Gontime Flashcards
What is indemnity
To restore, no better-no worse
What is insurance
Transfer of risk from insurer (1st party) to insured (2nd party)
What is covered property insurance?
Real property and personal property (things you can touch)
What is casualty insurance
Legal LIABILITY to others (3rd party) claimant for liability claim
What is a personal line
Type of insurance for families. Auto, home, boat, rv
What is a commercial line of insurance
For businesses; taxi or 18 wheelers, usaa bldg, customer in bldg, workers comp
What does an agent sell
Sell policies
What do actuaries set
They set rates
What is a risk?
Uncertainty of loss
What is a pure risk
Chance of loss only, son driving sports car
What is speculative risk
Chance of winning or loosing, slots and lottery
What risk does insurance only cover between pure and speculative
Pure risk only
What is the Law of Large Numbers
Actuaries estimating claims using the law
What is a peril
A cause of loss
What are named perils
Lists things that ARE covered
What is an open policy
Covers all except what’s specifically excluded
What is a hazard
Conditions that increase the chance of peril happening
List the different types of peril
Visible- dead tree in yard
Dishonest- arsonist
Morale- attitude of carelessness
What are the two types of loss
Direct- physical damage to property
Indirect- loss of use
What is an insurability interest/ financial interest
For an insurance policy to pay, there must be an insurance risk. Must exist at time of loss
Give examples of insurable interests
Buy a new car (auto loan) or a house (mortgage) or rental car
What is a tenant improvement
When you do work on a apartment you DO NOT own
What is a proximate cause
The first cause in an unbroken chain of events
*typically if proximate cause is covered, all resulting damage is too
What is CALC
Competent parties- 18,sane,sober
Agreement- offer and acceptance
Legal purpose- transfer of risk, must support public policy
Con$ideration- dollar value, exchange of values (premium=promise to pay)
Insured makes the offer
What is a representation
Believed to be true, answers to questions by insured
What is misrepresentations
Has no effect to be issued policy
What is material misrepresentation
Not true but would have caused insurer not to issue policy
What is concealment
Intentionally hidden
What happens when fraud occurs
Void the policy due to the concealment
What is a warranty
Written into the policy, promises insured will do, breach will void policy
What is a binder
Temporary contract, good for 30 days
Policy structure
Declarations-receipt
Insuring agreement- promises coverage
Conditions- rules (procedures) rights/responsibilities
exclusions- what’s not covered
What do declarations do
Tailors the policy
What are the 6 P’s
Policy #, parties involved! property description, policy term, policy limits and deductibles, premium
What is limit of liability
Maximum per loss
What is aggregate limit
Maximum per policy, found on commercial policies
What is a deductible
Retention or retention limit, insurer pays excess
If add to deductible you reduce premium
If increase deductible reduce frequency of claim
What is the premium
Consideration paid by insured is premium
Policy cancelled before expiration, insurer may pay back $ to unearned premium
What is an Insuring Agreement
uSAA promise to pay covered perils if covers liability, insurers pay for defense covered here
What are conditions
Contains duties and rights of the parties
Other procedures in conditions
-termination of procedures
What are the Insured duties after a loss
-prompt notification
-cooperation with USAA
-submission of proof or loss of sworn statement w/I 91 days
Protect property from further damage & inventory of damage property
What are USAA subornation rights
Insurer now has right to recover amount paid for loss from at-fault party
What are the rights of mortgagee
Pay premium, receive claim payment, receive cancellation notice
* nothing insured does, can prevent from collecting under policy
What are the 2 types of terminations
Cancellations
- before end of policy
Non-renewals
-occurs at end of policy period
What are cancellations
Insurers may cancel subject to state regs.
10 day advance notice, insured receives full refund of unearned premium without penalty, called pro rate
When can insured cancel
At any time
- no advance notice required
- insured may not get a refund
What are non renewals?
Insurer may nonrenew subject to state regulations
- 30 day notice required
- no adjustment in premium since goes to exp. date
When may insured renew
At any time (no rules)
-no advance notice required
What is the claims dispute resolution processes
Disagreements on value of the loss (appraisal) determines
If cannot be done, hire an umpire by both appraisers
What is an arbitration
Deals with disagreements on coverage issues
Where are the other insurance located
In the conditions section; when insured has more than one policy covering same loss
In other insurance, what is Pro Rata Liability
Proportionate total loss, big policy pays proportionately more
Policy limit 100,000, fire loss 40,000
Insurer A, 1/4 of limit; 25,000/100,000, 1/4 of 40,000=10,000 loss
Insurer B, 3/4 of limit; 75,00/100,000, 3/4 of 40,000= 30,000 loss
What is contributions by equal shares
All insurers share limit of lowest policy, split evenly.
Fire Loss= 40,000
Insurer A pays 1/2 of loss, 20,000
Insurer B pays 3/4 of loss, 20,090
What is primary and excess (other insurance)
Primary pays first, excess pays after primary limits are exhausted.
Policy A is primary- 40,000 loss
A pays 25,000 (until exhausted)
B pays remaining 15,000
What is coverage territory
Where applies, restrict to US (auto)
Worldwide=floaters
What are other common conditions (Assignments)
Insured May not transfer policy to another person unless given
Written consent
What is liberalization
Broadens or extends coverage, no additional premium charged
What legal action is taken against insurer
Insured May use within 2 years and one day of loss
What are the exclusions in DICE
Things that aren’t covered, flood, contraband, intentional acts
-have these bc they aren’t insurable or better covered somewhere else
What are endorsements
Changes to policy
*only authorized officer can change policy, insured can request change
What is Certificate of insurance
Verifies coverage, and it isn’t an insurance contract
What are the six Loss valuations
Replacement ACV value stated Values stated policy (liquidated determined) Market value Pair and set
What is a replacement cost
Today’s cost, with like and quality
What Is actual cost value
Replacement cost-depreciation
What is aggregate/stated value
antiques and classic care and artwork
What is value policy
Destroyed by fire, insured has right to demand policy limits as value, doesn’t apply to personal property
What is loss valuation
Negotiated amount determined by a buyer and seller
What is pair and set
Subtract value of what remains after the loss for value of the pair
What is total loss
Costs more to repair than to replace
What is partial loss
any loss that isn’t total loss.
* adjuster will verify if co insurance requirement is met before they pay a partial loss on building*
What is coinsurance
Insured to carry a minimum amount of insurance (insurance to value) 80%,
- never pay more than limit bought.
- Minimum not carried, partial losses are not paid in full (penalty applies)
What is vacant
Empty bldg, insured penalized after 60 days
-May not be covered for losses such as vandalism but still covered in fire insurance
What is abandonment
Insured cannot abandon partially damaged property and expect to be paid for its full value
What is salvage value
Total losses
What is casualty insurance
Most common is casualty coverage is Liability
What is liability
Legally responsible, third party coverage
What is civil liability
Actions brought by injured parties, can be covered by liability insurance
What is a tort
A tort is a civil wrong.
What is An unintentional tort
Negligence
What is an direct liability
Insured is wrongdoer
What is vicarious liability
Insured is responsible for actions of wrongdoer
What is contractual liability
Insurer assumes another’s liability under written agreement
What is absolute liability
Liability without fault, child drowns in pool, wild animal escapes cage, pit bull bites neighbor
What is strict liability
Product defect claims
What is negligence
Failure to do something that should be done that results in a LOSS
- reasonable prudent person rule
- would not be texting, driving, while in car and driving
What are the elements of negligence
Legal duty- owe obligation
Breach of duty- failure to comply
Actual loss- another suffers loss
Proximate cause- breach of duty is direct cause
What are the types of injuries and damages
BI- inc pain and suffering
Property damage-loss of use (fix of truck,rental vehicle)
Personal injury- persons character or reputation
What is the duty to defend
If claim would’ve been true, then it would be covered
Applies to frivolous claims
What is an accident
Sudden and unexpected
specific time an place proven
What is an occurrence
Event happens over time, Continuous or repeated exposure
Results in injury or disease
What are compensatory damages
Special- monetary damages
General- non-economic losses
What are punitive damages
Punish wrongdoer due to gross negligence
* usually not covered by insurance
What is admitted
Authorized insurer- certificate of authorityb
What is non-admitted
Unauthorized insurer, not required to have CoA, only sell surplus lines
What is a CoA
Issued by TDI, is an insurance company license
What is surplus line insurance
In Texas, agent must have surplus lines to sell surplus lines insurances
What are the surplus lines conditions
Coverage only placed with unauthorized carrier after a diligent search of authorized or admitted insurers.
*before can be non-admitted, you must check if they can be on admitted side
What is a domicile
Domestic-state
Foreign-in another state
Alien-in another county
What are stock insurers
Owned by shareholders
Dividends paid to stockholders if a profit is made and are taxable
Dividends are not guaranteed
What are mutual insurers
Policyholders.
Participating dividends are partial return of premiums and are not taxable
Dividends are not guaranteed.
What is self insurance
Business sets up claims savings account, to pay for property damage or risk
What is a govt insurance called
Residual market;
Def and state govt provide insurance not available by other insurance companies
What is the FAIR program
Home insurance, People that are subject to fire, inner city crime areas.
Who regulates the insurance business
State regulation
What and who falls under federal regulation
Applies, but only to extent that such business is. to regulated by law
What are the sources of underwriting information
Credit report Consumer investigative Inspection report Insurance application MVR Photos
What is the fair credit reporting act
To protect when adverse action resulting in review of credit
What do underwriters do
Use credit history and other sources of info to eval risk.
What are consumer rights under fair credit reporting act
Required to give written and verbal disclosure at time of app.
Consumer request copy of report (from credit bureau)
May challenge accuracy of reports contents
What is the terrorism risk insurance act
Fed govt reimburses insurance companies for terrorism losses covered in some (commercial insurance) policies
Who certifies that they can pay for losses under terriorism assurance act
Secretary of State, secretary of treasury, and attorney general
Will not pay more than $100 billion in aggregate
How is the terrorism risk assurance act applied
Must be injurious to life, property or infrastructure
Resulted in. U.S.
Produce $5 million in damage
What is Gramm Leach Bliley Act
Req financial institution to provide customer with notice if t hey share non-public info to third parties
Allows customer to opt out-instruct insurance company to not share with others
Also forced to develop uniform licensing laws
Who passes state regulations
State legislature passes statutes and publishes laws
What is the Texas insurance code
All laws on particular laws
What is commissioners duties
2 year term, February 1st of each odd year, no financial interest in company
What are the powers of commissioner
Issues insurance and licenses and certifications of authority, Conducts examinations (audits)
What are powers of commissioner
Issues cease and desist, imposes penalties following hearings, approves insurance policy forms sold within state
Approves rates for regulated lines of insurance
When are investigations done by commissioner
Once every five years
Insurer pays for audit and receives premium tax credit
New insurers examined every years or as necessary
What is the guarantee association
Protects claimants and policyholders in The event of insurers insolvency
Composed of all insurers authorized to transact business within the state
What is guarantee assoc.
Governed by board, 5 insurers and 4 public
What is the assessment of guaranty association
Amounts they pay is based upon their share of market in Texas, result in fine if not payed
What is the financial strength ratings
Private companies (not TDI) that publish these ratings
Who are the private companies that publish ratings
A.M. best
Moody’s
Standard and Poor’s
Fitch
What is rate regulation
Use and file in tx
TDI could eventually decline rate increase and order company to pay refund
What is agent regulations
Agents represent their companies
Eval customers needs and recommend appropriate coverages
Bind risk
What are the licensing requirements
18 years of age, pass exam, fingerprints, notify change of address w/I 30 days
Who is a resident agent
Licensed to sell in tx,
Who is a nonresident agent
Does not live in tx, allowed to sell in tx
What is a temp license
90 days, no renewal, required to have a agent sponsor, no test
What is an emergency license
90 days, agent has died or is disabled, renew 1 time, no test required
What is a insurance service rep
Salaried, no commissions, only does quotes and explains coverages,
Does not bind coverage or collect premiums, unless told to be supervising agent gives expressed authority
What is a limited lines agent
Sells one type of insurance,
Who is a risk manager
Does not permit licensee to receive commissions from sale of insurance
Who is a managing general agent
Appoints and supervise property and casualty agents who sells insurance, not licensed to sell, agents do actual selling.
Business and financial entities
One partner must be licensed before business can apply for license.
Banks must be separate and distinct from bank ops, to avoid coercion.
What is a license renewal
2 years
If lapses, may renew within 90 days- subject to a 50% fee
Must apply for new license if expired for one year or more
CE
2 ethics hours, 4 years of records, 30 hours, 50% in classroom
What is termination of appointment
Must be reported to TDI,provide reason for termination, LOA doesn’t result in loss of license
Who can take away license
Commissioner
What are fiduciary responsibilities
Misappropriation of funds, subject to state fines
Mixing (commingling) is prohibited
What is conversion
Bringing $ for one purpose then converting to a different use
What are the disciplinary actions
Cease and disorder
Suspend or revoke license
Levy fine- $25,000
20 days to request hearing, TDI must give 10 day advance notice of hearing
What penalties and fines may arise resulting from disciplinary actions
Misappropriating or converting $
Convicted of felony= If licensed, notify commish w/I 30 days
What if you fail to comply with fines
Agents-$1,000 per violation, $5,000 max
Insurers- up to $25,000
What is twisting
Misrepresentation
What is defamation
Financial condition
What is disparagement
Services
Unfair trade practices- testimonials
Genuine true, must be current opinion
What is boycott, coercion and intimidation
Force someone to do something
What is the false use of stats
Verifiably true, source must be i.d.
What is unfair discrimination
Race religion or country of origin is not allowed
What is unfair claims practices
Unless the claim is a fire loss of income claim
What time requirements do adjusters must me
15 days to acknowledge the claim or start the investigation
15 business days to except or deny the claim
Five business days to write the check
Requirements may be modified if arson or weather related catastrophe is involved
What are covered autos
Owned vehicles or private passenger auto’s pick up trucks and vans
size requirement is 25,000 pounds or less only
for personal use not business
the exceptions are farm vehicles
Covered autos non-own vehicles
Borrowed vehicles
rented vehicles
and temporary substitute vehicles
And rentals and these are all covered under liability only
Trailers hitched to insured vehicles
Automatically covered for liability only
Persons injured and Who are covered
Resident spouse and the name insured
Who is a Resident family member
Blood marriage or adoption
wards or foster children
Any person driving with the church permission who are they
Permissive user’s with spouses permission
What do Part A third-party cover
Pays legal obligations
bodily injury or property damage
Pays all claims handling cost without limits
Does not cover the insureds injuries or damage
What do bodily injury cover
Medical expenses
lost wages
pain and suffering
What is property damage
Damage to another vehicle-pay for rental as well
damage to a building
damage to wall or fence
What is the Texas motor vehicle safety responsibility act
Requires proof of ability to satisfy a liability claim against a person as a result of an accident
Meet requirements in Texas-by auto liability insurance or bond, deposit money with the state $85,000,
self-insure for $1 million
What are the limits of liability for Texas, split limit
$30,000 for bodily injury per person
$60,000 for bodily injury per accident covers all people in the vehicle
$25,000 for property damage per accident
What is the combined single limit
$85,000 per accident
What is a supplementary payment-bonds
Premiums up to $250
Loss of earnings up to $200 per day
Is defense a supplementary payment
Difference is not a a supplementary payment
What are the exclusions for liability
Does not apply to family members for use of a vehicle without permission
What does livery mean
Means delivery for a fee or taxi
What is a courier
Property for a fee
Is prearranged racing covered as an exclusion
No it is not covered
Lost cause intentionally by insured not covered
Road rage
What exclusions not normally covered under motorized vehicles
Motorcycles or autos with fewer than 4 wheels
Other insurance clause
Just borrows Mary’s car and is in an accident Mary is primary Jess is excess
What is Out of state coverage
Insured will pay higher
Liability limits purchased by the insurer
Limits required by the state in which the insured is traveling
What is The first parties medical payments
The insured occupying an auto or as a pedestrian is covered
The insurers guess passengers with permission is covered
Up to what amount is the medical payments coverage
Paid regardless of fault up to three years
Are medical expenses covered
Medical and funeral expenses are covered, $500 per person is minimum limit
What is PIP
Insured occupying as a pedestrian, first party
Pays regardless of fault up to three years
What does PIP pay
Medical funeral expenses,
80% of lost wages or essential services
A person cannot collect both
What are the PIP limits
$2500 per person minimum
May be rejected in writing
What is uninsured and Underinsured motorist coverage
First party coverage
Property damage up to $250 deductible applies
Person has no insurance you must pay the deductible
Who is an uninsured motorist
The hit-and-run
Or physical contact with other vehicle must occur
Runs you off the road it doesn’t hit you is not a hit-and-run
What is in Under insured motorist
Excess coverage over at fault drivers insurance
What are the available limits
Minimum split limits 30/60/25
$85,000 combined single limit
Maximum cannot exceed limit purchased for liability
Must Um/uim be included
Must be included in all liability policies issued in Texas, unless insured rejects the coverage in writing
What are the physical damage coverages?
Damage to ensured vehicles, non-owned vehicles (rental cars)
What physical damage coverage is covered in collision
Collision with another vehicle or object
upset of the vehicle; which is an overturned vehicle
What is comprehensive coverages
Earthquake and flood (auto) glass breakage (missile) contact with the bird
What are some physical damages exclusions
Sound video equipment permanently installed, $1500 if permanently installed
Personal property in the car
customized equipment
What are the most common exclusions
Wear and tear mechanical or electrical breakdown road damage to tires war (nuke) freezing
What are some free coverages
Limited to $20 per day up to $600 maximum per loss
If a theft loss there is a 48 hour waiting period
What is a loss settlement
Settled in actual cash value, you must depreciate the claim if in a wreck
What are the exceptions to newly acquired vehicles
Liability will extend until the end of the policy. And replaced for 14 days
What Are the duties of an insured following a loss
Notify the police of a hit-and-run and notify the police promptly after vehicle is stolen
What are the general provisions for territory
United States and its territories and possessions
Canada, Puerto Rico and Guam
no coverage in Mexico
What are the provisions for cancellation
Insurer gives you 60 days for a new policy to get to know you
and may cancel with 10 day notice
What if cancellation is more than 60 days
Insurer can cancel with a 10 day notice for nonpayment of premiums, drivers license suspended or revoked, fraudulent claim, vehicle registration is suspended or revoked.
What is a dwelling policy eligibility
Tenant usually occupied, no farms
mobile homes by endorsement and the wheels must come off
What is a monoline policy
It’s a type of insurance, property only, no liability unless endorsed, no theft coverage unless endorsed
What is dwelling policy coverage A
Additions attached to it, screen doors and windows, outdoor equipment, materials and supplies used for repairs or construction
What is dwelling policy coverage B
Other apart structures-limit is 10%, detached buildings, fences, detached garage, utility shed
What is dwelling policy coverage C
Personal property-the contents of the insured, insureds custody (houseguests), students property at a dormitory
What is dwelling policy coverage C
Personal property not covered-business equipment stored on premises, pets, motor vehicles, accounts, bills, currency, property of renters
What is dwelling policy coverage D
Fair rental value, loss of rental income caused by a covered peril
What is dwelling policy coverage E
Additional living expenses, motel bills, restaurant bills, laundry costs, due to loss of the use of the dwelling caused by a covered peril
What are other coverages for dwelling policies-free
Debris removal clean up after covered loss, property removal (30 days)
fire department service charge $500
Trees, shrubs, and other plants
Up to $500 per plant
Perils such as fire and vandalism are covered
