Insurance Terms & Concepts

Question 1

Peril

Answer 1

Something that causes a loss such as fire, windstorm, flood, or theft

Question 2

Hazard

Answer 2

Something that increases either the probability a loss will occur, or increases the severity of the loss

Question 3

Physical Hazard

Answer 3

a. A physical characteristic that may cause a loss to occur.

Such as a stairway in poor condition - may cause a visitor to fall.

Question 4

Moral Hazard

Answer 4

a. A conscious act that may cause a loss to occur

Such as arson 0 intentionally setting fire to a building to collect insurance

Question 5

Morale Hazard

Answer 5

a. An unconscious act that may cause a loss to occur

Such as someone who has several accidents in a policy period - carelessness

Question 6

Proximate Cause

Answer 6

Unbroken chain of events from the occurrence and damage from that occurrence, all damage as a result is part of that occurrence.

Question 7

Property insurance

Answer 7

Coverage on property and is payable to the insured - owner or lender with economic interest in the property = fist party to the contract

Question 8

Liability/casualty insurance

Answer 8

Payable to a third party on behalf of the insured. If the insured is negligent(runs a red light) and injures a third party(person in another car)- then liability insurance is avaiable to pay to the injured party.

Question 9

Abandonment

Answer 9

An insured cannot abandon property and claim for damage of full value

Question 10

Comparative negligence

Answer 10

The apportioning of blame in an accident

Question 11

Actual Cash Value

Answer 11

A claim settlement method(current cost less depreciation).

Question 12

Replacement Cost

Answer 12

claim settlement method(current cost, no depreciation)

Question 13

Valued Policy

Answer 13

Policy that pays the face amount of insurance regardless of actual cash value, if a total loss occurs.

Question 14

Coinsurance

Answer 14

Is a policy provision requiring the insured to maintain insurance at a percentage of value. In the event of a partial loss - a coinsurance claim settlement method is used when insured has not purchased amount of insurance required by policy.

Question 15

Specific Insurance

Answer 15

When each property is named and specifically covered for a set amount

Question 16

Blanket insurance

Answer 16

When a single amount of coverage applies to any loss of property or injury up to the single limit amount

Question 17

Mortgage Clause

Answer 17

Establishes rights of mortgage(lender) in the policy. Generally used in fixed property(real estate).

Question 18

Loss payable clause

Answer 18

Establishes rights of a lender having interest in personal property. Sometimes called loss payee clause. Personal property loans - such as auto loan.

Question 19

Subrogation

Answer 19

When insured transfer right to his company to collect damages.

Question 20

Severability

Answer 20

Interest of 2 insureds may be severed, so that the company can protect an innocent and not protect a guilty party in a claim situation.