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Home & Life Insurance > P.I. Policy Provisions and Contract Law > Flashcards

P.I. Policy Provisions and Contract Law Flashcards

1
Q

What is an appraisal?

A

a professional assessment to determine extent of damage

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2
Q

What is an earned premium?

A

The portion of premium paid in advance that now belongs to the insurer because it applies to the elapsed part of the policy

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3
Q

What is the removal or loosening of restrictions?

A

Liberalization

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4
Q

What is the failure to use the same care that a reasonable, prudent person would under the same or similar circumstances?

A

Negligence

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5
Q

Define policyowner

A

The person entitle to exercise the rights and privileges in the policy

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6
Q

What is a third party?

A

an individual/entity other than the two parties involved in an insurance contract (insured and insurer)

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7
Q

What is also referred to as ‘risk selection’?

A

Underwriting

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8
Q

Define ‘underwriting’

A

the process of reviewing applications for insurance to determine eligibility for coverage

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9
Q

What are the 4 essential elements for an insurance contract to be considered legally binding?

A
  1. Agreement - offer and acceptance; 2. Consideration; 3. Competent parties; and 4. Legal Purpose
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10
Q

The applicant makes an _____ when submitting the application. __________ takes place when underwriting is approved.

A

Offer; Acceptance

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11
Q

The binding force in any contract is the _____________.

A

Consideration

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12
Q

_____________ is something of value that each party gives to the other

A

Consideration

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13
Q

What is the consideration on the part of the insured?

A

The payment of premium; representations made in the application

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14
Q

What is the consideration on the part of the insurer?

A

The promise to pay in event of loss

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15
Q

What requirements must an individual fill to be considered a competent party?

A
  • be of legal age - mentally competent enough to understand the contract - not under influence of drugs/alcohol
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16
Q

What is a representation?

A

Statement(s) believed to be true to the best of one’s knowledge, but not guaranteed to be true; the answers the insured gives to the questions on the insurance application

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17
Q

Untrue statements on the application are considered __________________ and could void the contract.

A

Misrepresentations

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18
Q

What is a material misrepresentation?

A

A statement that, if discovered, would alter the underwriting decision of the insurance company

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19
Q

If material misrepresentations are ___________, they are considered fraud.

A

Intentional

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20
Q

A ________ is an absolutely true statement upon which the validity of the insurance policy depends

A

Warranty

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21
Q

Concealment is the legal term for:

A

the intentional withholding of information of a material fact that is crucial in making a decision

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22
Q

A ______ is a temporary agreement issued by an agent or insurer providing temporary coverage until a policy can be issued

A

Binder

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23
Q

Binders expire ____ ___ ______ __ ______

A

when the policy is issued

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24
Q

Every property or casualty policy is comprised of the 7 following major components:

A
  1. Declarations; 2. Definitions; 3. Insuring agreement; 4. Additional coverage; 5. Conditions; 6. Endorsements; and 7. Exclusions and policy limits
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25
Q

The section of an insurance policy containing the basic underwriting information, such as name, address, amount of coverage & premiums

A

Declarations

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26
Q

The ____________ component of an insurance policy clarifies terms used in the policy

A

Definitions

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27
Q

The section of an insurance policy that establishes the obligation of the insurance company to provide the insurance coverages as stated in the policy

A

Insuring Agreement (or Agreement)

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28
Q

A provision in an insurance policy that provides an additional amount of coverage for specific loss expense, at no additional premium

A

Additional (or supplementary) Coverage

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29
Q

The section of an insurance policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy

A

Conditions

30
Q

Name examples of conditions in an insurance policy:

A
  1. Inspections; 2. Changes to the policy; 3. Liberalization clause; 4. Return of premium
31
Q

Dictates the method that will be used to calculate the return premium when the policy is cancelled before the expiration date

A

Return of premium Condition

32
Q

Ensures that if the insurer introduces improved coverage free of charge, the insured will get the benefit of the new coverage immediately and will not have to wait for policy renewal

A

The liberalization clause Condition

33
Q

What are printed addendums to a contract that are use to change the policy’s terms/conditions/coverages?

A

Endorsements

34
Q

____________ must be in writing, attached to the policy, and signed by an executive officer of the insurer

A

Endorsements

35
Q

Details the perils that are not insured against and what persons are not insured

A

Exclusions

36
Q

__________ restrict some of the broad terms used in the insuring agreement, such as people (a spouse), property, and perils

A

Exclusions

37
Q

Examples of exclusions from coverage in a property policy:

A
  1. Earth movement (caused by earthquake, mudflow, or volcanic eruption) 2. Water damage (flood/subsurface water; water backs up through sewers/drains and overflows from a sump pump; water below ground that seeps through basement walls)
38
Q

Policy limits are also known as ___________

A

Limitations

39
Q

What is the term for the maximum amount an insured may collect?

A

Policy limit

40
Q

The individuals(s) whose name(s) appears on the policy’s Declarations is the _____ _______

A

Named Insured

41
Q

_____ _____ _______ is the individual whose name appears first on the policy’s declaration

A

First named insured

42
Q

Individuals or businesses that are not named as insureds on the declaration page, but are protected by the policy (2 words)

A

Additional Insureds

43
Q

If there is a disagreement between the insured and the insurer on the value of any property loss, either party can make a written demand for an _________

A

Appraisal

44
Q

An insurance policy that defines how the policy will respond if there is other valid insurance written on the same risk (2 words)

A

Other insurance

45
Q

___ ____ is a provision found in some property insurance policies that provides for the sharing of loss with other insurance that may be written on the same risk

A

Pro Rata

46
Q

A process where whatever is being allocated will be distributed in equal portions

A

Pro Rata

47
Q

A form or statement from an insured to an insurer, informing the insurer that events leading to a possible claim have occurred (3 words)

A

Notice of Claim

48
Q

A sworn statement that must be furnished by the insured to an insurer before any loss under a policy can be paid (3 words)

A

Proof of Loss

49
Q

What is cancellation (of a policy)?

A

The termination of an in-force insurance policy prior to the expiration date of the policy; can be voluntary, involuntary, or in mutual accordance with provisions contained in the policy

50
Q

What is nonrenewal (of a policy)?

A

The termination of an insurance policy at its expiration date by not offering a continuation of the policy

51
Q

A _________ ______ is attached to a policy to protect the interest of the mortgagee in the mortgaged property

A

Mortgagee clause

52
Q

The ______ _________ defines the location where coverage will be provided

A

Policy territory

53
Q

What are some sources that may be used for gathering information during the underwriting process?

A
  • Application form - Motor vehicle records - Interviews with neighbors/friends/employers - Inspection of property - Inspection of insurance history
54
Q

A printed form that includes questions about a prospective insured and the desired insurance coverage and limits

A

Application

55
Q

Which Act established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used?

A

Fair Credit Reporting Act

56
Q

What law protects consumers against the circulation of inaccurate or obsolete personal or financial information?

A

The Fair Credit Reporting Act

57
Q

Written and/or oral statements regarding a consumer’s credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources (2 words)

A

Consumer Reports

58
Q

Which Act stipulates that an insurance company may not disclose nonpublic personal information to a non-affiliated third party?

A

The Gramm-Leach-Bliley Act

59
Q

An insurance company CAN disclose nonpublic personal information to a third party when: (3 reasons)

A
  • The insurance company clearly discloses to the consumer in writing that info may be disclosed to a third party
  • The consumer is given the opportunity, before the info is disclosed, to direct that info not to be disclosed to a third party
  • The consumer is given an explanation of how the consumer can exercise a nondisclosure option
60
Q

What 2 disclosures does the Gramm-Leach-Bliley Act require be sent to a customer?

A
  1. When the customer relationship is established (policy purchased)
  2. Before disclosing protected information
61
Q

What was the purpose of creating the Terrorism Risk Insurance Act?

A

To create a temporary federal program that would share the risk of loss from future terrorist attacks with the insurance industry

62
Q

The TRIA requires that all commercial insurers offer what?

A

Insurance coverage for acts of terrorism

63
Q

What are characteristics of acts of terrorism?

A
  • the act is violent/dangerous to human life/property/infrastructure - the act must have resulted in damage within the U.S - the act must have been committed as part of an effort to coerce the U.S - the act must produce property/casualty insurance losses in excess of a specified amount
64
Q

What are the four primary elements of a legal contract?

A
  1. Agreement - offer and acceptance; 2. Consideration - premiums and representations on the part of the insured, payment of claims on the part of the insurer; 3. Competent Parties; 4. Legal Purpose
65
Q

The declarations section of a policy includes:

A
  1. Limits of Insurance 2. Policy Premiums 3. Name of the insured
66
Q

Duties of the insurer (found in property policy conditions) include:

A
  1. Paying covered losses 2. Providing advance notice of cancellation 3. Returning any premiums to the insured
67
Q

The pro rata liability clause is designed to protect the principle of _________

A

Indemnity; the intent of insurance is that after a loss, the insured is restored to the condition they were in before the loss

68
Q

The __________ is the part of an insurance policy that sets forth the obligations and duties of the insurer and insured

A

Conditions

69
Q

The ________ __________ lists the parties to the contract, effective and renewal dates, the description of coverage provided, and perils

A

Insuring Agreement

70
Q

__________ define what each party to the policy is required to do contractually in the event of a loss

A

Conditions

71
Q

______ _____ ___ provision requires that the insured protects the damaged property from further damage, cooperates with the insurer in settling the loss, and submits to the insurer signed proof __ ___ within a specified period of time

A

Duties after loss; loss of

72
Q
A

Home & Life Insurance (3 decks)

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