L, M, N, O & P Definitions Flashcards
Define
Law Of Large Numbers
Law Of Large Numbers:
Principle that states that the more examples used to develop any statistic, the more reliable the statistic will be.
Define
Legal Purpose
Legal Purpose:
One of the characteristics of a legal contract; means that contracts are only enforceable if they are not obviously illegal, immoral or against the public good.
Define
Liability Insurance
Liability Insurance:
Type of insurance that protects a person from financial loss arising out of claims brought against them for loss or damage (bodily injury or property damage) to another where the person can be held liable for that loss or damage. The financial responsibility associated with the claim is transferred from the insured to the insurance company, up to the limit of insurance carried.
Define
Licensee
Licensee:
Person on the premises with the owner’s consent, but for the sole benefit of the visitor.
Define
Lloyd’s Association
Lloyd’s Association:
A voluntary association of individuals or groups of individuals who agree to share in insurance contracts. Each individual is responsible for the amount of coverage they write or accept responsibility for.
It is also important to remember that Lloyds is not an insurance company, but a syndicate.
Define
Loss Cost
Loss Cost:
Factor used in figuring insurance rates that represents how much an insurance company needs to collect to cover expected losses.
Define
Loss Payable Condition
Loss Payable Condition:
See Mortgage Condition
Define
Loss Provisions
Loss Provisions:
General term used to describe policy conditions that specify what the insured and insurer must do in the event of a loss, in other words, who is responsible for what.
Define
Loss Ratio
Loss Ratio:
Method used to determine an insurance company’s success in covering current losses out of current premium income; determined by dividing incurred losses by earned premium.
Define
Manual Rating
Manual Rating:
Method of premium determination that uses rates based on collected statistics. The rates, which apply per unit of insurance, are published in manuals. A Manual Rate may also be referred to as a “Class Rating.”
See also Class Rating.
Define
Market Value
Market Value:
The amount property could be sold for at the time of loss. May be used to determine the amount of reimbursement for a loss, generally associated with Functional Replacement cost contracts..
Define
Material Fact
Material Fact:
Information, had the insurer known it would caused an insurer to decline a risk, charge a different premium or change the provisions of the policy that was issued.
Define
Merit Rating
Merit Rating:
Method of determining premiums where a manual rate is modified to reflect the risk’s unique characteristics. A Merit Rating may result in an increase or decrease in the premium requirement. Merit Rating is based upon the assumption that the loss experience of a particular insured will be substantially different from that of other insureds There are several different approaches to Merit Rating.
See also Experience Rating, Retrospective and Schedule Rating.
Define
Messenger
Messenger:
As defined in insurance forms, an insured, partner or employee who has care and custody of insured property outside the premises.
See also Custodian.
Define
Misrepresentation
Misrepresentation:
Written or verbal misstatement, omission or concealment of a fact. The intentional misrepresentation of a material fact is the definition of fraud. A material fact is information, which if known to the insurer would have altered its decision to issue.
Define
Mono-Line Company
Mono-Line Company:
Insurance company that writes a single line of insurance, e.g. an insurer that writes only property insurance versus a company that writes both property and casualty insurance.
Define
Mono-Line Policy
Mono-Line Policy:
Insurance policy that providing one type of insurance coverage, e.g. a policy that provides coverage for property losses only.
Define
Monopolistic State
Monopolistic State:
Method of providing Workers Compensation coverage used in some states; requiring that employers purchase Workers Compensation insurance from a state fund; private insurance companies are not allowed to compete.
Define
Moral Hazard
Moral Hazard:
Hazard created by an individual who would be willing to create a loss situation on purpose just to collect from the insurance company,
i.e. someone that intentionally takes advantage, does things the are unethical, if not illegal.
Define
Morale Hazard
Morale Hazard:
Hazard created by an individual’s tendency to contribute to a loss through his or her own irresponsible actions or carelessness.
Define
Mortgage Condition
Mortgage Condition:
Condition found in Property insurance policies that specifies the rights and duties of the mortgagee under the policy.
Also called the Loss Payable Condition.
Define
Mortgagee Rights
Mortgagee Rights:
Rights granted to a mortgagee (lender) under a Property contract issued to a mortgagor (borrower) by virtue of the mortgagee’s financial interest in the property.
Define
Motor Carrier Act Of 1980
Motor Carrier Act Of 1980:
Federal regulation that requires truckers and other commercial carriers to certify they are able to meet financial obligations if they become liable for injury or damage arising from their trucking operations.
Define
Multi-Line Company
Multi-Line Company:
Insurance company that writes more than one line of insurance, e.g. a company that writes both property and casualty insurance.
Define
Multi-Line Policy
Multi-Line Policy:
A policy providing coverage against both property and casualty exposures.
See also Package Policy
Define
Mutual Company
Mutual Company:
Insurance company owned by its policyowners. The policyowners have rights of ownership, similar in nature to stockholders of a stock insurer, such as, the right to vote on matters that affect them and the right to share in profits (divisible surplus), when and if declared by the insurer’s Board of Directors. Remember, dividends are not guaranteed.
Define
Mysterious Disappearance
Mysterious Disappearance:
Vanishing of property with no explanation.
Define
Named Insured
Named Insured:
Person, business or other entity named in the Declarations to whom the policy is issued and coverages are afforded.
Define
Named Peril Policy
Named Peril Policy:
Insurance policy that insures only against perils specifically listed in the policy. Also referred to as a specified cause of loss policy.
Define
National Association Of Insurance Commissioners (NAIC):
National Association Of Insurance Commissioners (NAIC):
Organization made up of individual state insurance commissioners whose purpose is to promote uniformity in regulation by drafting model laws and regulations.
Define
National Flood Insurance Program:
National Flood Insurance Program:
Program run by the federal government that makes flood insurance available to residents and businesses in participating communities. Includes coverage for both buildings and personal property.
Define
Nationwide Definition
Nationwide Definition:
Document that categorizes and classifies risks that are eligible for Ocean or Inland Marine insurance.
Define
Negligence
Negligence:
The lack of reasonable care that is required to protect others from the unreasonable chance of harm.
Define
No Benefit To Bailee Condition
No Benefit To Bailee Condition:
Condition found in Property insurance contracts that states that a bailee is not covered under an insured’s policy while the bailee has possession of the insured’s property.
Define
No-Fault Insurance
No-Fault Insurance:
Form of Automobile insurance where each insurance company pays the damages of its own insureds, regardless of who was at fault for the accidents. Generally, Medical Payments of an auto policy is as close as we get to no-fault insurance.
Define
Nonadmitted Insurer
Nonadmitted Insurer:
Company that is not authorized to do business in a particular state.
NOTE - Surplus Lines Insurers are not required to be admitted to insure domestic risks within the state, however, only a licensed Surplus Lines Producer can place business with a non-admitted (Surplus Lines) insurer.
Define
Nonconcurrent
Nonconcurrent:
Situation that exists when the same property is covered by more than one policy, but the policies are not identical as to the extent of coverage provided.
Define
Nonexclusive Agent
Nonexclusive Agent:
See Independent Agent
Define
Nonfiled Form
Nonfiled Form:
Type of Commercial Inland Marine form that is not standardized and cannot be included in the Commercial Inland Marine Coverage Part of the Commercial Package Policy. Each nonfiled form is written as a stand alone policy.
Define
Nonrenewal
Nonrenewal:
Decision made by an insured or insurance company not to continue coverage for another policy period after the current policy period expires.
Define
Nonreporting Form
Nonreporting Form:
Type of insurance policy for which a flat premium is charged. A premium rate is established for the policy period based upon the overall risk exposure. The premium for this type of policy form is fixed at policy inception for a stated amount of coverage during the policy period.
See also Reporting Form
Define
Obligee
Obligee:
Relating to bonds, the party to whom the principal (contractor) makes the promise, and for whose protection the bond is written.
Define
Occurrence
Occurrence:
A loss that occurs at a specific time and place or over a period of time. In other words, an accident or the continuous repeated exposure to the same general harmful condition that results in a loss or damage (bodily injury or property damage).
Define
Offer And Acceptance
Offer And Acceptance:
Two of the elements of a legal contract; means that a contract must involve two parties - one who makes an offer and another who accepts the offer.
Define
Open Competition
Open Competition:
Method of rate and form regulation used by some state insurance departments that allows insurance companies to complete openly with the forms and rates they select, subject only to requirements of adequacy and nondiscrimination.
Define
Open Peril Policy
Open Peril Policy:
Insurance policy that protects the insured from losses caused by any cause of loss (peril) that is not specifically excluded by the policy.
Also called all risk and special coverage.
Define
Package Policy
Package Policy:
Policy that includes more than one type of insurance coverage, e.g. a policy that provides for both property and liability coverages.
Also called a multi-line policy.
Define
Peril
Peril:
a peril is the cause of loss; fire is an example of an insured peril..
Define
Personal Contract
Personal Contract:
A characteristic of property and casualty insurance is that it is personal, insuring the person versus the property. A persons states they have there home insured; when in reality, they have themselves insured against loss or damage to their property. A person might say they have their car insured; when in reality, they have themselves insured against their own negligent actions towards others that results in bodily injury or property damage and further, they have themselves insured against loss or damage to their own vehicles.
Define
Personal Injury
Personal Injury:
Injury other than bodily injury arising out of such things as libel, slander, false arrest, wrongful entry, invasion of privacy, and malicious prosecution.
Define
Personal Lines
Personal Lines:
Insurance coverages that protect individuals and their families.
Define
Physical Hazard
Physical Hazard:
Hazard that arises from the condition, occupancy or use of the property itself.
Define
Policy
Policy:
An insurance contract.
Define
Policy Limit
Policy Limit:
Maximum amount the insurance company will pay for a particular loss, or for losses sustained during a period of time. Also called limit of coverage, limit of insurance and limit of liability.
Define
Policy Period
Policy Period:
The date and time specified in the Declarations for when coverage begins and ends. Property and casualty policy start and stop at 12:01AM; this rule is imposed to prevent gaps in coverage.
Define
Policy Territory
Policy Territory:
Place where coverage under a policy applies. The coverage territory may be specified as worldwide or limited, e.g. United States, Canada, Puerto Rico, territories and possessions of the United States.
Define
Post judgment Interest
Post judgment Interest:
Interest accruing on a judgment after an award has been agreed to, but before payment is made by the insurance company. Usually covered as a supplementary payment in Liability policies and paid in addition to the policy limit.
Define
Prejudgment Interest
Prejudgment Interest:
Interest awarded to compensate a third party for interest he or she might have earned if compensation had been received at the time of injury or damage. Interest accruing from the time of an occurrence until settlement is actually agreed to.
Define
Premises And Operations
Premises And Operations:
Business liability exposure arising out of the business location or the activities of the business.
Define
Premium Audit
Premium Audit:
Survey of the insured’s financial records to gather information used to calculate the premium, such as exposures and limits. A premium audit is accomplished at the end of the policy period, where a Deposit Premium (estimated premium) was paid at the beginning of the policy period.
Also see Retrospective Rating.
Define
Primary Insurance
Primary Insurance:
When two or more coverages or policies apply to the same loss, the one that pays first, up to its limit of liability or amount of the loss, whichever is less.
Define
Prior Approval
Prior Approval:
Method of rate and form ratification used by some state insurance departments that requires a company to obtain official approval before using new forms or rates.
Define
Pro Rata Other Insurance
Pro Rata Other Insurance:
Method of handling an insurance claim when more than one policy applies to the same loss. Each policy pays proportionately in relationship to what its policy limit bears to the total limit of all applicable policies.
Define
Pro-Rata
Pro-Rata:
See Pro-Rate.
Define
Pro-Rate
Pro-Rate:
(1) In the event an insurer cancels insurance prior to policy expiration, it (the insurer) is required to refund any unearned premium, referred to as a pro-rate. Also referred to as pro-rata or proportionate share refund.
(2) The term “pro-rate” is also applicable when two or more policies applies to the same property loss, each insurer stipulates it will pay its proportionate share only.
Define
Producer
Producer:
General term used in the insurance industry to describe agents, brokers, solicitors, adjustors and consultants. Also see Insurance Producer, Solicitor, Consultant and Adjustor.
Define
Products And completed Operations
Products And completed Operations:
Business liability exposure arising out of defects in the company’s products or completed operations.
Define
Professional Liability
Professional Liability:
Liability arising out of rendering or failing to render services of a professional nature.
Define
Proof Of Loss
Proof Of Loss:
Form completed by an insured after a loss that provides an official inventory of damages. A Proof of Loss statement is considered to be a sworn statement (warranty or guarantee) of information.
Define
Property Damage (PD)
Property Damage (PD):
Damage to or destruction of property, including loss of use of the property.
Define
Property Insurance
Property Insurance:
Line of insurance that includes many types of coverages designed to handle the risk that a person will suffer financial loss because something he or she owns is damaged or destroyed.
Define
Proportionate Share
Proportionate Share:
See Pro-Rate
Define
Proximate Cause
Proximate Cause:
An action that, in a natural and continuous sequence, produces a loss. Also defined as an unbroken chain of events that results in a loss.
Define
Punitive Damages
Punitive Damages:
Type of damage award intended to punish the defendant or to make an example out of him/her in an effort to discourage others from behaving the same way. Also called exemplary damages.
Define
Pure Risk
Pure Risk:
A risk in which there is no chance of gain, only loss.
Person
- *Person: A very broad term; may be used when referring to individuals, as well as entities, including but**
- *not limited to corporations, associations, firms and partnerships.**
Limited Class Insurance Producer
**Limited Class Insurance Producer:** A person licensed to sell one or more of the forms of limited class insurance coverage to individuals through a master, corporate group, or individual policy. Limited class licenses generally do not require examination and are not subject to continuing education requirements.
Limited Class Insurance:
- *Limited Class Insurance: Includes, but is not limited to credit, mortgage, auto dealer physical damage**
- *insurance, and any other form of insurance designated by the Director as a form of limited class insurance**.
Life Insurance
Life Insurance: is designed to protect an insured’s family, business, or both against premature death of the insured. This type of insurance provides the needed resources to pay off outstanding debt, pay off existing mortgages, providing for college funding, emergency funds, and income replacement or, in a business environment, to provide for business continuation.
