P&C Basics and Policy Structure Flashcards
Definition of a Peril?
the actual CAUSE of loss
Two types of peril:
- Named - SPECIFIED - covered perils are listed - on must be cause of loss or is not covered
- Open - SPECIAL COVERAGE - subject to EXCLUSIONS LISTED -
Def Exclusions: domestic animals, vermin and rodents
What is Open Peril?
SPECIAL COVERAGE - subject to EXCLUSIONS LISTED -
Def Exclusions: domestic animals, vermin and rodents
What is Named Peril
- Named - SPECIFIED - covered perils are listed - on must be cause of loss or is not covered
Another name for Specified Perils?
Named Perils
Another name for Special Coverage?`
Open Perils
Name three things that are always excluded in an Open Peril (Special Coverage) policy:
Domestic animals, vermin, rodents
Definition of Proximate Cause
the peril that was responsible for the loss
What is the Doctrine of Proximate Cause?
IF perils is covered, then ALL damage that is created through a continuous chain of events will be covered
What is personal property?
all forms other that real property - household goods, furniture, etc
What is real property?
buildings and structures - permanently attached (not land)
Definition of a Loss?
Reduction in value, quality or quantity of property
Two types of Loss:
- Direct Loss - actual physical damage to tangible property (real or personal property)
- Indirect Loss (consequential loss) - financial loss incurred as a result of a direct loss (additional living expenses, loss of business income, rental income)
What is a Direct Loss?
actual physical damage to tangible property (real or personal property)
What is another term for Indirect loss?
Consequential Loss
What is Indirect (Consequential) Loss?
financial loss incurred as a result of a direct loss (additional living expenses, loss of business income, rental income)
What are three examples of Indirect (Consequential) Loss?
- additional living expenses (ALEs)
- loss of business income
- loss of rental income
Definition of Settlement:
payment of covered claim
What is the Valuation Clause (loss settlement):
- describes how the property will be determined at the time of loss
- found in the CONDITIONS part of the policy
What is another name for the Valuation Clause?
Loss Settlement
What are the four methods that can be used to value the property in a policy:
- Replacement Cost (RC) - cost (cost new) at the time of loss - no deduction for depreciation - requires a minimum COINSURANCE limit of 80%
- Actual Cash Value (ACV) [Market Value] - replacement cost (cost new) at the time of the loss LESS DEPRECIATION
- Stated Amount - states maximum amount of payment at time of loss - determine at time of loss
- Agreed Amount - insurer and insured agree on value AT TIME OF APPLICATION
What is the Replacement Cost (RC) method of valuation?
- cost (cost new) at the time of loss
- no deduction for depreciation
- requires a minimum COINSURANCE limit of 80%
What is the Actual Cash Value (ACV) method of valuation?
replacement cost (cost new) at the time of the loss LESS DEPRECIATION
What is the Stated Amount method of valuation?
- states maximum amount of payment at time of
loss - determine at time of loss
What is the Agreed Amount method of valuation?
insurer and insured agree on value AT TIME OF APPLICATION
The Actual Cash Value (ACV) method of valuation is Replacement Cost (RC) less __________.
Depreciation
The Replacement Cost (RC) method of valuation requires a minimum ____________ limit of _____
coinsurance
80%
When is the Actual Cash Value (ACV) determined?
at the time of loss
When is the Agreed Amount determined?
AT TIME OF APPLICATION
When is the Stated Amount determined?
at time of loss
When is the Replacement Cost (RC) determined?
at the time of loss
Is there deduction for depreciation in the Replacement Cost (RC) method of valuation?
NO
Is there deduction for depreciation in the Actual Cash Value (ACV) method of valuation?
YES - which is what separates it from RC
Where is the valuation clause found in the policy?
Conditions page
What are the three limits of property insurance?
- Specific - specific amount of insurance - specific type of property - specific location
- Schedule - each item is specifically described and NOT required to be at a specific location - FLOATER
- Blanket (BEST) - single amount that may apply at multiple locations or different types of property
provides a single amount regardless of location
Specific Property Insurance:
specific amount of insurance - specific type of property - specific location
Schedule Property Insurance:
each item is specifically described and NOT required to be at a specific location - FLOATER
Blanket Property Insurance:
single amount that may apply at multiple locations or different types of property
provides a single amount regardless of location
Definition of Deductible:
portion of property loss paid by the insured (retained)
- applies PER OCCURRENCE
The deductible applies ___ _______.
per occurrence
Deductible are used to do what three things:
- require the insured to share in the loss
- reduce nuisance claims
- reduce insurance premiums
Criminal Court prosecutes for _______ wrong.
Public
Civil Court prosecutes for ________ wrong
Private - TORT LIABLITY
Definition of Tort Liability:
- a private wrong (civil) and not a crime
- responsible party is obligated to pay damages sustain to THIRD PARTY CLAIMANT
Three steps that create Tort Liability:
- Duty to act with reasonable care
- Breach of duty - negligence
- Injury or Damage
What is Casualty Liability Insurance:
liability coverage that protects an insured when legally responsible to a third party claimant
- 3rd party claimant can be individual, corporation, association, partnership, etc
Property insurance is a __ ______ contract.
Two Party
Liability Insurance is a __ ______ contract.
Two Party - THREE PARTIES ARE INVOLVED
Who is involved in property insurance?
Insured
Insurer
Who is involved in liability insurance?
Insurer
Insured
Third Party Claimant
Do deductibles apply in Liability insurance?
NO
Property Insurance protects against _____, while Liability protects against _____ ________.
Perils
Accidental Occurrences
What are the Four ways that legal liability are created?
- Negligence
- Contractual Obligations
- Imposed by Law
- Vicarious
What is the most common method to create legal liability?
Negligence
What is liability assumed by a written or oral agreement?
Contractual Obligation Liablity
What are Four examples of liability imposed by law?
- WC
- Liquor Liability
- No Fault Auto
- Strict Liability (Absolute Liability)