Insurance

Question 1

Characteristics of insurable risks

Answer 1

CHAD
- not Catastrophic for insurer
- Homogeneous risk exposures
- Accidental
- Determinable

Question 2

Calculating insurance payout if underinsured (homeowners)

Answer 2

What percentage do they have of what they’re supposed to have? Insurance will pay that % of the loss.

Ex. You have $300k insurance when you’re required to have $400k. You have 75% of what you’re required to have, so insurer will pay 75% of loss.

Question 3

Elements of a valid contract

Answer 3

COALL
- Competent parties
- Offer
- Acceptance
- Legal consideration
- Lawful purpose

Question 4

Insurance dividend options - mnemonic

Answer 4

CRAP-O

Cash
Reduce premiums
Accumulate at interest
Paid-up additions
One-year term

Question 5

Rule of thumb for covered losses (homeowner’s)

Answer 5

A ‘rule of thumb” is that covered losses must result from something that is “sudden and accidental.” Losses associated with neglect and intentional acts of the insured are not covered.