Definitions Flashcards
Financial responsibility law
State laws that require owners or operators of autos to provide evidence that they have the funds to pay for auto losses for which they might become liable. Insurance is the usual method for providing this evidence to the state.
Fraud
A false statement intended to deceive the insurer and induce it to part with something of value or to surrender a legal right. May void an insurance policy.
Insolvency
The insurer’s inability to pay their financial obligations (claims of policyholders)
Mine subsidence
A type of peril that involves damage to your dwelling caused by an underground cave in or collapse of mines. This peril of loss is a basic exclusion within property insurance policies.
Negotiate
To confer directly with, or offer advice directly to, a purchaser or prospective purchaser of a particular contract of insurance with respect to the substantive benefits, terms, or conditions of the contract, provided the person that is conferring or offering advice either sells insurance or obtains insurance from insurers for purchasers.
Sell
to exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurer.
Solicit
to attempt to sell insurance, or to ask or urge a person to apply for a particular kind of insurance from a particular insurer.
Rebating
“buying Business” - if an agent/solicitor gives any type of monetary consideration (cash, gift, etc.) to a prospective customer to encourage that customer to buy from him
Ohio Assigned Risk Plan
a mechanism for individuals unable to obtain auto insurance in the normal marketplace.
- company must offer coverage to the applicant for a three year period.
- policy can only be cancelled due to fraud, misrepresentation, or non-payment
Ohio FAIR Plan Underwriting Association
Basic Property, Homeowners, and some limited Farm Insurance coverage available for qualified person who have been unable to secure coverage in normal market.
Ohio Commercial Insurance Joint Underwriting Association
the non-profit unincorporated joint underwriting association established under section 3930.03 of the Revised Code
Ohio Commercial market assistance plan
the mechanism created to respond to assist commercial insurance buyers in Ohio in obtaining difficult-to-place commercial insurance coverages.
Uninsured/Underinsured motorist-
the owner/operator of a motor vehicle that:
- has no bodily injury liability bond or insurance policy covering owner’s liability,
- insurer denies coverage to owner/owner is insolvent
- identity of the negligent owner or operator cannot be determined
- owner has diplomatic or other legal immunity
Adhesion
The principle that any ambiguity in the wording of the contract will always be ruled upon in favor of the insured, since they had no chance to negotiate the terms;
one of the four characteristics of insurance contracts
Agency
A legal relationship between two parties: Principal and Agent
Agency system
Refers to an insurance distribution system that supports a “middle man.” There is a field force of licensed agents and the public buys through them.
Aleatory
Refers to unequal exchange of values
ex. the premium paid for protection is a lot less than the actual limit of protection: one of the four characteristics of insurance contracts.
Binder
A legal contract that gives immediate temporary coverage for temporary need; a binder may be oral or written
Binding Authority
Refers to the ability to issue binders. Agents could have both oral and written binding authority; the overwhelming number of agents has both
Broker
One who represents an insured in the solicitation, negotiation, or procurement of contracts of insurance, and who may render services incidental to those functions.
This person is also called an independent agent. By law, the broker may also be an agent of the insurer for certain purposes such as delivery of the policy or collection of premium.
Conditional
Refers to the fact that the promise to indemnify is predicated upon conditions.
Ex. can be summarized as if… then; one of the four characteristics of insurance contracts
Contract
A legal agreement between two parties for consideration, such as an insurance policy.
Estoppel
This concept is related to waiver. Once a person or company waives a known right, the waiver cannot be reversed.
Fiduciary
A person who occupies a position of special trust and confidence.
ex. in handling or supervising the affairs or funds of another.
General Agent (GA)
An individual appointed by an insurer to administer its business in a given territory. Responsible for building the agency and service force. Compensation is on a commission basis, although there may be additional expense allowances. Often called a Managing General Agent (MGA).
Hazard
Anything that increases the possibility of suffering a loss due to peril.
ex. improperly stored combustible materials, worn tires, intentional abuse to insured property, or unsafe structural changes.
Indemnity
Insurance is designed to restore the policy owner to the same financial condition enjoyed prior to a loss. The intent is to cover the amount of the actual loss only; the insured should not profit from a loss situation.
Insurable Interest
A financial relationship you have with property. For something to be insurable, there are six things affecting risk that usually must be true: a large number of homogeneous units involved, loss must be ascertainable or measurable, loss must be uncertain, economic hardship involved, catastrophic perils excluded, adverse selection eliminated. If any one of these six characteristics is missing, an interest is not insurable.
Insured
The party to an insurance arrangement to whom, or on behalf of whom, the insurance company agrees to indemnify for losses, provide benefits, or render service.
Insurer
The insurance company assuming risk and agreeing to pay claims or provide services.
Liability
- A legal obligation to pay for a loss.
- Type of insurance needed to cover the situation of being responsible for someone’s accident or injury or to provide a defense to settle any claim or suit against the insured. The insurer’s duty to settle or defend ends when the amount paid for damages resulting from the occurrence equals the limit of liability.
Mass Marketing System
Refers to an insurance distribution system that “cuts out the middle man.” The public calls an 800 number and buys direct.
Peril
The cause of a loss to a policyholder.
Policy
The written contract effecting insurance or the certificate thereof by whatever name called, and papers attached thereto and made apart thereof.
a legal document between the insurance company and the policy owner that defines the amount of coverage, the amount of the premiums for that coverage, and what is and isn’t covered in the event of a loss.
Policy owner
The person who has the right to exercise the privileges and rights in the policy contract. Also called contract holder or policyholder.
Premium
- The consideration for the insurance.
2. A periodic payment made to keep a policy in force.
Property insurance
Insurance that indemnifies a person with an interest in a property for a loss.
Risk
The uncertainty of loss that exists whenever more than one outcome is possible.
Risk, Pure
A risk in which there is no chance of gain, only loss.
Surplus lines insurance
A special line of coverage that is not filed with state insurance departments. Typically includes risks that are very large or unusual, such that most companies will not provide coverage. Carriers of this coverage may be out-of-county.
Unilateral
One sided.
ex. only one partner in the insurance contract makes an enforceable promise, that being the insurer; one of the four characteristics of insurance contracts.
Insurance
a social device for spreading the chance of financial loss among a large number of people.
Risk, Speculative
creates a situation that offers the possibility of gain as well as loss.
ex. gambling
Moral Hazard
a hazard created by a dishonest individual who would be willing to create a loss situation on purpose just to collect from an insurance company; risk of fraud
Morale Condition
attitude of the insured; a hazard created by an individuals tendency to contribute to a loss through the individual’s own irresponsible acts or carelessness
ex. knowing there is ice and snow on the sidewalk and doing nothing about it.
Law of large numbers
the larger the number of separate, similar risks combined into one group are within a given time period.
Indemnification
The process of making someone financially whole.
Restore the insured to the same, or nearly the same, financial condition they enjoyed before the loss.
Pro-Rata Liability
Clause in a Property policy that provides a method of sharing loss when more than one policy is applicable. Each company covers no more than its share.
Also known as the Other Insurance Clause
Rate
The per-unit cost of insurance
Replacement Cost
The cost of replacing property with brand new material, without deduction for depreciation
Robbery
In Crime Insurance, the forcible and felonious taking of property from a messenger or custodian by violence or threat of violence.
Salvage
Property taken over by an insurance company to reduce its loss. The company may dispose of salvage property as it wishes, but on request and proper reimbursement, may return it to the insured.
Short-Rate
A percentage penalty charged on insurance canceled by the insured before the end of the policy period. Return premium is calculated on a short rate basis, meaning the insurance company keeps a portion of the unearned premium to cover expenses.
Surplus lines Insurers/ Surplus lines Broker
Broker who attempts to place risk with an unauthorized carrier located in another state or country. Exempt from state licensing requirements.
Alien Insurer
Incorporated in a country other than the United States.
Domestic Insurer
Incorporated in the state in which it does business.
Foreign Insurer
Conducts business in a state other than where its offices are located.
Fiduciary Responsibility
when one person holds something in trust for another
ex. an agent’s fiduciary responsibility demands that you always do what is in the best interest of your client
Consideration
The exchange of something of value between the parties of a contract
Theft
Any act of stealing. Includes larceny, burglary, and robbery.
Actual Cash Value (ACV)
The cost to replace a property item at the time of loss; less an allowance for depreciation. Often used to determine amount of reimbursement for a loss.
Aggregate Limit
A type of policy found in Liability policies that limits coverage to a specified total amount for all losses occurring within the policy period.
Burglary
As it is defined in Crime insurance policies, the unlawful taking of property by forced entry into, or exit from the premises, while the premises are closed for business. There must be visible evidence of forced entry or exit.
Co-Insurance
- In property insurance, a clause under which the insured shares in losses to the extent that the insured is under-insured at the time of loss.
- In health insurance, a provision that the insured and insurance company will share covered losses in agreed proportion.
Combined Loss Ratio
The amount of claims paid out compared to the amount od premiums received over the same period of time;
ex. a company receives premiums of $1,000,000 and pays out $400,000 in claims over the same period of time. The loss ratio would be 40%
Direct Loss
Loss that is a direct result of a peril, such as fire.
Functional Replacement Cost
A compromise between true replacement cost and straight actual cash value (ACV); the insurer will rebuild for the same function or purpose, but rebuild using modern, less expensive building materials.
Indirect Loss
Loss that is a result or consequence of a direct loss
Loss
An unpredictable reduction in the quality, quantity, or value of something.
ex. bodily injury, disease, property damage, physical disappearance of property, incurred expenses, death, etc
Negligence
Failure to use that degree of care that an ordinary person of reasonable prudence would use under the same given circumstances. Negligence may be constituted either by acts of omission or commission, or both.
Mysterious Disappearance
Vanishing of property with no known explanation
Tort
a wrongful act of civil law, not including a breach of contract or trust, that results in injury to another’s person, property, reputation, or the like, and for which the injured party is entitled to compensation.
Strict Liability
Liability that arises from an extremely dangerous situation. Often found in cases involving explosives.
ex. You are strictly liable is you keep a wild animal as a pet.
Vacancy
The absence of people and personal property from a building; not expected to return. Property coverage is often restricted when there are long periods of vacancy, especially for the perils of vandalism and glass breakage.
Vicarious Liability
Imposed in some states on a person even though the person is not a party to the particular occurrence
ex. the owner of a motor vehicle might be vicariously responsible for injuries even though the owner is not driving the car at the time of the occurrence.
Underwriting
The process of evaluating a risk for the purpose of issuing insurance coverage on it.
Indirect loss
further expense suffered while being without the property
All-Risk Policy
policy that list exclusions, or itemizes perils not covered. It can be a short list, or a long and inclusive list.
Any peril causing loss not excluded is covered.
Bodily Injury
Defined as harm, sickness, disease or death.
Insured
The party to an insurance arrangement to whom, or of whom, the insurance company agrees to indemnify losses, provide benefits, or render service.
Insured Location
The residence premises and any part of a premise where an insured in temporarily residing (such as a hotel room). It also includes vacant land owned by the insured, as well as cemetery plots.
Pro-Rata Liability Clause
Clause in Property policy that provides a method of sharing loss when more than one policy is applicable. Each company covers no more than its share.
Also known as the Other insurance clause
Property Damage
Physical Injury to, destruction of, or loss of use of tangible property.
Subrogation
The transfer to the insurance company of the insured’s right to collect for damages. After paying a claim, the company stands in the place of the insured in suing the negligent party, thus preventing the insured from collecting twice.
Garage Keepers Legal Liability
A coverage that is part of the Garage Policy. Covers a garage’s risk of legal liability for customers’ autos in the care, custody, or control of the garage. At the insured’s option, can also apply without regard to fault, for an additional premium.
Garage Policy
A policy that provides coverage for garage businesses. Includes coverage for liability, physical damage, and garage keepers’ losses arising out of owned, non-owned, and hired autos.
Personal Auto Policy
Easy-to0read Auto policy that provides broad coverage for both owned and non-owned autos that are used, maintained, and/or operated by the insured and family.
Advertising Injury
Refers to misappropriation of advertising ideas, or infringement of copyright, title, or slogan.
Contractual Liability
Also known as Hold Harmless Agreement. Refers to when a business agrees to be responsible for someone else’s liability.
Fidelity Loss
Refers to employees breaching trust of employers
Monoline Policy
An insurance policy that provides a single form of protection. A Fire Dwelling Policy is an example of a monoline policy
Personal Injury
Refers to civil torts involving issues of libel, slander, defamation of character, or wrongful eviction.
Scheduled Object
Part of a Boiler and Machinery Policy; insured lists the machines to be covered under the policy.
