Insurance Terms & Related Concepts Flashcards
An insurer discovers that an applicant for a policy has submitted a fraudulent insurance claim in the past. What type of hazard does this represent?
Moral Risk
If an insured peril was the proximate cause of loss, what type of loss is it?
Direct Loss
A tornado that destroys a property would be an example of what?
Peril
What is Burglary?
A forced entry into another’s premises with felonious intent.
A situation in which a person can experience only a loss and no gain presents what type of risk?
Pure Risk
Insurance is a contract that protects the insured from what?
Loss
What do individuals use to transfer their risk of loss to a larger group?
Insurance
How is Actual Cash Value (ACV) calculated?
ACV = Current Replacement Cost - Depreciation
How are direct and indirect losses related?
Direct losses can cause indirect losses
What provision found in property policies prevents an insured from collecting twice for the same loss: once from the insurer and again for a third party?
Suborgation
What term describes a loss caused by continuous exposure to a condition?
Occurrence
What does indemnify mean in insurance?
To restore an insured to the same financial status as before a loss.
In property insurance, what is actual cash value?
Replacement cost at the time of the loss, minus depreciation.
(Insurance Carried divided by Insurance Required) x Loss Amount =
Loss payment
What type of limits of liability has the limits separately stated for different coverages?
Split limits
If a manufactured product is unsafe, what type of liability applies to the manufacturer?
Strict liability
A policy that covers all causes of loss except for those specifically excluded is known as what type of policy?
Open peril (or special) form
Conditions that increase the chance of a loss are known as what?
Hazards
What are the three types of hazards?
Physical, moral, and morale
What is a risk?
Uncertainty of loss
What are the two types of compensatory damages?
Special and general
A person who does not lock the doors to his or her house shows an indifferent attitude. What type of hazard does this represent?
Morale
Under absolute liability, does an injured party need to prove negligence?
No. Absolute liability exists when a condition or conduct is inherently dangerous, so no proof of negligence is not required.
What is negligence?
Failure to act as a reasonable, prudent person under given circumstance.
What provision states that if a policy allows for greater benefits than the financial loss incurred, the insured, the insured may be compensated only for the amount lost?
Indemnity
Both robbery and burglary can be considered what?
Theft
What is the term for the causes of loss insured against in an insurance policy?
Peril
What determines an insurer’s responsibility for payment, as stated in an insurance policy?
Limits of liability
What is a deductible in an insurance policy?
A specified dollar amount that the insured must pay before the insurer will pay the policy benefits.
What term defines an exact, direct, and uninterrupted cause of lost?
Proximate cause
The reduction, decrease, or disappearance of value of the person or property in a policy is known as what?
Loss
Wagering on a sporting event is known as what type of risk?
Speculative
What law protects consumers from the circulation of inaccurate or obsolete information?
The Fair Credit Reporting Act
What is the difference between vacancy and unoccupancy?
Vacancy refers to an insured structure in which no people have been living or working and no property has been stored for the specified period of time. Unoccupancy refers to an insured structure in which no people have been living or working within the required period of time, but some property is stored.
What type of policy insures all property at multiple locations for a single amount?
Blanket policy
An insured’s business is damaged by a fire, and temporarily shut down for repairs. As a result, the insured suffers loss of income. What type of loss is the loss of income?
Indirect or consequential
What is subrogation?
An insurer’s legal right to seek damages from third parties after reimbursing insureds for a loss.
In property insurance, what is the purpose of a coinsurance clause?
To encourage insureds to insure close to its value
In property insurance, when must insurable interest exist?
At the time of loss
What sublimit in a liability policy puts a ceiling on the payment for all claims that arise from a single accident?
Per occurrence
