Insurance Basics (CH 3)

Question 1

The function of underwriting is to accomplish two goals: an underwriter:

Answer 1

1. Analyzes the applicant (trying to determine the likelihood of future loss).
2. Calculates the premium (if the applicant meets guidelines of acceptability).

Question 2

Ways that rates may be determined by an insurance company:

Answer 2

Manual Rating- published rates in the insurer’s rating manual.

Experience rating- adjusted rates from the manual based on insured’s own loss experience.

Judgment rating- Determined by an underwriter using intuition and experience.

Loss cost rating- Plan developed by the Insurance Services Office (ISO)

Question 3

Four requirements for Proving Negligence

Answer 3

1. The defendant did have a legal duty to provide care.
2. The defendant breached that duty.
3. That breach of duty to provide care was the proximate cause.
4. The plaintiff was injured (bodily injury or property damage).

Question 4

Defenses for Negligence

Answer 4

• Assumption of risk
• contributory negligence
• comparative negligence
• Statue of limitations
• Intervening Cause

Question 5

Punitive Damages

Answer 5

awarded when the injury was caused by the gross negligence of the defendant. Often, these awards are triple the amount of the general damages awarded and are not covered by insurance. These amounts are meant to punish the wrongdoer and make an example out of them.

Question 6

Strict Liability

Answer 6

Ohio law says some situations or activities are so inherently dangerous that the embracer of the activity is liable for any injury suffered by anyone.
ex. Trampoline

Question 7

There are four ways to indemnify a property loss:

Answer 7

1. Replacement cost
2. Actual Cash Value
3. Functional replacement cost
4. Stated or Agreed Value

Question 8

Pro-rate

Answer 8

the method used if the insurer initiates the cancellation.

Insured receives the entire unearned premium

Question 9

Short-rate

Answer 9

the method used if the insured is requesting the cancellation.

Insured does not receive the full unearned premium.

Question 10

Vacancy clause

Answer 10

states that during the first 60 days of continuous vacancy in the insured building, loss is still covered. After 60 days of consecutive vacancy, vandalism is not covered