P & C Flashcards
What is the GRAMM-LEACH BILLY ACT
Established protection for consumers and allowed mergers of banks, security co’s & insurance co’s
Options for dealing with risk
Avoiding-
Transferring-
Retaining-
Contract of Adhesion
P1 prepares contract & submits to P2 on “take-it-or-leave-it” basis - courts usually rule in favor or INSURED
Aleatory Contract
Parties to a contract exchange unequal amounts of money. Premium paid is less than potential benefit.
Conditional Contract
Both parties must perform. Insurer pays claims if insured complies w/ policy conditions
Open Peril
Policies that cover risks of direct physical loss and the perils are not named
A property purchased 10 years ago for $100,000 has a replacement value today of $200,000. It has depreciated 3% each year. What is today’s actual cash value
Current replacement cost of $200,000 minus 30% (3% x 10 years) depreciation = $140,000
M owns a building that is insured for $200,000 with an 80% Coinsurance Clause. A loss of $12,000 occurs and the actual cash value of the property at the time of loss is $300,000. How much will be recovered?
First, determine the amount of coverage there should have been ($300,000 x .8 = $240,000). Divide what was insured by what should have been ($200,000/240,000 = 5/6) times the amount of loss ($12,000) = $10,000. (What was divided by what should have been times the loss)
Other Insurance clause
The Other Insurance clause generally states that two policies covering the same loss will pay proportionally (Pro Rata).
Subrogation
is inherent in indemnity contracts and allows the insurer to take legal action against the negligent third party (transfers the right of recovery from insured to insurer)
Actual Cash Value
Actual Cash Value valuation provides that the policy will pay the cost to repair or replace the damaged property at the time of loss, less a depreciation factor based upon the age of the property
Methods of writing property insurance limits
Specific, Scheduled and Blanket are all methods of writing property insurance limits
What is covered in the Declarations
The Declarations section of the policy contains specific information about the insured, and thus would vary by policy
The owner of clothing to be cleaned would be ?
The owner of clothing to be cleaned would be a bailor; the dry cleaner cleaning the clothes is a bailee
Insuring Agreement includes:
The Insuring Agreement is the company’s commitment to protect the insured and includes a description of the perils
Occurrence
An occurrence is an accident that includes continuous or repeated exposure to the same general harmful conditions
Conditions include:
The Conditions part of the policy contains the general rules and duties under the policy
Policy changes
All changes must be made by a written endorsement stating the change in the policy. The endorsement is to be attached to the policy
What is a binder
A binder includes everything, except it does not specify the premium amount. The Declarations of an actual policy would include the premium.
Limit of Liability
The Limit of Liability of the policy (in CONDITIONS) is the most the policy will pay in any one loss. However, if the insured’s insurable interest is less than the limit of liability, the most the policy will pay is the insured’s insurable interest
No-fault Liability
Most no-fault laws restrict the rights of the injured party to sue unless the injuries are severe, such as paralysis or death, and meet a threshold
Split Limits
The split limits of liability on an auto policy for bodily injury might be represented as 100/300 where $100,000 is the per person limit for bodily injury liability and $300,000 is the per occurrence limit for bodily injury
How much will your insurance company pay you for wind damage to your roof resulting in $10,000 if you insure your house for $400,000 and the mortgage company also insured your house for $100,000?
Pro-rata liability requires that each policy pays no more than its share of the loss and if the method of sharing is based on the ratio of limits, your amount of insurance paid by your insurer is calculated as follows: $400,000 + $100,000 = $500,000 total insurance available; $400,000 ÷ $500,000 = 4/5 * $10,000 = $8,000
Combined Single Limit
In a Combined Single Limit policy, the insurance is available to pay both bodily injury and property damage claims without regard to the number of claimants
