Insurance Terms And Related Concepts

Question 0

Based upon economics or an equity position.

Answer 0

Insurable interest.

Insurable interest is required at the time of loss in order to recover on a policy.

Question 1

Transferring “pure risk” (no gain) from individuals to a group. Pools large numbers of individual risks. Charges a small premium to each in the pool in exchange for protect.

Answer 1

Insurance.

Question 2

The uncertainty of loss.

The chance of loss.

Answer 2

Risk.

For example, when you drive your car, the risk is that you become involved in an accident.

Question 3

No chance of gain, only chance of loss.

Answer 3

Pure Risk.

You can only insure pure risk.

Question 4

You may gain, you may lose; example is investing in the stock market.

Answer 4

Speculative Risk.

You cannot insure speculative risk.

Question 5

Something that increases the risk. Example: drinking while driving greatly increases the chance of an accident.

Answer 5

Hazard

Question 6

Type of hazards that result from material or structural features of a risk, as opposed to human or management factors, such as an oily rag left by the furnace.

Something you can see. Something you can touch.

Answer 6

Physical Hazard

Question 7

The hazards that are circumstances of morals or habits that increase the probability of a loss from an insured peril, such as an insured previously convicted of arson. A dishonest person.

Answer 7

Moral Hazard.

A dishonest person is a moral hazard. A person who is not paying their credit card bills timely is a moral hazard

Question 8

Hazards which are an increase in the hazards presented by a risk arising from the insureds indifference to loss because of the existence of insurance. For example, an insured fails to repair faulty wiring, believing it is less expensive to pay insurance premiums than to pay an electrician. A careless person.

Answer 8

Morale Hazard

Question 9

The cause of loss. For example wind. It may damage your roof.

Example 
Standard Fire Policy (SFP). 
1 Fire
2 Lightening 
3 Removal

Answer 9

Peril.

Ex. Named peril.

Question 10

A house, apartment, or other place of residence.

Answer 10

Dwelling.

Question 12

What does HO stand for.

Answer 12

Home Owners Policy

Question 14

What does DP stand for.

Answer 14

Dwelling Policy

Question 16

Damage resulting to the structure causes by a peril, such as a fire or lightning, which are examples.

Answer 16

Loss

Question 17

A______ loss example is a fire burns the house down. The burnt down house is a ______ loss.

Answer 17

Direct Loss.

Question 18

Sometimes called a “consequential loss.” Loss of rental value (loss of use) that is covered on some policy forms. Losses of this nature are also called “time-element losses,” since they occurs over a period of time.

Additional living expenses.

Answer 18

Indirect Loss

Question 19

Replacement cost (at the time of loss, also known as current value) minus depreciation ( based on the age of the structure)

Answer 19

Actual Cash Value

Question 20

Starting with the DP-00-02 broad form fire insurance policy, the contract promises to pay all covered property insurance losses to the building structure in full (without deduction for depreciation), if the insured carries 80% of the full replacement cost of the structure as a policy limit of the loss. Remember you can never recover more than the policy limit.

Answer 20

Replacement Cost

Question 21

Is the amount of money you could get for property in the market.

Answer 21

Market Value.

The market value of a property may be higher or lower than the replacement cost of the property, depending upon the location of the property and the current market conditions.

Question 22

The insured chooses a limit of coverage for the property.

Answer 22

Stated Value.

A stated value policy does not guarantee that the stated value will be paid in the event of a total loss.

Question 23

The amount that the insurer can get for the salvage left after a total loss.

Answer 23

Salvage Value

Question 24

Negligence term, meaning that a party’s negligence must be the proximate cause or reason for the resulting injury to others. Is the beginning of chaining events in resulting loss.

Answer 24

Proximate Cause

Generally there must be a direct chain of events leading from the negligent act up to the resulting injury or property damage in order for the negligent act to be considered the proximate cause.

Question 25

The amount the insured must pay on every claim.

Answer 25

Deductible

Question 26

The word ______ means to pay. Property insurance policies are contracts of _______, meaning that the insured may not recover more than he or she actually lost.

Answer 26

Indemnity

Question 27

The policy limits. The policy limits are shown in the policy’s declarations (on the first page of the contract). The most the policy will pay.

Answer 27

Limits of Liability

Question 28

Something occurring over a period of time, but still covered by the policy.

Answer 28

Occurrence

Question 29

Occurs when the insured has moved out and taken his or her belongings.

Answer 29

Vacancy

Question 30

When the insured is on a vacation or trip.

Answer 30

Unoccupancy

Question 31

Covers bodily injury (BI) and property damage (PD) to others causes by the negligent acts of the insured.

Answer 31

Liability

Question 32

Liability without fault. (Keeping a pet tiger)

Answer 32

Absolute Liability

Question 33

Liability without fault.

Answer 33

Strict Liability

Question 34

Some state statutes spell out situations where one party maybe responsible for the negligent activities of another party.

Answer 34

Vicarious Liability

Question 35

Failure to act as a reasonable person would in the same set of circumstances.

Answer 35

Negligence.

Question 36

A temporary insurance contract that may be verbal or written.

Answer 36

Binder.

Question 37

Something added to a policy to modify its terms.

Answer 37

Endorsement.

Question 38

A no-fault type coverage, designed to prevent lawsuits.

Answer 38

Medical Payments

Question 39

Property insurance insures a specific property at a specific location for a specific amount.

Answer 39

Specific Property Insurance

Question 40

Provides a single amount of insurance that blankets all properties at a specific or at multiple locations.

Answer 40

Blanket Insurance

Question 41

The taking of property from inside the premises by a person unlawfully entering or leaving the premises, as evidenced by marks of force entry or exit.

Answer 41

Burglary

Question 42

Found on the first page of the policy. It contains the name of the insurance company ( first party ) and the name of the insured (second party). It also contains the address of the property covered and the policy limits.

Answer 42

Declarations

Question 43

This states what coverage is provided.

Answer 43

Insuring agreement.

Question 44

Normally contained in the 165 lines of text, the conditions apply both to the insured and the insurer. For example, it is the insured’s duty to protect the property from further damage.

Answer 44

Conditions.

Question 45

Usually listed in a separate section of the policy, this is a list of things that are never covered, such as flood, war, earthquake, etc.

Answer 45

Exclusions

Question 46

Liability that arises from an extremely dangerous situation. It’s ident found in cases involving explosives.

Answer 46

Absolute liability

Question 47

Taking property from the care and custody of a person by someone who has caused or threatened to cause bodily harm.

Answer 47

Robbery

Question 48

Any act of stealing. It includes all of the more narrowly defined acts of stealing, such as burglary and robbery.

Answer 48

Theft (larceny)

Question 49

Property that is gone without any apparent reason. It’s the probability of theft.

Answer 49

Mysterious Disappearance