Chapter 10 Flashcards
what are the basic parts of an insurance contract?
- declarations
- definitions
- insuring agreement
- exclusions
- conditions
- miscellaneous provisions
what are declarations?
statements that provide information about the particular property or activity to be insured
what is on a declarations page?
- name of address of insurer
- name and address of insured
- insured property location
- policy period
- amounts of insurance
- premium
- deductible
- other relevant information
what words refer to the insurer?
“we”, “us”, “our”
what words refer to the insured?
“you” and “your”
what is an insuring agreement?
summary of the major promises of the insurer (what the policy covers)
what are named perils?
only those perils specifically named in the policy are covered
what are open perils?
all perils are covered except for those that are specifically excluded
what type of peril is better under an insuring agreement?
open perils
what are exclusions?
perils or property that are not covered under the policy
what are examples of exclusions?
flood/earthquake, war, intentional loss, certain types of property
when are exclusions necessary?
- certain perils are considered uninsurable
- presence of extraordinary hazards
- coverage provided by other contracts
- moral hazard
- attitudinal hazard
- coverage not needed by typical insureds
what are conditions?
provisions in the policy that qualify or place limitations on the insurer’s promise to perform
what are examples of conditions?
- prompt notification of loss
- protect property from further loss
what are some miscellaneous provisions?
- states have mandatory provisions
- notice of cancellation
- notice of nonrenewal
- notice of loss
- mortgage clause
what are the types of insureds?
- named insured
- first named insured
- other insureds
- additional insureds
what are named insureds?
the person or party named on the Declarations page on the policy
what are first named insureds?
has certain additional rights and responsibilities that do not apply to other named insureds
what are other insureds?
persons or parties who are insured under the policy even though they are not specifically named
what are additional insureds?
person or party added to the policy by an endorsement
what are endorsements and riders?
provisions that add to, delete from or modify the original policy terms
what are examples of endorsements and riders?
-negotiate coverage enhancements, specific exclusions
what is a deductible?
a provision by which a specified amount is subtracted from the total loss payment that would otherwise be payable
what do deductibles do?
- eliminate small claims
- reduce premiums
- reduce moral and morale (attitudinal) hazard
what is the formula for pure premium?
pure premium = frequency * severity
what is a straight deductible?
the amount the insured is responsible for per loss before the insurer pays anything
what is aggregate deductible?
the amount the insured is responsible for in total (over all losses during the policy period) before the insurer pays anything
what is elimination (waiting) period?
stated period of time at the beginning of a loss during which no insurance benefits are paid
what is common in disability insurance and typically cannot be collected until you have been out of work for 30, 60, or 90 days?
elimination (waiting) period
what is coinsurance in property insurance ?
encourages the insured to insure property to a stated percentage of its insurable value
what happens if coinsurance requirement is not met at the time of loss ?
the insured must share the loss (as a coinsurer)
what is the amount of recovery formula?
amount of recovery = (amount of insurance carried/ amount of insurance required)* loss
what is coinsurance in health insurance?
provision that requires the insured to pay a specified percentage of covered medical expenses AFTER the deductible is met
what reduces premiums and precent over utilization of policy benefits?
coinsurance in health insurance
what are other insurance provisions?
provisions for when multiple insurance policies apply
what prevents the insured from profiting from a loss?
other insurance provisions
what is pro rata liability?
Each insurer’s share of a loss is based on the proportion that
its insurance bears to the total amount of insurance on the
property
what is contribution by equal shares?
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
what is primary and excess insurance?
primary insurer pays first and the excess insurer pays only after the policy limits under the primary policy are exhausted
what is an example of coverage over primary liability policy limits?
“umbrella liability”
