Chapter 8: Key Terms

Question 1

Actual Cash Value

Answer 1

The depreciated value of personal property

Question 2

Assumption of Risk

Answer 2

The injured party fully understood and recognized the dangers that were involved in an activity and voluntarily chose to proceed

Question 3

Basic Coverage

Answer 3

Protects the homeowner from losses associated with specifically named perils

Question 4

Bodily Injury

Answer 4

Occurs when an insured driver causes bodily harm to a third party and the insured driver is deemed responsible for the injuries

Question 5

Broad Coverage

Answer 5

Provides protection for the perils covered in basic coverage, plus additional protection for named perils not covered under basic coverage

Question 6

Collateral Source Rule

Answer 6

Holds that damages assessed against a negligent party should be reduced simply because the injured party has other sources of recovery available, such as insurance or employee benefits (health or disability insurance)

Question 7

Collision

Answer 7

Auto insurance coverage that protects the insured against upset and collision damages, such as those sustained in an accident involving other vehicles, or those sustained when an auto runs off the road.

Question 8

Combined Single Limit Policy

Answer 8

A policy that has a fixed amount of coverage that the insurance company pays, whether the loss is attributable to bodily injury or property damage

Question 9

Comparative Negligence

Answer 9

The amount of damage is adjusted to reflect the injured party’s proportion of contribution to the cause of the injury

Question 10

Comprehensive

Answer 10

Auto insurance coverage that protects the insured’s auto against perils out of the insured’s control, such as missiles or falling objects, fire, theft, earthquake, hail, flood, or vandalism

Question 11

Contributory Negligence

Answer 11

Negligence on the part of the injured party that contributes to the harm and therefore requires the injured to bear some responsibility for the injury

Question 12

Dwelling

Answer 12

Residential structure covered under a homeowners insurance policy

Question 13

Endorsement

Answer 13

Attachment or addition to an existing insurance policy that changes the original terms

Question 14

Homeowners Insurance

Answer 14

A package insurance policy that provides both property and liability coverage for the insured’s dwelling, other structures, personal property, and loss of use

Question 15

Intentional Interference

Answer 15

Intentional act committed against another that causes injury

Question 16

Last Clear Chance Rule

Answer 16

This rule states that a claimant who is endangered by his own negligence may recover if the defendant has a “last clear chance” to avoid the accident and failed to do so

Question 17

Liability Coverage

Answer 17

Covers bodily injury or property damage to others for which the insured driver is deemed to be responsible

Question 18

Libel

Answer 18

A written statement that causes harm to another

Question 19

Loss of Use

Answer 19

Under homeowners insurance coverage, loss of use is a combination of additional living expenses and loss of rental income

Question 20

Medical Payments

Answer 20

A no-fault, first-party insurance coverage designed to pay for bodily injuries sustained in an auto accident

Question 21

Negligence

Answer 21

Harm caused by failure to use reasonable care

Question 22

Open Perils Policy

Answer 22

All-risk coverage for personal property that provides for a much broader and more comprehensive protection program than named-perils coverage

Question 23

Other Structures

Answer 23

Small detached structures on the insured;s property in addition to the main house, such as garages, greenhouses, or storage buildings

Question 24

Personal Automobile Policy

Answer 24

Insurance policy that covers liability for injuries and damages to persons inside and outside the vehicle and covers the cost to repair/replace a damaged or stolen vehicle

Question 25

Personal Liability Umbrella Policy (PLUP)

Answer 25

Coverage designed to provide a catastrophic layer of liability coverage on top of the individual’s homeowners and automobile insurance policies

Question 26

Personal Property

Answer 26

Valuable items owned by the insured that are covered under homeowners insurance

Question 27

Replacement Cost

Answer 27

The amount necessary to purchase, repair, or replace the dwelling with materials of the same or similar quality at current prices

Question 28

Res Ispa Loquitue

Answer 28

A doctrine of the law of negligence that is concerned with the circumstances and the types of accidents, which affords reasonable evidence if a specific explanation of negligence is not available

Question 29

Slander

Answer 29

Verbal statement that causes harm to another

Question 30

Split Limit Policy

Answer 30

Three separate liability coverage limits covering bodily injury (per person and per occurrence) and property damage

Question 31

Strict and Absolute Liability

Answer 31

Liability resulting from law. Strict liability allows for defense, absolute liability does not

Question 32

Uninsured / Underinsured Motorist

Answer 32

Motorist without liability coverage or whose insurer can/will not pay claim, such as a hit-and-run driver, or motorist with insufficient liability coverage according to state law

Question 33

Vicarious Liability

Answer 33

One person may become legally liable for the wrongful act of another