Insurance Terms

Question 1

Risk

Answer 1

The chance of a financial loss

Question 2

Peril

Answer 2

Something that causes a loss

Question 3

Contract

Answer 3

document representing the agreement between an insurance company
and the insured. Central to any insurance contract is the insuring agreement, which
specifies the risks covered, the limits of the policy, and the term of the policy

Question 4

Hazard

Answer 4

Something that increases the probability that a loss will occur

Question 5

Insurers

Answer 5

a person or company that underwrites an insurance risk; the party in an
insurance contract undertaking to pay compensation

Question 6

Indemnify

Answer 6

Indemnification is an agreement where your insurer helps cover loss,
damage or liability incurred from a covered event. Indemnity is another way of
saying your insurer pays for a loss, so you don’t have financial damages

Question 7

Insureds

Answer 7

One who has or is covered by an insurance policy

Question 8

Losses

Answer 8

the injury or damage sustained by the insured in consequence of
the happening of one or more of the accidents or misfortunes against which the
insurer, in consideration of the premium, has undertaken to indemnify the insured

Question 9

Direct Loss

Answer 9

physical harm to tangible property

Question 10

Indirect Loss

Answer 10

Economic loss which flows as a result of direct loss

Question 11

Liability

Answer 11

an insurance product that provides
an insured party with protection against claims resulting from injuries and damage

Question 12

Speculative Risk

Answer 12

uncertainty about an event under consideration that could
produce either a profit or a loss, such as a business venture or a gambling
transaction. A pure risk is generally insurable while speculative risk is usually not

Question 13

Pure Risk

Answer 13

risks that are beyond human control and result in a
loss or no loss with no possibility of financial gain. Fires, floods and other natural
disasters are categorized as pure risk, as are unforeseen incidents, such as acts of
terrorism or untimely deaths

Question 14

Personal Pure Risks

Answer 14

risks affecting an individual that result in a loss or reduction of
personal assets. Unemployment is an example of pure risk. An illness that requires
expensive medical treatment and thus reduces personal assets is another example.
Other types of personal pure risk include a house fire, disability and premature
death

Question 15

Property Pure Risk

Answer 15

include the potential of fire, floods, hurricanes and other
natural disasters to damage or destroy property, including buildings and the
contents of buildings. The loss of property due to theft also falls into this category.
Property pure risk can incur both direct and indirect losses

Question 16

Liability Pure Risks

Answer 16

risks arising from litigation against a person or organization. For
example, homeowners could be sued for medical expenses, lost income or other
damages by someone who slipped on their walkway

Question 17

Control Risks

Answer 17

Avoidance, The technique of minimizing the frequency or severity of
losses with training, safety, and security measures

Question 18

Loss Control

Answer 18

Be safe, act in a safe manner. i.e. wear a seat belt

Question 19

Retention

Answer 19

(1) Assumption of risk of loss by means of noninsurance, self-insurance,
or deductibles. Retention can be intentional or, when exposures are not identified,
unintentional. (2) In reinsurance, the net amount of risk the ceding company keeps
for its own account

Question 20

Transfer Risk

Answer 20

Risk transfer is a risk management and control strategy that involves
the contractual shifting of a pure risk from one party to another. One example is
the purchase of an insurance policy, by which a specified risk of loss is passed from
the policyholder to the insurer

Question 21

Personal Contract

Answer 21

Policies cover people who own and operate things, such as
automobiles

Question 22

Warranty

Answer 22

A policy condition, either based on information in the insureds
application or inserted by the insurer. It is a guarantee of a fact

Question 23

Misrepresentation

Answer 23

An untrue statement by the insured, made in an application for
insurance but which does not become a part of the policy

Question 24

Abandonment

Answer 24

Property insurance policies usually contain an abandonment clause,
stating the insured cannot dump damaged property on the insurer and demand its
full value

Question 25

Proximate Cause

Answer 25

The cause having the most significant impact in bringing about the loss under a first-party property insurance policy, when two or more independent perils operate at the same time (i.e., concurrently) to produce a loss. Courts employ a set of rules to resolve causation disputes when a property policy states that it covers or excludes losses "caused by" a peril and there is more than one peril at work in a fact pattern. Under common law, whether the policy provides coverage depends on which peril is chosen as the proximate cause

Question 26

Actual Cash Value(ACV)

Answer 26

Replacement Cost minus Depreciation

Question 27

Coinsurance

Answer 27

The amount, generally expressed as a fixed percentage, an insured must pay against a claim after the deductible is satisfied. It's ultimately a way for the insured and insurer to share responsibility for the risk. It can also help reduce the cost of the insurance policy premium. Coinsurance can be written on an 80/20, 90/100, or 100% rule

Question 28

Insurable Interest

Answer 28

type of investment that protects anything subject to a financial loss. A person or entity has an insurable interest in an item, event, or action when the damage or loss of the object would cause a financial loss or other hardships

Question 29

Policy

Answer 29

a document detailing the terms and conditions of a contract of insurance

Question 30

Binder

Answer 30

temporary policy that serves as a placeholder until your formal policy is issued. Issuing a new policy can sometimes take a few days or weeks, depending on the underwriting process

Question 31

Contract

Answer 31

document representing the agreement between an insurance company and the insured. Central to any insurance contract is the insuring agreement, which specifies the risks covered, the limits of the policy, and the term of the policy

Question 32

Consent

Answer 32

permission for something to happen or agreement to do something

Question 33

Consideration

Answer 33

For insurers, consideration also refers to the money paid out to you should you file an insurance claim. This means that each party to the contract must provide some value to the relationship

Question 34

Legal Capacity

Answer 34

refers to the availability of insurance necessary to meet the demand. It is often determined by the consumer's ability to accept risk. i.e. must be of legal age…

Question 35

Legal Nature

Answer 35

Must be allowed in the eyes of the law

Question 36

Law of Large Numbers

Answer 36

the average of a large number of results closely mirrors the expected value, and that difference narrows as more results are introduced

Question 37

Negligence

Answer 37

failure to act in a way that a reasonable person would when faced with the same situation and circumstances. In insurance, insurance negligence is when a policyholder or someone else in the household might be negligent if the failure to act leads to damages

Question 38

Duty

Answer 38

You have the responsibility to do the correct action

Question 39

Breach of Duty

Answer 39

not doing the correct action

Question 40

Causes

Answer 40

Bodily Injury or Property Damage

Question 41

Financial Loss

Answer 41

Result of the above causes harm to another

Question 42

Adhesion

Answer 42

an agreement between two parties where one party has a significant power advantage in setting the terms of the agreement

Question 43

Aleatory

Answer 43

something is dependent on an uncertain event, a chance occurrence. Aleatory is used primarily as a descriptive term for insurance contracts. An aleatory contract is a contract where performance of the promise is dependent on the occurrence of a fortuitous event

Question 44

Unilateral Contract

Answer 44

a contract in which only one party makes an enforceable promise. Most insurance policies are unilateral contracts in that only the insurer makes a legally enforceable promise to pay covered claims. By contrast, the insured makes few, if any, enforceable promises to the insurer

Question 45

Domestic Insurer

Answer 45

an insurer admitted by and formed under the laws in the state in which the insurance is written

Question 46

Foreign Insurer

Answer 46

insurance company that is located in one state but which writes policies for clients in another state

Question 47

Alien Insurer

Answer 47

insurance company based outside the United States

Question 48

What are the 3 types of Hazards?

Answer 48

Physical, Moral, and Morale

Question 49

Physical Hazard

Answer 49

actions, behaviors, or conditions that cause or contribute to peril

Question 50

Moral Hazard

Answer 50

changes that might occur and increase the risk of loss when a person knows that insurance will provide coverage

Question 51

Morale Hazard

Answer 51

a term used to describe a subjective hazard that tends to increase the probable frequency or severity of loss due to an insured peril. For example, an insured's attitude may be indifferent if a loss occurs because they have insurance

Question 52

Proximate Cause

Answer 52

direct cause of loss, without which the loss would not occur; therefore, it is a highly relevant principle in the insurance industry. For an act or event to be considered a proximate cause, it does not necessarily have to directly precede a loss or begin a chain of occurrences leading to the same. Establishing a proximate cause is important in determining whether coverage applies or if liability can be imposed on the negligent party

Question 53

Property Insurance

Answer 53

insurance on the things you own

Question 54

Liability Insurance

Answer 54

insurance product that provides an insured party with protection against claims resulting from injuries and damage to other people or property. Liability insurance policies cover any legal costs and payouts an insured party is responsible for if they are found legally liable. Intentional damage and contractual liabilities are generally not covered in liability insurance policies. Unlike other types of insurance, liability insurance policies pay third parties, and not policyholders

Question 55

Assumption of Risk

Answer 55

If a person knows the consequences of a particular act and voluntarily accepts that risk, he or she is solely responsible for any resulting injury

Question 56

Abandonment

Answer 56

Property insurance policies usually contain an abandonment clause, stating the insured cannot dump damaged property on the insurer and demand its full value

Question 57

Comparative Negligence

Answer 57

a principle of tort law that applies to casualty insurance in certain states. Comparative negligence states that when an accident occurs, the fault and/or negligence of each party involved is based upon their respective contributions to the accident. This allows insurers to assign blame and pay insurance claims accordingly

Question 58

Actual Cash Value (ACV)

Answer 58

property and auto physical damage insurance, one of several possible methods of establishing the value of insured property to determine the amount the insurer will pay in the event of loss

Question 59

Replacement Cost

Answer 59

It is usually defined in the policy as the cost to replace the damaged property with materials of like kind and quality, without any deduction for depreciation

Question 60

Valued Policy

Answer 60

a policy that pays the amount of the insurance regardless of the ACV, if a total loss occurs

Question 61

Coinsurance

Answer 61

the amount, generally expressed as a fixed percentage, an insured must pay against a claim after the deductible is satisfied. In health insurance, a coinsurance provision is similar to a copayment provision, except copays require the insured to pay a set dollar amount at the time of the service. Some property insurance policies contain coinsurance provisions

Question 62

Specific Insurance

Answer 62

a type of property insurance in which only one individual property is covered by the policy. Specific insurance is an alternative to blanket coverage, in which a policy can cover many different properties or locations

Question 63

Blanket Insurance

Answer 63

a type of insurance policy that insures the common areas of a condominium or townhome. It also covers the common property in an area governed by a homeowner's association, or HOA

Question 64

Mortgage Clause

Answer 64

an important provision in a property insurance policy that ensures that the insurance company will pay the mortgagee in the event that loss or damage occurs to a mortgagor's property. The clause is an important measure that mortgagees take to protect their investment in a mortgagor's property

Question 65

Loss Payable

Answer 65

Insurance provision authorizing payment in the event of loss to a person or entity other than the named insured with an insurable interest in the covered property or, in some cases, jointly to the insured and the other person or entity

Question 66

Lienholder

Answer 66

If you finance a car, a lienholder may be listed on your car's title and your car insurance policy until you pay it off. A lienholder is a lender that legally has an interest in your property until you pay it off in full. The lender — which can be a bank, financial institution or private party — holds a lien, or legal claim, on the property because they lent you the money to purchase it

Question 67

Subrogation

Answer 67

a right held by most insurance carriers to legally pursue a third party that caused an insurance loss to the insured. This is done in order to recover the amount of the claim paid by the insurance carrier to the insured for the loss

Question 68

Severability

Answer 68

a policy provision clarifying that, except with respect to the coverage limits, insurance applies to each insured as though a separate policy were issued to each. Thus, a policy containing such a clause will cover a claim made by one insured against another insured

Question 69

Liberalization

Answer 69

a provision that extends to persons already insured under a particular policy the broadened coverage features that may be introduced in subsequent editions of that policy form

Question 70

Warranty

Answer 70

(1) A guarantee of the performance of a product. Product warranties are included within the definition of the named insured's product in general liability policies. (2) A statement of fact given to an insurer by the insured concerning the insured risk which, if untrue, will void the policy

Question 71

Representation

Answer 71

a statement made in an application for insurance that the prospective insured represents as being correct to the best of his or her knowledge

Question 72

Misrepresentation

Answer 72

a material misrepresentation occurs when the insured makes an untrue statement that: 1) is material to the acceptance of the risk; and 2) would have changed the rate at which insurance would have been provided or would have changed the insurer's decision to issue the contract

Question 73

Concealment

Answer 73

a willful act of holding back information that may be pertinent to the issuance of an insurance policy even though the insured was not asked about that particular subject. A concealment can result in the voiding of a policy

Question 74

Liability Limits

Answer 74

the stipulated sum or sums beyond which an insurance company is not liable for payments due to a third party. The insured remains legally liable above the limits

Question 75

Single

Answer 75

auto insurance that provides one flat amount for coverage limits.

Question 76

Split

Answer 76

provides a specific limit per person for bodily injury and a total amount the insurance company will pay for all injury as a result of one accident

Question 77

Aggregate

Answer 77

the amount an insurer will pay for each individual claim made during the policy period, the aggregate limit is the maximum amount an insurer will pay for all such claims made against the insured during the policy period, no matter how many separate claims might be made

Question 78

Deductibles

Answer 78

The amount you pay for covered health care services before your insurance plan starts to pay

Question 79

Straight Deductible

Answer 79

a deductible that is a constant value (as a specified amount)

Question 80

Percentage Deductible

Answer 80

a percentage of the insured value.

Question 81

Franchise Deductible

Answer 81

a minimum amount of loss that must be Incurred before insurance coverage applies

Question 82

Coverages

Answer 82

the amount of risk or liability that is covered for an individual or entity by way of insurance services. Insurance coverage, such as auto insurance, life insurance—or more exotic forms, such as hole-in-one insurance—is issued by an insurer in the event of unforeseen occurrences.

Question 83

Primary Coverage

Answer 83

insurance coverage that pays out regardless of whether there are other insurance polices covering the same risk. Primary coverage is contrasted with secondary coverage, which only pays out after a primary insurance policy has paid out

Question 84

Excess Coverage

Answer 84

Pays when Primary can’t pay