Definitions 2

Question 1

Mono-line policy

Answer 1

Insurance policy that only provides one type of insurance coverage.

Question 2

Mono line company

Answer 2

Insurance company that writes a single line of insurance.

Question 3

Moral hazard

Answer 3

Hazard created by a person who willingly created the loss situation just to collect from the insurance company.

Question 4

Morale hazard

Answer 4

Hazard created by a person’s tendency to cause a loss because of their own irresponsible actions or carelessness.

Question 5

Multi line company

Answer 5

Insurance company that writes more than one line of insurance

Question 6

Mutual company

Answer 6

Insurance company owned by it’s policyholders. The policyholders share in profits made by the company through dividends or reductions in future premiums.

Question 7

National Association of Insurance Commissioners (NAIC)

Answer 7

Organization made up of individual state insurance commissioners to promote uniformity of laws and regulations.

Question 8

National flood insurance program

Answer 8

Program run by the federal government that makes flood insurance available to eligible communities at subsidized rates for both buildings and personal property.

Question 9

No benefit to Bailee condition

Answer 9

Condition found in some property insurance contracts stating that a Bailee is not covered under the insurance policy while the Bailee has possession of the insureds property.

Question 10

Bailee

Answer 10

A person or organization that has temporary possession of someone else’s personal property.

Question 11

No-fault insurance

Answer 11

Type of automobile insurance in which each insurance company pay the damages of its own insureds regardless of who was at fault for the accident.

Question 12

Non-reporting policy

Answer 12

Type of insurance policy for which upfront premium is charged every time the policy is renewed.

Question 13

Occurrence

Answer 13

A loss that occurs at a specific time and place or over a period of time.

Question 14

Ocean marine insurance

Answer 14

Insurance designed to provide product coverage for cargo and ships in transit over sea.

Includes cargo insurance, hull insurance & freight insurance

Question 15

Open peril policy

Answer 15

Policy that protects the insured from losses caused by any peril that is not specifically excluded.

Question 16

Other insurance condition

Answer 16

A policy condition that sets out how many other insurance that applies to the same loss will affect reimbursement under the policy.

Question 17

Package policy

Answer 17

Policy that includes more than one type of insurance coverage.

Also called a multi-line policy

Question 18

Personal auto policy (PAP)

Answer 18

Auto policy that provides property and liability coverage for both owned and nonowned auto’s used, maintained, or operated by the insured and his or her family members.

Question 19

Peril

Answer 19

The cause of loss.

Question 20

Personal injury

Answer 20

Injury other than bodily injury arising out of such things as libel, slander, false arrest, etc.

Question 21

Physical hazard

Answer 21

Hazard that arises from the condition, occupancy, or use of the property itself.

Question 22

Primary insurance

Answer 22

When two or more coverages or policies apply to the same loss, the one that pays first.

Question 23

Property damage (PD)

Answer 23

Damage to the property, including loss of use of the property.

Question 24

Proximate cause

Answer 24

An action that produces a loss.

Question 25

Pure risk

Answer 25

A risk in which there is no chance of gain, only loss.

Question 26

Rebating

Answer 26

Giving or offering some benefit other than those specified in the policy to get a customer to buy insurance.

Question 27

Reciprocal company

Answer 27

And unincorporated group of members who share insurance responsibilities with other members.

Question 28

Replacement cost

Answer 28

The cost to replace a damaged or destroyed item of property, without deduction for depreciation.

Question 29

Representation

Answer 29

Statements on the insurance application that the applicant believes are true.

A representation is not considered a matter to which the parties contract so a policy cannot be voided on the basis of a representation

Question 30

Retroactive date

Answer 30

Under the claims made CGL form, a date stipulated in the declarations as the first date on which an event may occur and may be covered by the policy if a claim is filed.

Question 31

Risk

Answer 31

The chance or uncertainty of loss.

Question 32

Risk retention group

Answer 32

Insurance company formed by several organizations to cover those organizations liability loss exposures.

Question 33

Self insurance

Answer 33

It’s an alternative to purchase insurance in which a company or individual assumes the risk of paying for its losses and sets aside the necessary funds to pay for such losses.

Question 34

Speculative risk

Answer 34

A risk that might result in a loss or gain.

Question 35

Stock company

Answer 35

Insurance companies owned by stockholders. Profits are shared by the stockholders.

Policyholders are not entitled to a share of company profits.

Question 36

Supplementary payments

Answer 36

A payment the provides extra coverage over and above the insured limit of liability.

Commonly included are defense costs, first aid expenses, postjudgement interest etc.

Question 37

Tort

Answer 37

A civil wrong for which monetary damages may be provided. Does not include losses arising out of contracts.

Question 38

Twisting

Answer 38

Illegal activity in which an agent convinces a prospect to cancel existing insurance and buy another policy from the agent to the detriment of the prospect.

Question 39

Umbrella policy

Answer 39

Type of policy that provides broad coverage for an insurance liability over and above liability covered by other policies.

Question 40

Unilateral contract

Answer 40

Type of contract that is one sided. An Insurance policy is one sided because only the insurance company is legally bound to perform its part of the agreement.

Question 41

Uninsured motorist

Answer 41

Uninsured motorist include those who do not carry insurance, motorists whose insurance does not meet the states minimum financial responsibility laws, drivers whose insurance companies are insolvent, and hit-and-run drivers who cannot be identified.

Question 42

Utmost good faith

Answer 42

Both insured and insurer need to trust each other.

Meaning that the insurance company must be able to rely on the honesty and cooperation of the insured and the insured must be able to rely on the company both to fulfill their obligations.

Question 43

Vicarious liability

Answer 43

Liability that a person or business incurs because of the actions of others, such as family members or employees.

Question 44

Waiver

Answer 44

Intentional relinquishment of a known right.

Question 45

Warranty

Answer 45

A specific agreement between the insured and the insurer that becomes part of the insurance policy.

A breach of said warranty can void the policy.

Question 46

Worker’s Compensation and employers liability policy

Answer 46

Insurance the covers and employers obligations under Worker’s Comp laws in case of a work-related injury or illness.

Question 47

Mobile home insurance

Answer 47

Coverage that protects both a mobile home structure and its contents.

H02 or an H03 can be a endorsement that is attached to a homeowners policy to modify coverage for mobile homeowners

Question 48

Bond

Answer 48

A guarantee that a specific obligation is fulfilled.

Question 49

Fidelity bond

Answer 49

Is written to protect against dishonest acts by employees.

Guarantees employees will do an honest job.

Question 50

Principal

Answer 50

The party who promises to do a specific thing.

Question 51

Surety

Answer 51

The party (often the insurance company) who agrees to be responsible for loss that might result if the principal does not keep their promise.

Question 52

Obligee

Answer 52

Party to whom the principal makes a promise and for whose the protection the bond is written.

Question 53

Fidelity bonds

Answer 53

Are continuous and do not have an expiration date, although they may be terminated by the parties to the bond.