P and C 3 Insurance Basics Flashcards
Actual Cash Value (ACV)
The cost to replace damaged property at today’s value minus a deduction for depreciation due to wear and tear or obsolescence (ACV = RV - D)
Aggregate Limit
A type of policy limit found in liability policies that limits coverage to a specified total amount for all losses occurring within the policy period.
Burglary
As it is defined in Crime insurance policies, the unlawful taking of property by forced entry into the premises, or exit from the premises. There must be visible entrance of forced entry or exit.
Co-insurance
If an insured does not carry a specified percentage of coverage in relation to the value of the property, the insured will not collect the entire amount of a partial loss. This clause applies to most business properties. Its purpose is to encourage the insured to carry insurance coverage, as close to the fall value of the property as possible.
Direct Loss
Actual physical damage to, or destruction of, tangible property. For example, if a house burns, the cost to repair the house is a direct loss of the fire.
Indirect Loss
Loss that is a result or consequence of a direct loss. Also known as a consequential loss.
Loss
An unpredictable reduction in the quantity, or value of an asset. For example: Bodily injury, disease, property damage, physical disappearance of property, incurred expenses, death, etc.
Negligence
Failure to use a degree of care that an ordinary person or reasonable prudence would use under the same given circumstances. Negligence may be constituted by acts of either omission, commission, or both.
Mysterious Disappearance
Vanishing of property with no known explanation
Peril
The happenings or events which cause a loss
Premium
- Consideration for the insurance
2. Periodic payment made to keep a policy in force
Pro-Rata Liability
Clause in a Fire policy that provides a method of sharing loss when more than one policy is applicable. Each company covers no more than its share. Also known as the Other Insurance clause.
Rate
The per-unit cost of insurance
Replacement Cost (R/C)
The cost of replacing property without deduction for depreciation.
Robbery
In Crime Insurance, the forceable and felonious taking of property by violence, or threat of violence, from a messenger or custodian.
Salvage
Property taken over by an insurance company to reduce its loss. The company may disclose of, or salvage, property as it wishes, but on request and proper reimbursement, may return it to the insured.
Short-Rate
A percentage penalty charged on insurance canceled by the insured, before the end of the policy period. Return premium is calculated on a short-rate basis, meaning the insurance company keeps a portion of the unearned premium to cover expenses.
Theft
Any act of stealing. Theft includes larceny, burglary, and robbery.
Tort
A legal wrong one person does to another. Tort law is the basis of all civil law. Negligence is an unintentional tort and is covered by liability policies.
Vacancy
The absence of people and personal property from a building, not expected to return. Property coverage is often restricted when there are long periods of vacancy, especially for the perils of vandalism and glass breakage.
Vicarious Liability
Imposed in some states upon a person even though he is not a party to the particular occurrence (e.g., the owner of a motor vehicle might be vicariously responsible for injuries even though he is not driving the car at the time of the occurrence).
Underwriting
The process of evaluating a risk for the purpose of issuing coverage on it.
