Property & Casualty Basics Flashcards
P&C basic concepts/terms/elements/etc
What is Insurable Interest?
You must have interest in the item/person you are insuring, such as cars or houses you own. For a person, you need to be related or married.
Memory trick: BB$ (BLOOD, BUSINESS, or MONEY). Friends are NOT considered insurable interest.
What is Underwriting?
Underwriting is known as the Risk Selection Process, assessing how much risk a person has to transfer.
What are Perils?
Perils are the Causes of Loss, the reasons you file a claim, such as fire, lightning, and wind. Insurance does not cover all possible perils.
What is a Named Peril policy?
A policy that only covers perils that are named/listed on the policy.
What is an Open Peril policy?
A policy that covers any perils except what’s excluded, listing out what is NOT covered.
What defines Vacancy?
A house is vacant when there are NO people and NO stuff. After 61 days of being vacant, a house will begin to lose coverage.
What is Unoccupancy?
A house that has stuff but NO people, with the intention of the people returning, like going on vacation.
What is Direct Loss?
The direct physical damage to property, which includes Proximate Cause of Loss.
What is Indirect Loss?
The losses that happen because of the direct loss; for example, the cost of staying at a hotel after a house burns down.
What is Blanket Insurance?
A single policy that covers multiple classes.
What is Specific Insurance?
A policy that covers a certain thing or its own amount of coverage.
What is Fire Resistive construction?
A house built with materials that can resist burning down for up to 2 hours. It has the best rating.
What is Frame construction?
A building made of wood, which is flammable. It has the worst rating.
What is Loss Valuation?
A factor in determining the premium.
What is Replacement value?
The brand-new price to replace with a similar or same kind or quality at today’s prices.
What is Actual Cash Value?
The used value to replace things, calculated by knowing the Replacement value and subtracting wear and tear (depreciation).
What is Market Value?
What a willing buyer would pay a willing seller.
What is Functional Replacement?
The modern, less expensive price to make repairs, like using drywall instead of plaster.
What is Agreed value?
A policy that sets the replacement price of an item based on a fair valuation of the item.
What is Stated value?
A policy that sets a maximum limit that the insurer will pay up to if the item suffers a covered peril.
What is Property Damage?
Direct damages to property.
What is Bodily Injury?
Direct damage to a person’s body.
What are $pecial Damages?
Medical bills and loss of wages after an accident.
What are General Damages?
Pain and suffering, mental anguish; very subjective.
What are Punitive damages?
Damages awarded for punishment.
What is Absolute Liability?
Liability for obviously dangerous activities, such as swimming pools and pet tigers.
What is Strict Liability?
Liability strictly related to products.
What is Vicarious Liability?
The parent is responsible for the acts of the child, and the employer is responsible for the acts of the employee.
What are Declarations in a policy?
The first page of the policy, summarizing who and what is covered, by which company, and for what amount.
What do Definitions in a policy explain?
They explain certain meanings of words used in the policy.
What is the Insuring Agreement/Clause?
Lists the perils insured against and contains the promise to pay and the parties of the contract.
What is Additional/Supplementary Coverage?
Built-in extra coverage to all policies at no additional cost.
What are Conditions in a policy?
Rules, duties, obligations, and ways of behaving for both the insured and insurer.
What are Exclusions in a policy?
Lists what is NOT covered.
What are Endorsements?
Written changes made to amend the policy; added coverage via an endorsement raises the premium.
What is a Certificate of Insurance?
A document that states the insured has coverage.
Who is considered Insured?
Anyone covered by the policy.
What is the First Named Insured?
In a commercial policy, the designated person who manages the policy for the business.
Who is the Named Insured?
The person who bought the policy and is listed on the Declaration Page.
What is an Additional Insured?
A mortgage/lien holder added via an endorsement regarding a specific interest.
What is the Policy Period?
States how long a policy covers an insured.
What is the Policy Territory?
States where the coverage is active (e.g., US, Canada, US territories).
What are Policy Limits?
The maximum amount of money the insured can collect under the policy.
What are Limits of Liability?
The maximum amount of money the insurer is liable to pay.
What is Cancellation?
Terminating an in-force policy.
What is Nonrenewal?
Termination of a policy at expiration.
What are Deductibles?
The amount of money the insured pays first before the insurer pays.
What is Coinsurance?
A rule that states an insured needs to carry at least 80% of the replacement cost of the home to have the full claim covered.
What is Other Insurance?
A provision in the policy explaining that if there is more than one policy covering a loss, they will all need to pay a fair share.
What is Aggregate Limit?
The maximum available money on the policy for all claims.
What is Per Occurrence?
The sublimit of liability that sets a maximum for all claims arising from one accident/occurrence.
What is Per Person?
The maximum available limit in an accident for one person.
What is Split Limit?
Separately stated limits of liability - Per person/per accident.
What is Combined Single Limit?
A single dollar limit available for all claims from one accident without breaking it up by person, bodily, or property.
What is Theft?
The act of stealing.
What is Burglary?
Breaking and entering, forced entry causing damage.
What is Robbery?
Stealing while a person is a witness/victim.
