of commercial insurance
1) Property Insurance (-direct loss -Indirect loss)
2) Liability Insurance ( -General liability -Professional liability -Employer liability)
Commercial insurance/ General Liability insurance
it is defined as the legal liability that an enterprise faces when running its day to day operations
Commercial insurance/ General Liability insurance/ 5 areas
1) Operations
2) Product
3) Completed Operations
4) Contingent liability
5) Contractual liability
Commercial insurance/ professional liability
Arise from negligent act, errors, omissions and poor performance by employees when performing their professional duties.
Commercial insurance/ employer liability
Covers the various risk exposure that an organization faces when it employs people to complete various tasks
Commercial insurance/ occurrence
Commercial insurance require that the loss or bodily harm be caused by an occurrence which includes:
1) continuous or repeated events over a period of time
2) accident
3) series of accident
Commercial insurance/occurrence policies
Pays for the loss that occurred during the policy period regardless of when the claim is filled
Commercial insurance/claim made policies
Pay for loss after a certain date but the claim are made during the policy period
Commercial insurance/ 3possible types of deductibles
1) aggregate deductible
2) straight or per occurrence deductible
3) franchise deductible
Commercial insurance/ aggregate deductible
The firm pays all the losses for the year until the deductible limit is reached
Commercial insurance/straight or per occurrence deductible
The firm pays the deductible for each separate loss
Commercial insurance/franchise deductible
It is only for ocean marine insurance. Either a dollar amount or a percentage of the loss and the entire loss is paid once the loss is greater than the deductible
Commercial insurance/ stop loss provision
Caps the amount the insured pays in total through out the policy period
Commercial insurance/ coinsurance in commercial property
An insured can elect to underinsure but will pay a higher premiums for doing so and is expected to keep the amount of coverage based on the current replacement value. If so, the insurer will pay all losses up to the limit of the policy
Commercial insurance/ coinsurance for commercial property: calculation of pure premiums
Expected loss paid / $coverage
Commercial insurance/ coinsurance for indirect loss
Covers extra expenses for additional cost incurred as a result of a direct loss. The coinsurance requirement is based on the amount of time a firm would be shut down if is incurred a loss
Commercial insurance/ captive insurers
Insurance companies owned by a firm or firms. The insurer insures the firm and perhaps other non related companies to capitalize on risk pooling. Can be pure captive or group captive
Commercial insurance/ pure captive
Insures only parents and parent’s subsidiaries
Commercial insurance/ group captives
Insurers having many parents
Commercial insurance/ 3 structures of coverage
1) umbrella policy
2) blanket insurance
3) multiple-line insurance
Commercial insurance/ structure of the coverage / umbrella policy
Provides protection against a catastrophic lawsuit by providing broad blanket coverage to areas not covered by the underlying policy. Covers beyond the scope of the underlying policy for personal injury and property damage
Commercial insurance/ structure of the coverage/ blanket insurance
Provides coverage under a single limit for:
- 2 or more items
- 2 or more locations
- a combination of items and/or location
Commercial insurance/ structure of the coverage/ multiple-line insurance
Covers property and casualty in one contract it could provide insurance for property, general liability, business income, equipment breakdown and crime
Commercial property insurance
Covers damage and loss to property. Loss can be direct or indirect/ consequential
Commercial property insurance / 2 categories of direct loss
Loss due to perils
Loss due to dishonesty
Commercial property insurance / direct loss due to perils / extended coverage
Provides protection against perils not covered by the basic policy such as riot and civil commotion
Commercial property insurance / direct loss due to perils / specified perils
Covers a list of perils named
Commercial property insurance / direct loss due to perils / open perils
Provides coverage for every peril except for a list of exclusion
Commercial property insurance / direct loss due to perils / 9 types of possible coverage
1) building and personal property
2) boiler and machinery
3) account receivable
4) Builder risk
5) condominium association
6) credit insurance
7) crop (hail) insurance
8) glass insurance
9) marine insurance
Commercial property insurance / direct loss due to perils / 3 types of building and personal property
1) real property
2) business personal property
3) personal property of others
Commercial property insurance / direct loss due to perils / boiler and machinery insurance
Protects against physical damage and financial loss that result from sudden and accidental breakdown of boiler machinery and equipment. It might provide inspection and repairs before the machine breaks down
Commercial property insurance / direct loss due to perils /builders risk
Covers buildings under construction for fire, windstorm, flood, earthquake and vandalism
Commercial property insurance / direct loss due to perils /Credit insurance
Protects manufacturers, wholesales, and service organizations against consumer insolvency
Commercial property insurance / direct loss due to perils / glass insurance
Provides coverage for plate glass windows and doors which are often excluded from building coverage
Commercial property insurance / direct loss due to perils / 2 types of marine insurance
1) ocean marine
2) island marine
Commercial property insurance / direct loss due to perils / 4 major types of ocean marine insurance
1) Cargo insurance
2) Hull insurance
3) Protection and indemnity insurance
4) Freight insurance
Commercial property insurance / direct loss due to perils / ocean marine insurance/ cargo insurance
Covers goods being shipped for damage and loss
Commercial property insurance / direct loss due to perils / ocean marine insurance/ hull insurance
Covers the ship on an all risk basis
Commercial property insurance / direct loss due to perils / ocean marine insurance/ protection and indemnity
Covers:
1) damage to piers, docks, and the ship’s cargo
2) illness or injury to passengers and crew
3) fines and penalties
Commercial property insurance / direct loss due to perils / ocean marine insurance/ freight insurance
Covers loss of earnings to the ship’s owner if goods are damaged or losed and can’t be delivered
Commercial property insurance / direct loss due to perils / island marine insurance
Covers articles in transit and also bridges and tunnels
Commercial property insurance / direct loss due to perils / 3 major types of island marine insurance
1) Bailee
2) business floaters
3) means of transportation
Commercial property insurance / direct loss due to perils / island marine insurance/ bailee coverage
Covers property held by someone who has temporary procession of the property that belongs to another
Commercial property insurance / direct loss due to perils / island marine insurance/ business coverage
Policy that provides broad and comprehensive protection on a property that is frequently moved from one location to another
Commercial property insurance / direct loss due to dishonesty/ 2 types of insurance
1) crime insurance for non employee theft
2) theft by employees covered by fidelity bonds
Commercial property insurance / direct loss due to dishonesty / non employee theft / 5 major types of coverage
1) forgery or alteration
2) inside the premises
3) outside the premises
4) computer fraud
5) money orders and counterfeit currency
Commercial property insurance / indirect or consequential losses / 6 types of coverages
1) Business income
2) Spoiled food
3) Extra expenses
4) Contingent business interruption
5) leasehold interest
6) rain insurance
Commercial liability insurance / vicarious liability
The obligation of a principal to pay the losses of a third party caused. Y an agent such as an employee
Commercial liability / strict liability
Those engaging in certain undertaking such as hazardous practices like the industrial use of high explosives are held responsible for injury without inquiry into fault
Commercial liability/ products liability
It is increasingly held to strict liability for makers of items such as foods, cosmetics, drugs, automobile
Commercial liability/ general liability/ 5 specific policies not covered by the exceptions
1) personal and advertising injury
2) environmental liability
3) fire legal liability
4) liquor liability
5) property in the insured’s care custody or control
Commercial liability/ 5 types of professional liability
1) errors and omissions
2) directors and officers
3) malpractice
4) architects and engineers
5) general partners liability
Commercial insurance/ Surety bonds
Bond that provides monetary compensation if the bonded party fails to perform certain acts. They guarantee the performance of the principal
Commercial liability/ 3 parties involved in a surety bond
Principal (party bonded )
obligee (party reimbursed for the damages )
surety ( party the agrees to answer for the debt)
Commercial liability / 9 types of surety bonds
1) auctioneer’s bond
2) insurance agent bond
3) judaical bond
4) federal surety bond
5) fiduciary bond
6) license and permit bond
7) lost instrument bond
8) public official bond
9) contract bond
