Chapter 1 Insurance Terms Flashcards
What is Depreciation?
Reduction in value, particularly due to wear and tear.
What Is Exposure?
Susceptibility to risk
What is Insurance policy?
A contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events
What is Implied warranty
A legal term a product is suitable for its intended purpose and fits an ordinary buyer’s expectations
What is a Insurer (principal)?
The company who issues an insurance policy
What is Obsolescence?
Depreciation in the value of a property due to becoming outdated
What is Premium?
The money paid to the insurance company for the insurance policy
What is the Law of large numbers?
States that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be
What are the 3 types of Insurable Interest?
Financial, Blood (Relative), Business.
Does Insurable interest have to exist at the time of loss?
YES!
What are the 2 types of risk?
Pure, and Speculative
What is Pure Risk?
No opportunity for financial gain, Only type of risk thats insurable.
What is speculative Risk?
Can have either a Loss or a Gain ex Gambling (no insurable).
Out of Pure or Speculative Risk, which is insurable?
Only Pure
What is Peril?
Perils are the causes of loss insured against in an insurance policy.
Life insurance insures against
financial loss caused by the premature death of the insured;
Health insurance insures against
the medical expenses and/or loss of income caused by the insured’s sickness or accidental injury;
Property insurance insures against
the loss of physical property or the loss of its income-producing abilities;
Casualty insurance insures against
the loss and/or damage of property and resulting liabilities.
Different types of Hazards?
Physical, Moral, and Morale
What is Physical Hazard?
Are those arising from the material, structural, or operational features of the risk, apart from the persons owning or managing it
What is Moral hazards?
Refer to those applicants that may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer
What is Morale hazard ?
Refers to an increase in the hazard presented by a risk, arising from the insured’s indifference to loss because of the existence of insurance
What is a Loss?
Disappearance of value of the person or property insured in a policy, caused by a named peril.
what is Indemnity?
Often referred to as reimbursement
Insureds or beneficiary are permitted to collect to the extent of financial loss (no financial gain)
What is Subrogation?
Insurer’s legal right to seek damages from third parties
Occurs after insurer reimburses insured
Prevents insured from collecting twice
What Is an Accident?
Is a sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected nor intended.
What is an Occurrence ?
is a broader definition of loss than accident because it includes those losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected.
what are 2 types of losses for Businesses and Individuals?
Direct, and Indirect Loss
What is a Direct Loss?
Means direct physical damage to buildings and/or personal property. Includes other damage where the insured peril was the proximate cause of loss.
What is a Indirect Loss?
Losses considered a result of direct loss. Such losses usually result from the time it takes to repair or replace damaged property.
What is Named Peril?
No coverage is provided for unlisted perils.
What is Open peril?
describe the breadth of coverage provided under an insurance policy form that insures against any risk of loss that is not specifically excluded
What types of damages are their?
Property, and Bodily Damage
What is Property Damage?
Measured by the actual monetary loss the injured party suffered, which is measured by the value of the property damaged or destroyed and the loss of use of that asset.
What is Bodily Injury?
Bodily injury may lead to claims by the injured party not only for medical expenses and lost wages, but also for disfigurement, pain and suffering, mental anguish, and loss of consortium.
what is negligence?
Is the failure to use the care that a reasonable, prudent person would have under the same or similar circumstances.
Define Burglary
the crime of forced entry into or out of the premises of another by a person or persons with felonious intent. (must have visible signs of forced entry/exit from premises.)
Define Robbery
taking of property from the care and custody of a person by one who has caused or threatened to cause that person bodily harm, or committed an obviously unlawful act witnessed by that person.
Define Theft
any act of stealing and encompasses both burglary and robbery
Define Vacancy
an insured structure in which no people have been living or working, and no property has been stored for the period of time required as stated in the policy (usually 60 days).
Define Inoccupancy
refers to an insured structure in which no people have been living or working within the required period of time, but some property is stored.
Mysterious disappearance
the disappearance of property without knowledge as to the location, time or how the property was lost.
What is Blanket Coverage?
is a single property insurance policy that provides coverage for multiple classes of property at one location, or for one or more classes of property at multiple locations.
What is Specific Coverage?
Is a property insurance policy that covers a specific kind or unit of property for a specific amount of insurance.
What is Loss Valuation?
is a factor in determining the premium charged and the amount of insurance required.
What is Actual Cash Value? (ACV)
