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PA Casualty and Insurance Exam Prep > Definitions > Flashcards

Definitions Flashcards

1
Q

Insurance

A

A contract that binds the insurer to indemnify (compensate) the insured against specified types of loss in return for money (premiums).

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2
Q

Law of Large Numbers

A

A theory that states that it is more likely to predict a particular outcome as the number of units in a group increases.

Ie., the bigger the observed sample, the more accurate the predicted results will be.

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3
Q

Indemnity

A

The underlying principle of insurance, which is restoring an insured to the same financial position that existed before a loss occurred.

To compensate to same financial position before loss.

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4
Q

Loss

A

The source of a claim for damages under an insurance policy.

Ie., financial loss due to loss of property, loss of loved one, losses due to medical problems.

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5
Q

Direct physical loss

A

A loss in which damage occurs as a result of an occurrence without an intervening cause.

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6
Q

Intervening cause

A

An event that interrupts the chain of causation by providing an independent cause of the final result.

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7
Q

Indirect or consequential loss

A

Loss in which damage occurs as a result of direct loss.

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8
Q

Insurance interest

A

The concept that insurance can be purchased when the applicant has a potential for financial loss

Insurable interest must be present at the time of loss and present as the time of application.

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9
Q

Risk

A

Meaning 1: the property or party that is insured

Meaning 2: the uncertainty of loss

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10
Q

Pure risk

A

A situation that only involves the chance for loss or no loss.

Such as property ownership.

This risk is insurable

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11
Q

Speculative risks

A

Are situations that involves the chance for either a loss or a gain

Such as gambling

This risk is uninsurable.

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12
Q

Premium

A

Money paid for insurance

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13
Q

Negligence

A

A conduct that is culpable because it misses the standard required by law of a reasonable person.

Failing to do something a reasonable person would do

Doing something a reasonable person would not do.

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14
Q

Self insurance

A

The making of financial preparations to meet risks by setting aside sufficient funds in advance to meet estimated losses

No insurance policy purchased

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15
Q

Applicant

A

The individual who applies for insurance is the applicant

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16
Q

Insurer

A

Another name for insurance company

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17
Q

Insured person

A

1) any member of the insured household who is a relative or is under 21.
2) a child or parent living with the insured, regardless of age
3) any other member of the insured household who is under the age of 21

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18
Q

Name insured

A

Person(s) listed as an insured in the Declarations page

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19
Q

First name insured

A

The first insured listed and the person in charge of correspondence. Such as renewal notices and policy changes

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20
Q

Additional insured

A

An individual or entity who other than the named insured qualifies as an insured under the policy.

Usually applies for mortgage or a business arrangement

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21
Q

Agent/producer

A

An individual who is state licensed to solicit and sell insurance for one or more insurance companies.

Must be authorized by an insurer (principal) to act on its behalf

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22
Q

Principal

A

Insurer

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23
Q

Policy owner

A

1) applies for a policy
2) takes responsibility for premium payment
3) right to cash values, dividends and policy process
4) ability to change beneficiaries and other policy particulars

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24
Q

Binder

A

A written or oral contact made by agent to put a policy immediately but temporarily for a specified period of time until accepted or cancelled by the insurance company.

A promise to pay within certain time frame

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25
Q

Certificate of insurance

A

A document issued by insurance company/broker that is used to verify the existence of insurance coverage

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26
Q

Endorsement

A

An attachment to a document that amends or adds to.

Also referred to as a “rider”

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27
Q

Rider

A

Endorsement

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28
Q

Waiver

A

The voluntary abandonment of a known or legal right or advantage

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29
Q

Estoppel

A

The idea that once a fact has been admitted to be true by a previous action it can no longer be denied to be true

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30
Q

Accident

A

An unforeseen and unintended event that is identifiable as to time and place

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31
Q

Occurrence

A

An event, including continuous and repeated exposure to conditions

Results in bodily in fury or property damage unexpected, unintended

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32
Q

Exposure

A

The condition of being at risk for financial loss due to hazards or unforeseen events

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33
Q

Hazard

A

A condition that increases the chance for loss or severity of loss

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34
Q

Four types of Hazards

A

Physical hazards- such as damages steps or worn tires

Moral - insured habits

Morale - insured attitude

Legal - created by legal authority

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35
Q

Peril

A

Cause of a loss or event insured against

36
Q

Named peril policy

A

A policy that only provides insurance for perils that are specifically listed or named in the policy

37
Q

Open perils policy

A

A policy that provides insurance for all perils except those specifically listed to exclude

38
Q

Maslows hierarchy of needs: list 5

A 
Physiological needs - physical needs
Security
Affiliation
Esteem
Self actualization
39
Q

Naic

What does it stand for?

A

National association of insurance commissioners

40
Q

What are the roles of National association of insurance commissioners (NAIC)?

A

1) all state insurance directors or commissioners are members
2) encourages and tries to standardize insurance laws through the country by recommending model legislations to each home state
3) they do not make laws, they enforce laws in their own state.
4) they determine the amount of surplus, complaints investigation and examination of agents and insurers.

41
Q

Tort

A

A tort is a vigil wrong that unfairly causes someone else to suffer loss or harm resulting in legal liability for the person who commits the act.

42
Q

Co-insurance

A

Another cost feature, usually in commercial property insurance policy.

Requires specified amount of insurance based on the value of the insured property. Share percentage of loss.

43
Q

Deposit premium

A

An initial or provisional premium required by an insurer.

44
Q

burglary

A

The breaking and entering with felonious intent end up with a visible signs of forced entry

Ie., B for burglary, B for breaking, B for building

45
Q

Robbery

A

The taking of another person’s property by force or fear of nature

46
Q

Larceny

A

The taking or removal of another person’s property with the intent to permanently deprive them of it.

47
Q

Theft

A

The unlawful taking off the property of another including burglary robbery and larceny

48
Q

Mysterious disappearance

A

Personal property is missing but there is no provable cost for its disappearance the property might be lost or stolen

49
Q

Liability

A

A legally enforceable debt or obligation

50
Q

Adverse selection

A

of persons who present a greater than average or less than average degree of risk for loss.

Higher risk subject to higher cost

51
Q

Resinsurance

A

Insurance sold and purchased between 2 insurance companies for the purpose of transferring, sharing risk usually catastrophic risk or losses in excess of a specific amount (500k or 100k)

52
Q

Reinsurer

A

The insurer selling reinsurance to ceding insurers

53
Q

Ceding insurer

A

The insurer buying reinsurance from a reinsurer.

54
Q

Facultative insurance

A

The ceding insurer offers individual risks to the reinsurer. Reinsurer May choose to accept or reject each individual risk

(Based on each individual risk)

(Ceding insurer writes)

*faculty with a C

55
Q

Treaty insurance

A

The residues write coverage for one or more lines of insurance issued by the ceding insurer.

Treaty reinsurance continues in force unless canceled by one of the parties.

Reinsurer cannot reject individual risks

(Reinsurer writes)

  • treaty with an R
56
Q

Multi line insurance companies

A

Writes more than one line of insurance

57
Q

Stock companies

A

Insurers organized under the laws of the state in which are incorporated and owned by shareholders who elect officers and directors. Share profits growth stock growth and dividends.

*Stock companies, share holders

58
Q

Mutual companies

A

These companies have no capital stock and owned by policyholders who share profits and dividends. Can attend and vote at company meetings.

*Mutual companies, Policy holder

59
Q

Assessment mutual insurers

A

Share losses among group members. No premium is paid in advance. Premium paid by occurrence.

Similar to condo fixes

60
Q

Advance premium assessment group

A

Premiums are paid at the beginning of each period. If more claims than premiums, then need to pay more. If money left over then returned to group members at the end of period

61
Q

Non-assessable mutual insurers

A

Charges fixed premium and the policy holders cannot be assessed further. Reserved and surplus are maintained to provide payment of all claims.

Fixed payment, no refunds at end of period

62
Q

Reciprocals or reciprocal insurers

A

Groups that exchange insurance on each other

63
Q

Risk retention groups

A

A mutual insurance company that insured people in the same profession of business

64
Q

Purchasing groups

A

Not an insurance company!
Purchasing group can be any group of persons with similar or related liability risks. Purpose is to purchase insurance in a group basis.

65
Q

Contract of adhesion

A

Only one party to the contract prepares the contract and submits it to the other party.

The insured cannot make any changes to the contract

66
Q

Aleatory contract

A

Unequal amounts of money are exchanged. Unequal value

67
Q

Personal contracts

A

They cover the unstable interest and cannot be transferred or assigned to another individual

68
Q

Unilateral contract

A

One sided contract. Only one party is legally bound to perform any duties once premium is paid

69
Q

What is utmost good faith?

A

Both parties bargain in good faith in forming the contract.

Applicants expected to make honest and full disclosure of facts

Insurer expected to promptly indemnify the insured according to contract

*nothing to do with premium or money, just facts and indemnification

70
Q

Non currency insurance

A

Happens when 2 ore more policies do not cover a risk in the same way at the same time.

Creates coverage gaps

71
Q

Excess insurance

A

Starts when the primary insurance ends. Aka Umbrella Insurance

72
Q

What is an assignment of a policy?

A

It is the transfer of a policy. From one insured to another entity.

Law requires rotten authorization and signed off by an officer (not agent) of insurance company

73
Q

Pro rata

A

When more than one insurer covers claim. Division of loss. Distribution is not even in percentage

74
Q

General average loss

A

Refers to a loss that directly affects two or more. Generally includes sacrifice of least prioritized.

Throwing away some cargo to save others
Using cargo as fuel
Cutting away spare of sails

For common safety

75
Q

Particular loss

A

Partial loss or damage caused to any cargo or property

76
Q

Uninsured motorist

A

Covers BI as result of accident caused by uninsured motorist or hit and run

77
Q

Underinsured motorist

A

Covers excess liability provided by at fault drivers up to the limits of their policy

78
Q

Limited tort and how to convert to full tort?

A

Covers recovering rights to medical and out of pocket expenses

Must meet financially responsibility requirements to be considered for coverage

Does not cover pain and suffering and non monetary compensation

—— unless other drivers is under influence, vehicle registered in another state, intention to injure himself, not carrying required financial responsibility, defect vehicle. Then victim can seem Full tort compensation

79
Q

Full tort

A

Coverage unrestricted extended financial compensation by injuries caused by other drivers

Includes non monetary and pain and suffering

80
Q

Subsequent injury fund

A

Set up by PA to pay prior disabilities benefits so employers are not discouraged from hiring disabled as they will not be responsible for full loss if partial disabled becomes full disabled

81
Q

State workers insurance fund

A

WC insurance option to insure employers against liability and assure payment of WC, employers are liable.

State employees- long shore and harbor workers, federal coal mine

82
Q

Coverage triggers

A

Notification of a claim

83
Q

Retroactive date

A

First date claim is covered

84
Q

Hold harmless clause

A

Policy Stating the contractor or subcontractor is solely responsible for the work to be done.

Covers Lease:
Leases
Easements
Agreements
Sidetrack agreement
Elevator agreement
85
Q

Discovery trigger

A

Discovery- trigger activated coverage under the policy in place discovery is known. Not at action date but at discovery date.

86
Q

Loss sustained trigger

A

Injury in fact- actual injury or loss sustained. Coverage triggered for when actual injury occurred

PA Casualty and Insurance Exam Prep (3 decks)

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