P&C BASIC Flashcards
Insurance means what
Transfer of risk
Chance of loss or gain; not insurable
Speculative risk
Chance of loss only; insurance companies will insure
Pure risk
Is physical loss to property with no intervening cause
Direct loss
This is also called proximate cause of loss
Direct loss
Is a consequential loss as the result from a direct loss
Indirect loss
Is the possibility that a loss will occur
risk
A single policy that covers multiple classes
blanket
A policy that covers a certain thing or its own amount of coverage
Specific
Anything that increases the chance that a loss will occur
Hazard
Arise from material, structural, or operational features of risk situation
Physical
Intentionally causing a loss; lying
Moral hazard
Carelessness; Indifference of loss
Morale Hazard
Owned by policyholders
Mutual insurer
Owned by stockholders
Stock insurer
Known as Risk Selection Process
Underwriting
Cause of loss
Peril
Is the tendency for higher-risk individuals to get and keep insurance as compared to individual that represent an average level of risk
Adverse selection
Is insurance for insurers; transfer risk from one insurer to another insurer
Reinsurance
retaining, rather than transferring risk
self-insurance
- War risk insurance
- Nuclear energy liability insurance
- Flood Insurance
- federal crop insurance
- unemployment insurance
- worker’s compensation
Federal government
State where a company is incorporated
Domestic
Company is incorporated in another state or U.S. territory
Foreign
Company is incorporated in another country
Alien
Individual that sell insurance products of several companies
Independent agents
Individual that represent only one company
Captive agents
Is a written contract
Express Authority
Is assumed by insurer
Implied Authority
Is assumed by customer; perceived
Apparent Authority
Known as offer & acceptance
agreement
Customer submits & application
offer
insurer issues policy
acceptance
is a relationship in which one person is authorize to represent and act for another person, or for a corporation
Agency
person authorized to act on behalf of the other
Agent
the person whose behalf the agents acts
principal
the insurance agent acts on behalf of the principal (insurance company)
Agency
Is a person in a position of financial trust
fiduciary
Competent parties are…..
1) Legal age
2) mentally sane
3) Not under the influence
Both parties bring something of value
Consideration
Insurers write the policy customer either takes it or leave it
Adhesion
Unequal exchange; customer pays small monthly premium premium; insurer pays large claims
Aleatory
Both parties have rules & duties they have to follow
Conditional
Statement an applicant believes to be true
representation
Did not mean to lie
misrepresentation
Contract between you and the insurer
personal
one sided promise, only the insurer is legally bound to do anything
unilateral
failure to disclose a known fact
concealment
medical bills & loss of wages after an accident
special damage
pain & suffering, mental anguish-very subjective
general damages
Obviously dangerous
EX: pet tiger; swimming pool
Absolute liability
Strictly products
Strict Liability
Parents/Employers are responsible
Vicarious Liability
To restore the insured to the financial state they enjoyed before loss occurred
Indemnity
False information must have been a determining factor in the insurer’s decision to accept the risk
Material misrepresentation
Intentional act designed to deceive and induce another party to part with something of value
Fraud
Intentional voluntary giving up of a known right
Waiver
Once waiver has been created it cant be changed
Estoppel
Most amount of $ the insured can collect under the policy
Policy limits
Terminating an in force policy
Cancellation
Terminating of policy at expiration
Nonrenewal
Early cancellation before expiration
Short rate
insured will receive a portion of the premium back
pro rata
A policy is canceled on the effective date either by insurer or insured
Flat cancellation
The amount of $ the insured pays first before the insurer pays
deductible
the MAX AMOUNT of $ the insured can collect under the policy
Limits of Liability
pay a fair share of loss to protect indemnity
other insurance
No people; No Stuff
Vancancy
No people; Yes stuff
Unoccupied
Max Available $ on the policy for all claims
Aggregate
Insurance for insurers; transfer risk from one insurers to another insurer
reinsurance
Policy cannot be transferred without written consent from the insurer
Assignment
- Maximum per each accident
- sublimit of liability for each accident
per occurrence
Condition found in property insurance contracts that provides that if the insurer broadens coverage under a policy form or endorsement without requiring an additional premium, then all existing similar policies or endorsements will be construed to contain the broadened coverage
Liberalization
Is the transfer to the insurance company of the insured’s right of recovery against others
Subrogation
Is a temporary oral or written statement made by the agent that gives the insured immediate coverage for a specified time
Binder
A single policy that covers multiple classes
Blanket insurance
A policy that covers a certain thing or its own amount of coverage
Specific Insurance
A group-owned insurer whose main activity is risk sharing
Reciprocal Insurance
A group-owned insurer that primarily assumes and spreads the liability-related risks of its members
Risk-retention group
Assume the financial risk one’s self
Self-insurer
Protects consumer privacy
Fair Credit Reporting Act
Protection financial privacy
Gramm leach
Reduction, decrease, or disappearance of value
Loss
A policy form that alters or adds to the provision of a property and casualty insurance contract
endorsement
What a reasonable and prudent policy owner would expect
reasonable expectation doctrine
A sudden, unforseen, unintended, and unplanned event from which loss or damage result
accident
An accident includes continuous or repeated exposure to the same general harmful conditions
occurrence
A person or any organization to which property has been entrusted, usually for repairs, serving or storage
bailee
A person or organization that entrust property to a bailee
bailor
Taking of property inside the premises locked safe or vault by a person who commits forcible entry into, or exit from, the property of another while trespassing
burglary
Insured does not agree with the insurer’s decision regarding a claim, what process helps decide the outcome
Arbitration
The cost to replace property with property of like kind & quality, at current pricing, without a deduction for depreciation
replacement value
The cost to repair or replace property at its replacement value, minus depreciation
Actual cash value (ACV)
The insurance company and insured agree to a specific value of a particular property before the policy is issued
Agreed value
A valuation method that states the value of a particular property on the declaration page, but provides for the insurer to pay the lesser of the stated value or ACV of the property following a loss
stated value
The price a willing buyer would pay for property purchased from a willing seller
market value
Insures one or more items of property on a single policy and the amount of insurance applying to each item is shown on a schedule
Scheduled limit
Addresses disputes about the amount of a loss
Appraisal
Receives the broadest coverage of all persons or organizations protected by a policy
Named insured
Reduces the amount paid in a partial loss as total losses are paid based on the coverage limit on the policy
Coinsurance
Is a civil wrong committed by one person against another
tort
Is a common law defense used by the defendant when the injured party is partially responsible for his own injuries
Contributory negligence
The ____ limit of liability applies to bodily injury, property damages, or both
combined single
- Assume the responsibility of loss
Retention
Primarily assumes & spreads the liability related risks of its members
Risk retention group
To assume the financial risk one’s self
Self insurer
