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CH1 Insurance Terms and Related Concepts > General Ins Principles > Flashcards

General Ins Principles Flashcards

1
Q

Law of Large Numbers

A

The larger number of individuals with similar exposure to loss is more predictable of future losses

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2
Q

Insurable Interest

A

*Must exist at time of loss. Policyowner would incur financial loss.

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3
Q

3 elements of Insurance Interest

A

Financial, Blood, Business

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4
Q

Risk

A

Uncertainity regarding financial loss

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5
Q

What are the two types of Risk?

A

Pure & Speculative

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6
Q

Pure Risk

A

Insurable because it only involves the chance of loss. No chance for financial gain.

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7
Q

Speculative Risk

A

Involves opportunity for gain or loss. NOT Insurable Ex: Gambling

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8
Q

Hazards

A

Circumstances or settings that increase the likelihood of an insured loss occurring. Ex. Slippery floor

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9
Q

3 kinds of Hazards

A

Physical, Moral, Morale

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10
Q

Physical Hazard

A

Structural, Material, or Operational features of the risk

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11
Q

Moral Hazards

A

Deals with an applicant who lies on application or submits fraud claims

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12
Q

Morale Hazards

A

An indifference to loss. Ex: No intention of fixing something, insurance will pay when breaks.

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13
Q

Indemnity

A

Often referred to as reimbursement.

  • Beneficiary allowed to collect to the extent of financial loss.
  • Cannot gain financially from a loss
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14
Q

Subrogation

A

Insurer’s legal right to seek damages from third parties after insured is reimbursed. Prevents insured from collecting twice.

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15
Q

Accident vs Occurence

A

Accident-unplanned, sudden and unexpected event resulting in damage or injury.

Occurence-includes losses caused by repeated exposure to conditions resulting from property damage or injury

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16
Q

Two types of Damages

A

Property and Bodily

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17
Q

Special Damages

A

Out-of-pocket expenses for medical, loss of wages, or miscellaneous expenses

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18
Q

General Damages

A

Compensate for disfigurement, mental anguish, or pain and suffering

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19
Q

Punitive Damages

A

Punishment for gross negligence, extreme behavior or willful intent

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20
Q

Negligence

A

Failure to use reasonable and prudent care

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21
Q

4 elements of Negligence

A
  • Actual loss or damage
  • Legal Duty
  • Unbroken chain of events
  • Standard of care
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22
Q

6 types of Loss Valuation

A
  • Actual Cash Value
  • Replacement Cost
  • Market Value
  • Agreed Value
  • Stated Value
  • Salvage Value
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23
Q

Types of Liability

A

Strict and Vicarious

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24
Q

Strict Liability

A

Often applied to PRODUCT liability cases

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25
Vicarious Liability
Liability imposed on one party as a result of another.
26
Limits of Liability
- Per Occurence (accident) - Per Person - Aggregate - Split - Combined
27
Proximate Cause
Cause of property damage or bodily injury is natural and reasonably forseeable
28
Deductible
Dollar amount must be met by the insured before insurer provides coverage *Higher Deductible = Lower Premium
29
Coinsurance
Policyholder maintains minimum amount of insurance coverage on property Partial loss is paid in full if minimum is met Coinsurance clause is not affected in a total loss
30
Loss Payment = (Insurance carried / Insurance required) x Loss Amount
31
Insurance to value
Replacement cost settlement for policyowners who carry minimum insurance coverage
32
Deposit Premium
Estimated premium is paid in advance of a policy being issued
33
Deposit Premium Audit
Insurance provider may audit the insured's records and books to determine an adequate premium
34
Certificate of Insurance
Written evidence demonstrating that the insurance policy has been issued Lists the amounts and types of insurance provided
35
Peril
Causes of loss that are insured against
36
Legal Hazards
Describe an array of legal or regulatory conditions that affect an insurer's ability to collect premiums.
37
Loss
Refers to the decrease or reduction of value of the individual or property insured in a policy
38
Direct Loss
Involves other damage where the covered peril was the proximate cause of loss. Example: Water damage from fire dept putting fire out but fire was proximate cause of loss.
39
Indirect Losses
losses resulting from direct loss. Examples: Extra living expenses that occur while home is being repaired or loss of profits a business might suffer having to close down due to repairs.
40
Named Peril
Term used in property insurance to describe the extent of coverage provided under an insurance policy form that lists covered perils. **No coverage is provided for unlisted perils
41
Open Peril
insures against any risk of loss that is not specifically excluded.
42
Burglary
Crime of forced entry with criminal intent
43
Robbery
Taking of property from the custody of an individual by harming or threatening bodily harm.
44
Theft
Any act of stealing, includes both burglary and robbery
45
Mysterious Disappearance
Disappearance of property without any knowledge as to time, location or how property was lost. * this type of loss is excluded from most policies
46
Vacancy
Refers to covered structure where no one has been working or living for the required time stated in a policy (typically 60 days)
47
Unoccupancy
No one has been working or living within requried period of time, but some property is stored
48
Blanket Insurance
Single property policy that offers coverage for more than one class of property at one location, or for multiple classes of property at more than one location.
49
Specific Insurance
Property policy that insures specific kind or unit of property for a specific amount of coverage.
50
Loss Valuation
A factor in calculating the premium charged and the amount of coverage required
51
Actual Cash Value (ACV)
Calculated by deducting depreciation from the current replacement cost to replaced damaged property with like kind and quality
52
Replacement Cost
Cost of replacing damaged property with like kind and quality at today's price without any deduction for depreciation
53
Functional Replacement Cost
Cost of replacing damaged property with less expensive and more modern equipment. Example: building with lath and plaster walls may be replaced with drywall which is lower cost but just as functional
54
Market Value
Rarely used method of loss valuation based upon the amount a willing buyer would pay to a willing seller for the property before the loss occurs.
55
Agreed Value
Property policy with a provision agreed upon by the insured as to the amount of coverage that signifies a fair valuation for the property
56
Stated Value
Amount of coverage scheduled in a property policy that is not exposed to any coinsurance requirements in the event of a covered loss.
57
Salvage Value
Estimated value of an asset upon its sale at the end of its life. Property that can be sold as a whole or in parts. Example: Totaled car being sold for parts so insurer can lower cost of claim
58
Limits of Liability Definition
Insurance carriers liability for payment as stated in an insurance policy. Is the maximum amount of money the insurer will pay for particular loss
59
Per Occurence (Accident)
Liability policy sublimit that puts a ceiling on payment for all claims that result from a single accident.
60
Per Person
Maximum payment amount available for bodily injury to a single perosn in an accident.
61
Aggregate Limit
Maximum limit of available coverage provided under liability policy during a policy year, regardless of number of accidents and claims. *Resets on policy's anniversary date
62
Split Limit
Seperate limits of liability for different coverages. For example 25/50/25
63
Combined Single
Single dollar amount of liability that applies to the total damages of property and bodily injury.

CH1 Insurance Terms and Related Concepts (1 decks)

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