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IA&B PC Insurance > Chapter 3: Property & Casualty Basics > Flashcards

Chapter 3: Property & Casualty Basics Flashcards

1
Q

Insurable Interest

A

financial interest a person has in the person/property being insured

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2
Q

liberalization

A

if coverage is changed during policy period, insureds under the insurance company’s existing insurance policies will receive the benefit of broadened coverage
*must broaden coverage, no increase in premium

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3
Q

Underwriting- Purpose/Process

A

Performed by both producers and underwriters during the risk selection process
Information gathered from producer’s application, physical inspections, government reports (vehicle, credit, financial)
Avoid adverse selection

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4
Q

Rate vs. Premium

A

Rate is price per unit, Premium is rate per unit multiplied by the number of units

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5
Q

Rate

A

price structure to cover claims and other expenses; provides a profit for the insurer

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6
Q

Judgement Rates

A

rates determined & applied to individual insureds by the insurance company

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7
Q

Manual or Class Rates

A

insureds with similar characteristics (homogeneous) are placed into classes, charged same rate.
Manual rates are only rate used in many lines of insurance, used to start developing a merit rate

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8
Q

Merit Rate

A

Consider the characteristics of a particular risk which increases/decreases a premium. They measure individual loss history and actions taken to reduce/prevent loss

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9
Q

Experience Rating (merit)

A

looks to past individual experience to predict future rates

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10
Q

Retrospective Rating (merit)

A

applies the loss history for the current policy period to develop a “final premium” for that same policy year

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11
Q

Hazard

A

specific condition/situation which increases the probability of loss or the extent of loss

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12
Q

Physical Hazard

A

structural, operational, or material characteristics of a risk

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13
Q

Moral Hazards

A

character flaws in a person that could lead to create a loss or expand a loss

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14
Q

Morale Hazard

A

irresponsibility, carelessness or indifferences to a loss

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15
Q

Named peril

A

will list each and every peril covered

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16
Q

Open Perils (special form)

A

covers all causes of loss or damage except those which are specifically stated to not be covered

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17
Q

Basic Named Perils

A

Fire, lightning, windstorm, hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism, sprinkler leakage, sinkhole collapse, volcanic action

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18
Q

Broad Named Perils

A

theft, falling objects, weight of snow/ice accidental discharge/overflow of water, sudden/accidental tear apart of appliance, freezing of plumbing, sudden and accidental damage from artificially generated electrical current

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19
Q

Direct loss

A

loss/damage as a direct result of a covered peril or cause of loss

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20
Q

Consequential/indirect loss

A

loss results in insured’s inability to use property because it suffered a direct loss

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21
Q

Specific Insurance

A

specific limit of insurance on a specific property at one specific location

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22
Q

Blanket Insurance

A

specific limit of insurance applying to more than one type of property or more that one location; uses total blanket limit to pay losses

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23
Q

Scheduled Coverage

A

specific insurance covering more than one location; specified limit is provided for each item on location

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24
Q

Frame Construction

A

generates the most expensive premium

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25
Q

Types of Construction (numbered)

A
  1. Frame
  2. Joisted Masonry
  3. Non-combustible
  4. Masonry non-combustible
  5. Modified Fire Resistant
  6. Fire Resistant
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26
Q

Fire Resistive

A

fire insurance premium is least expensive

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27
Q

Replacement Cost

A

cost to replace damaged property (new for old)

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28
Q

Actual Cost Value (ACV)

A

replacement cost at the time of loss minus physical depreciation

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29
Q

Functional Replacement Cost

A

original insured property can be replaced with more commonly used material functionally equivalent at lower cost

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30
Q

Market Value

A

value of property as determined by the amount of money people would pay for the property knowing relevant facts

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31
Q

Agreed Value

A

Insured and insurance company agree on a value, amount of insurance carried must be equal to the agreed value

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32
Q

Valued Policy

A

declares the amount which will be paid in the case of a total loss of the property

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33
Q

Declarations Page (what is found)

A

Information that personalizes the policy
Named insured, address, location, coverages, amounts of insurance, effective dates, limits of endorsements

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34
Q

Insuring Agreement (clause)

A

outlines promises made by insurance company to insured

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35
Q

Additional/Supplementary Coverages

A

specifically list additional coverages that provide coverage beyond the basic policy, at no additional cost

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36
Q

Conditions

A

obligations/duties required of the insured and insurance company to carry out the policy provisions

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37
Q

Exclusions

A

limit/restrict coverage

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38
Q

Endorsements

A

add, modify or exclude coverage, changing the original terms of the policy

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39
Q

Certificate of Insurance

A

Requested by third party to verify existence of insurance coverage

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40
Q

Named insured

A

specifically named on dec pages

41
Q

First Named Insured

A

more than one named on dec pages, the first listed

42
Q

Additional Insured

A

not usually named on dec pages, added to policy as insured by endorsement

43
Q

Automatic Insureds

A

granted insured status because they fit into category described in policy provisions

44
Q

3 Cancelation Provisisons

A

Pro Rata- insured gets back exactly what entitled to, based on cancelation date
Short Rate- company changes small fee for cancelation
Flat Rate- policy not taken by insured, no coverage taken and no premium earned

45
Q

Earned Premium

A

applies to the time the policy was in effect

46
Q

Unearned Premium

A

applies to the unused time left in a policy

47
Q

Nonrenewal

A

action by the insurance company to terminate insurance coverage at the expiration date or renewal of the policy date

48
Q

Other Insurance (what is it & how to handle)

A

insured has more than one policy to pay the loss
Primary Insurance, Excess Insurance, Pro Rata, Contribution by equal shares

49
Q

Other Insurance Options- Primary & Excess

A

Primary- insurance coverage pays first
Excess- policy only responds after other insurance is paid out full limit

50
Q

Other Insurance - Pro Rata

A

each policy will pay its proportionate share based on its limit of insurance written compared to the total limit of all insurance written

51
Q

Other Insurance- Contribution by equal shares

A

each company will pay an equal amount of each loss, remaining policy continues to pay

52
Q

Nonconcurrancy

A

policies do not insure for the same level of perils, resulting in gap in coverage

53
Q

Coinsurance (did/should)

A
  • Requires insured to carry specified percentage of the value of the property; only for partial losses
  • Insured has not insured the property to the required values, insured will be required to share in a portion of most covered losses
54
Q

Vacancy

A

absence of both people/personal property
Commercial prop.- must rent/use at least 31% of the building

55
Q

Unoccupency

A

building contains furnishings and other personal property but has not had people occupying the space for a period of time

56
Q

Duties of insured after a loss

A

report claims, cooperate in investigation, submit damages for inspection, make inventory of lost property, submit proof of loss

57
Q

Assignment

A

insured giving away ownership of the policy/rights to another person

58
Q

Waiver of Rights

A

Either party to contract voluntarily gives up one of the rights/requirements in Conditions section of policy

59
Q

Insurer Provisions (liberalization & subrogation)

A

Liberalization- if policy is changed during policy period, insureds under existing policies will receive benefit of broadened coverage
Subrogation- insurance company seeks recovery from a negligent third party who caused a loss to insured’s property

60
Q

Claims Settlement Options

A

Options to put insured into previous financial condition
- Repair
- Replace
- Pay cash to repair/replace

61
Q

Third Party Provisions- Standard Mortgage Clause (Lienholders Rights)

A

rights/duties of a mortgagee when the lender is named in the policy as the mortgagee

62
Q

Third Party Provisions- Loss Payable Clause

A

any loss payment must include the financial interest of the lender named on the dec page or attached endorsements

63
Q

Third Party Provisions- No Benefit to the Bailee

A

Bailee- rightful possession of the property of another
avoid situation where bailee tried to escape legal liability for a loss to an insured’s property (preserve insurer’s subrogation rights)

64
Q

Legal Liability

A

established under Common Law, Statutory Law, Contract Law

65
Q

Tort

A

civil wrong against another party

66
Q

Common Law

A

One party has committed a tort

67
Q

Statutory Law

A

person violates a statue(law)

68
Q

Contractual/Contract Law

A

assumed the responsibility of another through a contract

69
Q

Negligence

A

failure to exercise that amount of care an ordinarily prudent person would use to protect others from unreasonable risk/harm/injury
*must have all four elements for negligence

70
Q

Legal Duty/Standard of Care (negligence)

A

legal duty to act or not act in a given situation

71
Q

Breach of Duty (negligence)

A

you didnt do what others would have in a similar situation

72
Q

Proximate Cause (negligence)

A

unbroken chain of events leading to the damages

73
Q

Actual Loss or Damage (negligence)

A

third party must suffer actual injury or damage

74
Q

4 Common Law Defenses

A

Assumption of Risk, Act of God/Nature, Intervening Cause, Contributory Negligence

75
Q

Assumption of Risks- Law Defense

A

one knowingly/voluntarily exposes a known danger and the consequences of that danger

76
Q

Act of God/Nature- Law Defense

A

event produced by a physical cause of nature, not within human control or intervention

77
Q

Intervening Cause- Law Defense

A

separate act that breaks the direct connection between the proximate cause of loss and sets in motion a new chain of events causing injury/loss

78
Q

Contributory Negligence- Law Defense

A

person adds in any way and is not entitled to collect damages from the other party

79
Q

Comparative Negligence

A

an injured party can recover damages as long as their % is not great than the negligence of the other party

80
Q

Statute of Limitations

A

any statute which prescribes the time limit in which a legal action must be brought
Injury suit- 2 years
Contractual Liability suit- 4 years

81
Q

Damages

A

sum of money which compensates an injured party

82
Q

Compensatory Damages

A

compensate the injured party for damages incurred

83
Q

Special Damages (economic)

A

measurable dollar amounts of an actual loss or out of pocket costs

84
Q

General Damages (non-economic)

A

subjective and hard to measure; pain and suffering, disfigurement, loss of consortism

85
Q

Punitive Damage

A

sum of money in excess of the amount required to compensate for loss and which is imposed to punish the negligent party for the reckless indifference now and deter similar conduct in the future

86
Q

Absolute/Strict Liabaility

A

imposes liability w/o regard to fault or negligence
Strict- holds sellers, distributors and manufacturers responsible for hazardous products
Absolute- explosives, mining or blasting, lions and tigers

87
Q

Accident

A

taking place in an instant rather than continuously over time

88
Q

Occurance

A

including continuous or repeated exposure to substantially the same general harmful conditions

89
Q

Duty to Defend

A

policy to provide a defense to the insured for any/all covered claims under the policy

90
Q

Per person liability limit

A

the most the policy will pay for bodily injury to any one person

91
Q

Per Occurrence (accident) Liability Limit

A

the most an insurance company will pay arising out of any one occurrence of a covered loss, no matter how many people were injured

92
Q

Split Limit Liability

A

limit that is divided between two types of insurance coverages; usually Bodily injury and property damage

93
Q

Combined Single Limit Liability

A

combined single limit for bodily injury and property damage; advantage is flexibility

94
Q

Aggregate Limit Liability

A

the most we will pay for all claims that occur during one policy period, also contain a per occurrence limit. Written on per policy, per location, per project basis; not reinstated until next policy term

95
Q

Purpose of PA Property & Casualty Insurance Guaranty Association

A

pay covered claims under certain property & casualty policies which have not been paid by an insurance company because of insolvency (inability to pay debts)

96
Q

Guaranty Association- Range of Authority

A

only covers property/casualty policies written by admitted/authorized insurers

97
Q

Standard Fire Policy

A

conditions/provisions are basis of most property policy’s (dwellings, homeowners, comm. property and businessowners policy)

98
Q

Binder

A

temporary contract of insurance; issued for a period not to exceed 30 days

99
Q

Insurance Consultation Services Exemption Act

A

protects insurers from liability actions resulting from performing or failing to perform services.

IA&B PC Insurance (21 decks)

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