Primary Insurance Flashcards
Coinsurance
Provisions in the policy that require that the insured cover the property for a certain % of the property’s ACV (actual cash value) at the time of the loss
Straight Deductible
Deductible that remains constant and is specified in the policy
Franchise Deductible
Dollar amount or % of the policy limit where a loss in excess of the franchise deductible will be paid in full (including the deductible amount) and any loss below the franchise amount will not be covered (common in marine)
Direct Loss
Loss that results in a decrease in value due to a peril
First Party
Party covered by the insurance policy. AKA the insured
Hazard
Condition that either creates or increases the chance of a loss
Human Resources Loss Exposure
Exposures that exist because an organization has employees. Losses occur when employees are unable to work. Some common perils include: old age, sickness / disability, unemployment, and death
Indirect Loss
Loss resulting from loss of use or the occurrence of additional costs due to a direct loss
Insurance-to-Value
Limit in a property policy that approximates the max potential loss or the value of the property being insured
Liability Loss Exposure
Condition or situation presenting the possibility of loss, such as bodily injury or property damage, to a third party
Loss Exposure
Any situation or condition presenting the possibility of an unintentional loss. The three types of loss exposures are: property, liability, and human resources
Peril
The cause of a possible covered loss such as fire, wind, and earthquake
Perils Insured Against
The types of risks covered by the insurance policy, which are included in the insuring agreement. Two types: (1) named perils and (2) open perils
Named Perils
Provides coverage only for those perils listed in the policy
Open Perils
Provides coverage caused by any peril except those specifically excluded in the policy
Property loss exposure
Condition or situation presenting the possibility of financial loss or a decrease in value of real or personal property
Pure risk
Risk that has only the possibility of loss or no loss (cannot benefit from the situation)
Tail
Refers to the turnaround time of a loss settlement
Third Party
Someone, other than the insured, who is damaged and receives the claim payment
Loss costs
projected future claim costs and the loss adjustment expense (LAE) associated with them. ISO publishes loss costs for property and liability coverages. NCCI publishes rates for workers comp for several states.
External exposures
Exposures outside the area owned or controlled by the insured. These exposures fall into two categories: (1) single-occupancy exposures such as homes and (2) multiple-occupancy exposures such as apartment buildings
Peril v Hazard
Peril is something outside of your control that causes a loss. Hazard is something in your control that creates or increases the chance of a loss.
Types of Hazard (3)
Physical hazard - conditions of property, persons, or operations that increase the chance of a loss
Moral hazard - situations where dishonesty and immoral behavior result in an increased probability of loss
Morale hazard - carelessness, indifference, and a don’t care attitude
