Primary Insurance

Question 1

Coinsurance

Answer 1

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

Question 2

Straight Deductible

Answer 2

Deductible that remains constant and is specified in the policy

Question 3

Franchise Deductible

Answer 3

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)

Question 4

Direct Loss

Answer 4

Loss that results in a decrease in value due to a peril

Question 5

First Party

Answer 5

Party covered by the insurance policy. AKA the insured

Question 6

Hazard

Answer 6

Condition that either creates or increases the chance of a loss

Question 7

Human Resources Loss Exposure

Answer 7

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

Question 8

Indirect Loss

Answer 8

Loss resulting from loss of use or the occurrence of additional costs due to a direct loss

Question 9

Insurance-to-Value

Answer 9

Limit in a property policy that approximates the max potential loss or the value of the property being insured

Question 10

Liability Loss Exposure

Answer 10

Condition or situation presenting the possibility of loss, such as bodily injury or property damage, to a third party

Question 11

Loss Exposure

Answer 11

Any situation or condition presenting the possibility of an unintentional loss. The three types of loss exposures are: property, liability, and human resources

Question 12

Peril

Answer 12

The cause of a possible covered loss such as fire, wind, and earthquake

Question 13

Perils Insured Against

Answer 13

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

Question 14

Named Perils

Answer 14

Provides coverage only for those perils listed in the policy

Question 15

Open Perils

Answer 15

Provides coverage caused by any peril except those specifically excluded in the policy

Question 16

Property loss exposure

Answer 16

Condition or situation presenting the possibility of financial loss or a decrease in value of real or personal property

Question 17

Pure risk

Answer 17

Risk that has only the possibility of loss or no loss (cannot benefit from the situation)

Question 18

Tail

Answer 18

Refers to the turnaround time of a loss settlement

Question 19

Third Party

Answer 19

Someone, other than the insured, who is damaged and receives the claim payment

Question 20

Loss costs

Answer 20

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.

Question 21

External exposures

Answer 21

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

Question 22

Peril v Hazard

Answer 22

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.

Question 23

Types of Hazard (3)

Answer 23

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