Policy Provisions

Question 1

Appraisal

Answer 1

a professional assessment to determine the extent of damage. Used when there is a disagreement on the value of any property loss.

Question 2

Earned Premium

Answer 2

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

Question 3

Liberalization

Answer 3

the removal or loosening of restrictions

Question 4

Policyowner

Answer 4

the person entitled to exercise the rights and privileges in the policy

Question 5

Third-Party

Answer 5

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

Question 6

Underwriting

Answer 6

risk selection; the process of reviewing applications for insurance to determine eligibility for coverage

Question 7

8 major components of a policy (In order)

Answer 7

Declarations
Definitions
Insuring agreement
Additional coverage
Conditions
Endorsements
Exclusions
Policy Limits

Question 8

Declarations

Answer 8

Section of an insurance policy containing the basic underwriting information. (Name, address, amount of coverage on premiums, and insured locations) The first page of the policy.

Question 9

Definitions

Answer 9

Section of an insurance policy that clarifies terms used.

Question 10

Insurance Agreement (“Clause”)

Answer 10

Section of an insurance policy that establishes the obligation of the insurance company to provide the insurance coverage as stated in the policy. (Lists parties in contract, effective and renewal dates, descriptions of coverage provided, and perils.)

Question 11

Additional or Supplemental Coverage

Answer 11

A provision in an assurance policy that provides an additional amount of coverage for specific loss expenses, at no additional premium. (Ex. Reasonable expenses incurred by an insured to protect damaged property from further loss, and defense expense)

Question 12

Conditions

Answer 12

Section of insurance policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy. (Ex. Inspections, changes to the policy, how they will renew, etc.)

Question 13

Endorsements

Answer 13

Printed addendums to a contract that are used to change the policy’s original terms, conditions, or coverages. It must be in writing, attached to the policy, and signed by an executive officer of the insurer.

Question 14

Exclusions

Answer 14

Section of an insurance policy that details the perils that are not insured against and what persons are not insured. (Can exclude people (except a spouse), property, and perils) Ex. Earth movement if caused by earthquakes, mudflow, or a volcanic eruption.

Question 15

Policy Limits

Answer 15

“Limitations” are the maximum amount an insured my collect, or for which an insured is protected under the terms of the policy.

Question 16

Additional Insureds

Answer 16

Individuals or businesses that are not named as insureds on the declaration page, but are protected by the policy.

Question 17

Duties of the named insured in the event of a loss: (5)

Answer 17

1. Protect the damaged property from further damage
2. Prepare an inventory of damaged property
3. Cooperate with the insurer in settling the loss
4. Notify the police in the case of a theft loss
5. Submit to the insurer a signed sworn proof of loss after being requested to do so within a certain time.

Question 18

First Named Insured

Answer 18

Name that appears first on the declaration. Has control over the policy and is the only insured who may cancel or request changes to the policy. Is responsible for payments and reporting losses.

Question 19

Other Insurance

Answer 19

provision in an insurance policy that defines how the policy will respond if there is other valid insurance written on the same risk

Question 20

Notice of Claim

Answer 20

a form or statement from an insured to an insurer, informing the insurer that events leading to a possible claim have occurred. Will include information as to how, when, and where the loss took place.

Question 21

Proof of Loss

Answer 21

Initial claim report. A sworn statement that must usually be furnished by the insured to an insurer before any loss under a policy can be paid. It must be in writing.

Question 22

Loss settlement

Answer 22

Under a professional liability policy, the insurer must gain the insured’s consent before settling the claim.

Question 23

Cancellation

Answer 23

The termination of an in-force insurance policy, by either the insured or the insurer, prior to the expiration date shown in the policy.

Question 24

Nonrenewal

Answer 24

the termination of an insurance policy at its expiration date by not offering a continuation of the existing policy or a replacement policy.

Question 25

Arbitration

Answer 25

utilized when the insurer and insured do not agree on how to settle a claim; sent to one or more arbitrators.

Question 26

Terrorism Risk Insurance Act (TRIA)

Answer 26

Temporary federal program intended to share risk of loss from terrorist attacks with insurers. Insurers must meet deductibles and retentions before government reimbursement.

Question 27

Pro rata

Answer 27

a provision found in some property insurance policies that provide for the sharing of loss with other insurance

Question 28

Mortgagee Clause

Answer 28

attached to a policy to protect the interest of the mortgagee in the mortgaged property.

Question 29

Sources of insurability information (Underwriting process)

Answer 29

application form
motor vehicle records
interviews with neighbors/friends/employers
inspection of property
inspection of insurance history

Question 30

Privacy Protection (Gramm Leach Bliley)

Answer 30

Insurance companies may not disclose nonpublic information to a third party except for:
1. it is disclosed to the consumer in writing that it could happen
2. the consumer is given the opportunity to deny the disclosure of information
3. the consumer is given an explanation of how the consumer can exercise a nondisclosure option