Important Terms

Question 1

First named insured

Answer 1

The first person or organization listed on the declarations page.

Question 2

Binder

Answer 2

Temporary coverage for an insurance applicant until the policy is issued
- Ex.: Mary applies for a policy and the insurer gives her a binder. This lets Mary have coverage while the insurer verifies her credit history, driving record, an any other information in her application.

Question 3

Insured

Answer 3

The person or organization that is covered by the policy; usually the one who owns the policy and pays the premiums.

Question 4

Insurer

Answer 4

The company or organization offering financial protection.

Question 5

Policy period

Answer 5

The dates during which the policy is in effect.

• Inception date-expiration date
• Usually ends at 12:01 AM on the expiration date

Question 6

Blanket coverage

Answer 6

“Blankets” more than one property, type of property, or coverage under a single limit.

Question 7

Specific limits

Answer 7

Limits that apply to one specific type of property.

Question 8

Representation

Answer 8

a statement of fact

Question 9

Misrepresentation

Answer 9

A false, distorted, or deceitful statement of fact or opinion, even if made unintentionally.

Question 10

Warranty

Answer 10

Promise or guarantee that certain conditions will be met. (found on conditions page)
-If policyholder breaks a warranty, the insurer can deny coverage.

Question 11

Concealment

Answer 11

deliberately withholding relevant information

Question 12

Concealment vs misrepresentation

Answer 12

• Concealment is hiding the truth
• Misrepresentation is stating something untrue
• Ex.: Applicant failing to mention her previous arrests for drunk driving. This is pertinent information that the applicant must disclose.

Question 13

Waiver

Answer 13

• Voluntary surrender of a right, claim or privilege.
• Expressed: in writing, signed
• Implied: assumed based on actions
• Ex.: If a policyholder notifies his insurer of increased hazards, but the insurer does nothing, then the insurer has made an implied waiver. It no longer has a right to deny a claim based on those increased hazards.

Question 14

Estoppel

Answer 14

• Legal principle that prevents an insurer from denying coverage if the insured has reasonably come to believe that he has such coverage, based on the insurer’s practices.
• Form of implied waiver
• The insurer losses rights to refuse coverage if it has:
  1. ) previously allowed an action without restriction
  2. ) it has made misleading statements or practices that the insured has come to believe.

Question 15

Reformation of an insurance policy

Answer 15

• The correction of an insurance policy by a court of law to accurately express the true nature of the agreement between the insurer and the insured.
• If the insured’s address is listed on the declarations page as 75 Meadowmere Drive, but the correct address is actually 75 Meadowmere Boulevard, this typo could dramatically affect coverage, and can be fixed through reformation.
• A policy can be reformed for:
  1. ) mutual mistake of fact
  2. ) fraud

Question 16

Insurer

Answer 16

Agency or company providing indemnity for loss.

Question 17

Insured

Answer 17

Person or organization purchasing the policy.

Question 18

First named insured

Answer 18

First person or entity listed on dec page.

Question 19

Policy period

Answer 19

Inclusive period between inception and termination dates

Question 20

Binder

Answer 20

Temporary coverage until policy is issued

Question 21

Representation

Answer 21

a statement assumed to be true

Question 22

Misrepresentation

Answer 22

False statement

Question 23

Warranty

Answer 23

guarantee of action or condition

Question 24

Concealment

Answer 24

deliberately withholding pertinent information

Question 25

Express waiver

Answer 25

written relinquishing of a right, claim, or privilege

Question 26

Implied waiver

Answer 26

assumed relinquishing of a right, claim, or privilege based on practice

Question 27

Estoppel

Answer 27

Principle holding that if insurer accepts a practice for a time, it cannot later refuse coverage because of that practice.