Insurance Terms Flashcards
Risk
The chance of a financial loss
Peril
Something that causes a loss
Contract
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
Hazard
Something that increases the probability that a loss will occur
Insurers
a person or company that underwrites an insurance risk; the party in an
insurance contract undertaking to pay compensation
Indemnify
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
Insureds
One who has or is covered by an insurance policy
Losses
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
Direct Loss
physical harm to tangible property
Indirect Loss
Economic loss which flows as a result of direct loss
Liability
an insurance product that provides
an insured party with protection against claims resulting from injuries and damage
Speculative Risk
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
Pure Risk
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
Personal Pure Risks
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
Property Pure Risk
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
Liability Pure Risks
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
Control Risks
Avoidance, The technique of minimizing the frequency or severity of
losses with training, safety, and security measures
Loss Control
Be safe, act in a safe manner. i.e. wear a seat belt
Retention
(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
Transfer Risk
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
Personal Contract
Policies cover people who own and operate things, such as
automobiles
Warranty
A policy condition, either based on information in the insureds
application or inserted by the insurer. It is a guarantee of a fact
Misrepresentation
An untrue statement by the insured, made in an application for
insurance but which does not become a part of the policy
Abandonment
Property insurance policies usually contain an abandonment clause,
stating the insured cannot dump damaged property on the insurer and demand its
full value
Proximate Cause
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
Actual Cash Value(ACV)
Replacement Cost minus Depreciation
Coinsurance
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
Insurable Interest
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
Policy
a document detailing the terms and conditions of a contract of
insurance
Binder
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
Contract
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
Consent
permission for something to happen or agreement to do
something
Consideration
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
