Chapter 2 Flashcards
Pro Rata Cancellation
A proportionate cancellation of insurance that refunds premium to the insured based on the precise number of days coverage was in effect.
Short Rate Cancellation
A cancellation of insurance that incurs a financial penalty, The insurer retains a portion of the unearned premium to cover costs
Flat Cancellation
A cancellation of insurance that is retroactive to the effective date of the policy. No coverage is provided and the insurer must refund the policy premium paid by the insured.
Proximate Cause
The primary cause of loss
** proximate cause is the first event in the unbroken chain of events that resulted in loss
Inherent Vice
A quality within property that causes it to damage or destroy itself. Examples include rust, rot and the fading of paint. Inherent vice is not covered by a property policy.
Arbitration
disputed claim is decided by a neutral third party.
Concurrent Causation
A principle holding that when two perils simultaneously cause a loss
(i.e., they are both considered the proximate cause of loss), the insurer must pay the loss even if one of the perils is excluded by the policy.
Concurrency/Concurrent Policies
The existence of two or more policies covering the same exposures, having the same policy periods, and the same coverage triggers
Non-Concurrency/Non-Concurrent Policies
The existence of two or more policies covering the same exposures that don’t have the same policy periods.
Deductible
The specified amount of each loss that the insured must bear
Bailee
A person or any organization to which property has been entrusted, usually for repairs, servicing or storage. Because bailees are legally responsible for property in their care, property insurance policies specifically exclude coverage for property in the care of a bailee.
Bailor
A person or organization that entrusts property to a bailee.
Direct Loss
A loss that causes direct damage to property without an intervening cause.
Indirect Loss or Consequential Loss
A loss that is not the direct result of a peril.
Specific Limit
Insures a single item of property for a single limit of insurance. For example, a fire policy insures one dwelling for $100,000.
Scheduled Limit
Insures one or more items of property on a single policy and the amount of insurance applying to each item is shown on a schedule. For example, one farm policy insures a home for $100,000 and a barn for $200,000.
Blanket Limit
Insures property located at more than one location OR more than one type of property at the same location OR both. For example, the $1 million blanket limit applies to two separate buildings at two separate locations, as well as the business personal property contained in each building.
Declarations
The Declarations Page describes basic information about the policy, including:
Who – Names the insurer and insured, including legal representatives in the event of the insured’s death.
What – A description of the property being insured and other parties having insurable interests, such as a mortgagee.
Where – The location of insured property and the named insured’s mailing address.
When – The effective and expiration dates of the policy.
How Much – The limits of liability insuring covered property and the annual premium for each type of coverage.
Insuring Agreement
The insuring agreement states the insurance company’s promise to pay the insured.
Property insurance policies state in the insuring agreement what perils are covered.
conditions
The conditions section states the obligations of the parties to the contract, as well as any other conditions of coverage. The insureds duties and obligations are spelled out in this section.
Policy Period – Specifies that coverage only applies to losses occurring when the policy is in force.
Concealment or Fraud – Specifies that coverage will not apply if an insured makes a material concealment, misrepresentation, or fraud in the application pertaining to the claim.
Liberalization Clause – Specifies that if the insurer broadens coverage with no increase in premium, that broadening of coverage will apply to existing policies without the need for an endorsement.
Cancellation – Specifies the terms under which the policy can be cancelled by the insurer and the named insured.
what does Assignment mean?
Specifies that the insured may not transfer rights of ownership without the insurer’s prior written consent.
