Insurance Flashcards
Principle of indemnity
The insurer generally seeks to reimburse the insured for approximately the amount lost, no more and no less
Insurable Interest - Property/Casualty
Insurable interest must be present at the time of inception and of claim (like owning a building).
In addition, the insured cannot transfer the contract to someone else.
Normally a new contract is issued.
Insurable Interest - Life Insurance
Insurable interest need be present only at the time of inception.
The insurable interest need not be present at time of death.
After a life insurance policy has been issued, the beneficiary designation and ownership can be transferred to anyone. There is no insurable interest requirement.
A change of beneficiary or ownership form must be submitted to the company after which they acknowledge the change.
Contract Characteristics - Subrogation
Subrogation gives the insurer all rights the insured possessed against negligent third parties.
It is a process of substitution; the insurer takes over the legal rights of the insured that existed at the time of the loss.
Contract Characteristics - Unilateral
Only one party is bound; the insured makes no promise.
Contract Characteristics - Adhesion
Contract is accepted “as is”. It is not negotiated.
Contract Characteristics - Waiver Provisions
Only the president, vice president, secretary, etc. may alter contract; it must be accepted “as is.”
Contract Characteristics - Aleatory
Number of dollars given up is unequal. Outcome is uncertain.
Characteristics of Insurable Risks
- Large number of homogeneous exposure units
- Loss must be definite and measurable
- Must be fortuitous or accidental
- Must not be catastrophic (to insurer)
Self-Insurance
Self-insurance describes a formal program of risk retention.
The business operates as an insurance company for its own risks.
This involves having a large number of similar potential losses, the ability to predict overall losses with reasonable accuracy, and the establishment of a fund for future losses and their possible fluctuations.
It is primarily used by, but not limited to, large companies.
Reminder for Homeowners Insurance Sections
Section 1
A - Abode
B - Buildings
C - Contents
D - Days Inn, ‘demnity, ‘dditional
Section II
E - Enemies (Liabilities)
F - First Aid (medical)
Property Excluded under Coverage C
(personal property coverage)
(1) Animals, birds, or fish
(2) Motorized land vehicles (not riding lawn mower) and aircraft
(3) Property of roomers, boarders, and other tenants (needs HO-4 renter’s policy)
(4) Property contained in an apartment regularly rented or held for rental to others by the insured (unless specifically endorsed)
Property Loss Question Tips
For HO policies, the coinsurance percentage is always 80% of replacement value.
However, for commercial buildings, the percentage can be 90%.
If depreciation information is not given, ACV cannot be correct.
The same formulas are used for commercial property as the prior homeowner’s question.
In addition, all calculations are always due to partial (not total) losses.
Remembering Personal Auto Policy Parts
A - “All my Fault” - Liability/BI/PD
B - “Bandages” - Medical
C - “Careless” - Uninsured Motorist
D - “Damage to Auto- Collision and Other than Collision
Health Reimbursement Account (HRA)
(Only C Corporations can use)
An HRA is an arrangement that:
- Is solely employer-funded and
- Reimburses employee for substantiated medical expenses up to a maximum amount per coverage period. Example: It can reimburse for out-of-pocket costs of an HDHP (High Deductible Health Plan).
