Chapter 3 Flashcards
Insurable Interest
Financial interest a person has in the person or property being insured
- Property insurance
- Life insurance
Purpose of underwriting
- GOAL- to avoid or minimized the possibility of adverse selection
- What is reviewed
A. Producer application
B. Physical Inspection
C. Government Reports
D. Consumer Credit Companies
E. Financial Sources
Different between rate and premium
Rate is a price per unit
Premium is made up of the rate per unit multiplied by the number of units
Judgment Rate
Rates determined and applied to individual insureds by the insurance company
Manual or class Rates
Similar characteristics are placed into classes insureds of the same class are charged the same, manual rates may be used as a starting point for merit rates
Merit Rate
Consider the characteristics of a particular risk which can either increase or decrease a premium
3 types of hazards
- Physical
- Moral
- Morale-
Named Perils
List each and every peril covered
Open Peril
Policy covers all causes of loss or damage except those which are specifically stated to NOT BE COVERED
Direct and indirect loss
- Direct- is a damage as a direct result of a covered peril or cause of loss
- Indirect- results from an insured’s inability to use property because it suffered a direct loss
Specific, blanket, and scheduled insurance coverage
- Specific- specific limit of insurance on a specific property at one specific location
- Blanket- specific limit of insurance applying to more that one type of property or more that one location
- Scheduled- specific insurance covering one location
Types of construction
- Frame
- Joint Masonry
- Noncombustible
- Masonry Non-Combustible
- Modified Fire Restive
- Fire Restive
Types of loss Valuation
- Actual cash value
- Replacement Cost
- Functional Replacement Cost-
- Market Value
- Agreed Value
- Valued Policy
What is on the Declarations page?
- named insured
- Address
- Location
- Coverages
- amounts of insurance
- Effective dates
- endorsements
Different parts of insurance policy
- Declarations
- Definitions
- Insuring agreement or clause
- Additional/Supplementary Coverages
- Conditions
- Exclusions
- Endorsements
What is a certificate of insurance and who requests them?
- Snapshot of the policies and limits as of their effective date
- Issued as a matter of information only
- Does not amend, extend or alter the coverage afforded by policies
- Does not constitute a contract between the insurer or agent and the certificate holder
List and explain different types of insureds?
- Anyone or organization covered under the policy
- Named Insured
- First names Insured
- Additional Insured
- Automatic Insureds
List 3 ways a policy may be cancelled
- Pro-Rata
- Short Rate
- Flat Rate
Describe difference between earned and unearned premium
- Earned Premium- Applies to the time the policy was in effect
- Unearned Premium- Applies to the unused time left in policy
What is a deductible and what purpose does it serve?
Deductible is the amount of loss under an insurance policy which an insured must pay before the insurance company will pay its portion of the loss
Other insurance
- Primary Insurance
- Excess Insurance
- Pro-Rata
- Contribution by equal shares
What does non concurrency mean and why is this not a desirable circumstance?
Non Concurrency- The undesirable situation that can arise when the policies do not insure for the same level of perils, leads to a gap in coverage
What is the purpose of coinsurance?
Coinsurance- is a condition in commercial property policies that requires an insured to carry a specified percentage of the value of the property
Explain the difference between vacancy and unoccupancy and the effect on policies
Vacancy- absence of both people and personal property
Unoccupancy-The building contains furnishings and other personal property, but has not had people occupying the space for a period of time
Discuss an insured’s duties after a loss.(PINES)
- Protect
- Inventory
- Notify
- Exhibit damage
- Submit proof
What is assignment regarding policy rights?
Assignment is the insured giving away ownership of the policy or rights provided in the policy to another person or organization
Identify and explain three 3rd party provisions
Standard Mortgage Clause- Explains the rights and duties of a mortgage when the lender is named in the policy as the mortgagee
Loss Payable Clause- States that any loss payment must include the financial interest of the lender named on the declarations page or an attached endorsement
No Benefit to the Bailee- “Bailee” is someone who has rightful possession of the property of another(dry cleaner), avoids a situation where the bailee tries to escape his/her legal liability for a loss to an insured’s property
List 3 basis in which legal liability is established
Common Law
Statutory Law
Contract Law
What are 4 elements of negligence must be present for negligence to exist?
Legal Duty/Standard of Care
Breach of Duty
Proximate Cause
Actual Loss or Damage
What are the 4 common law defenses?
Assumption of Risk
Act of God or Act of Nature
Intervening Cause
Contributory Negligence
What are the 2 statutory defenses?
Comparative Negligence
Statute of Limitations
Compensatory damages are made up of what types of damages?
Special Damages
General Damages
What are punitive damages?
The sum of money in excess of the amount required to compensate for loss, and which is imposed in order to punish the negligent party for reckless indifference, outrageous or malicious conduct now and deter similar conduct in the future
What is strict/absolute and vicarious liability?
Strict Liability- is a legal concept most commonly applied by the courts in product liability cases
Absolute Liability- applies in common law in three instances
1.explosives
2. Mining or blasting
3. Animals
Vicarious Liability- Exist when a person or organization is held responsible for the negligent acts of others
How do limits of liability apply?
Per Person
Per Occurrence
Aggregate Limit
Split Limits
Combined Single Limit
What is the purpose of PA property and casualty insurance guaranty Association?
Purpose is to pay covered claims under certain property and casualty policies which have not been paid by an insurance company because of insolvency
Why is the standard fire policy important?
All property policies issued in the commonwealth contain policy language which at a minimum is equal to the policy language of the standard fire policy
What is a binder?
Temporary contract of insurance and can be either oral or written, in PA a binder can only be issued for a period not to exceed 30 days
