Property & Casualty Insurance Basics Flashcards
Property that is the subject of insurance
Insurable Interest
___ must exist at the time of a loss.
Insurable Interest
__ obtaining & reveiwing information for an application.
Underwriting
___ Evaluates applications to find if a policy should be issued & set the proper terms & conditions based on the determined risk.
Underwriter
__ a formula to show a quick analysis of the insurance performance for a certain period.
Loss Ratio
__ What is the loss ratio formula?
Incurred loss + Loss adjusting expense/earned premium
Incurred loss + Loss adjusting expense/earned premium =
Loss Ratio formula
__ is a specific cause of loss
Peril
What is a named Peril Policy?
A policy that covers only those perils listed or named in the policy.
What does open peril cover?
Any risk NOT specifically excluded
What are the types of losses?
- Direct Loss
2. Indirect Loss
___ physical damage to building and/or personal property or includes other damage where the insured peril was the proximate cause of loss.
Direct Loss
__ not direct damage but a result of the direct loss.
Indirect Loss
___ the method of pricing policies that the actuaries of the insurance comoany have applied per dollar of coverage.
Rate
___ may be created as a dollar per payroll or appraisal value
Rate
___ used when valid statistics are not available or when the individual risks are so unique that it’s impossible to have a large group with the same level of risk.
Judgement Rating
What is judgement rating commonly used for?
Ocean Marine Insurance
It’s the judgement of ___ to determine the risk & required rate.
Underwriter
__ is computing a rate for insurance that applies to all applicants in a certain risk class or risk level.
Class rating
___ are created by applying a list of charges and/or credits to a class rate to determine the proper rate for a particular risk.
Schedule ratings
What is an example of a schedule rating?
Discount for no claim
___ rate is affected by the insured’s own past loss experience.
Merit Rating
___ the final premium is determined by the actual losses during the policy period.
Retrospective Rating
___ is a single property insurance policy that covers several types of property or multiple people at one location or multiple locations
Blanket Insurance
___ is a property insurance policy that covers a certain kind of property for a certain amount of insurance.
Specific Insurance
Current replacement cost minus depreciation
Actual Cash Value
Current price to restore with like, kind, & quality
Replacement Cost
Replace with the same size & function but least expensive current construction methods or materials.
Functional Replacement Cost
Amount a typical buyer would pay.
Market Value
Value of a total loss agreed to when the policy is written.
Agreed value
the amount scheduled in a policy to be paid for a particular or total loss regardless of value
Stated Amount
claims of civil wrongful acts brought to court by alleged injured persons, usually unintentional
Torts
risk o loss for which a person or company may be held responsible.
Liability
the failure to do something that a normal, prudent person would’ve done.
Negligence
Action that began an unbroken chain of events that resulted in the loss.
Proximate Cause
What requirements must exist to create negligence?
Legal Duty
Breach of Legal Duty
Proximate Cause
Actual loss or damage.
an action or event that, in a natural and unbroken sequence, produce a loss.
Proximate Cause
What class does frame on building fall under?
Class 1
What class does Joisted Masonry fall under?
Class 2
What class does noncombustible construction type fall under?
Class 3
What class does masonry noncombustible construction fall under?
Class 4
What class does modified fire resistive construction type fall under?
Class 5
What class does fire resistive construction type fall under?
Class 6
What are the types of construction?
Frame Joisted Masonry Noncombustible Masonry Noncombustible Modified Fire Resistie Fire Resistive
Exterior walls that are masonry with a rating of 2 hours or less?
Modified Fire Resistie (Class 6)
Supporting walls are masonry, roof, and floors and are metal/concrete.
Masonry Noncombustible (Class 4)
the exterior support walls, roof, & floors are wood or other similar combustible materials & maybe covered with siding or veneer of wood, vinyl, brick, or stucco.
Frame (Class 1)
the exterior support walls are of masonry material such as brick, adobe, concrete, stone, or a similar material, but roof & floors are combustible materials (wood, etc.)
Joisted masonry (Class 2)
a metal structure
Noncombustible (Class 3)
What are the types of injuries or losses.
Bodily Injury
Property Damage
Personal Injury
Advertising Injury
holds that if the injured party contributed to the injury in any way through his own negligence then he has no right to recover damages.
Contributory Negligence
if an individual is aware of the risks involved & still chooses to expose him/herself to those risks the he/she has no right to recovery.
Assumption of Risk
a cause that sets in motion a new chain of events, so the original case is not the proximate cause.
Intervening Cause
a state law that sets a time limit in which an injured person may file a suit in court.
Statue of Limitations
What are the categories of Liability?
General Absolute professional Advertising Personal Vicarious Strict
___ liability use & maintenance of premises or operations in business.
General
___ liability imposed on defendants engaged in hazardous activities such as harboring wild animals, using explosives.
Absolute
___ liability nonbusiness activities of individuals & families
Personal
___ liability from business dealings serving others (law, real estate, insurance, etc.)
Professional
___ liability from acts of libel, slander, defamation.
Advertising
___ liability responsibility of another (children, employees, etc.)
Vicarious
___ liability from defective products (dangerous toys, medicines, etc.)
Strict
contains insured’s name, address, amount of coverage, & premiums, &a description of the insured’s location.
Declaration
contains clarification of the terms used in the policy.
Definitions
contains the insurer’s promise to pay & a description of coverage provided & perils covered.
Insuring Agreement (clause)
additional amount of coverage for specific loss expense at no additional premium.
Supplementary Coverage
rules that insured & insurer agree to follow under terms of the policy.
conditions
What category would inspections be in a policy?
condtions
addendums to a contract that are used to change the policy’s original terms, conditions, or to add or delete coverage.
Endorsements
___ can be added anytime, must be in writing, attached to the policy, & signed by insurer.
Endorsements
___ is anyone covered under the policy, whether named or not.
Insured
In ___ insurance, the name first on the Declaration page are the only one’s who may cancel, ask for change, pay premiums, etc.
Commercial
___ defines the location where coverage will be provided.
Policy Territory
___the insured is financially responsible for before the insurer provides coverage.
Deductible
___ refers to other insurance written on the same risk but not on the same coverage basis.
Non-concurrency
___ the formula for sharing loss with other insurance based on comparing each policy’s limit to the total coverage & each pays that percentage of the loss.
Pro Rata
___ is when each policy will pay equally until one hit it’s limit, then the other until it hits its limit
Contribution by Equal Shares
___ is maximum amount of insurance the insured can collect for a loss.
Policy Limits
___ an accident is sudden, unplanned, & unexoected event, not under the control of the insured, resulting in injury or damage that was unintended.
Occurence
___ is a limit in a liability policy on the payment for all claims that are from a single accident.
Per Occurence
___ is maximum amount available for payment of bodily injury to a single person in an accident.
Per Person
___ is maximum coverage available under the liability policy during a policy year regardless of the number of claims.
Aggregate Limit
___ seperately state limits for different coverage.
Split Limit
___ may be stated on per person, occurence, policy basis or between bodily injury & property damage.
Split Limits
___ a single $ limit of liability applying to the total damages for bodily injury & property damage.
Combined Single Limit
___ the insured agrees to maintain a minimum amount of insurance on the property to receive full coverage.
Co-insurance
___ if the clause required $100,000 & only $50,000 was purchased, the policy would only pay 50% of a partial loss, less the deductible.
Co-insurance
___ is the transfer of legal rights.
Assignment
Can an insured assign their rights in a policy without permission of the insurer?
No
___ is giving up property to others or no one.
Abandoment
___ if the insurer improves coverage (usually because of legislation or regulation) without cost, it’s immediate.
Liberalization
___ is an increase in cost, it will happen with proper notice of the increase in premium at the next renewal.
Liberalization
___ once an insurer pays a claim to the insured if there is a third party responsible, the insurer receives the right to persue a claim against the third party
Subrogation
___ a promise to defend the insured in any lawsuit involving the type of liability insured against until the limit is paid for a claim.
Duty to Defend
___ amount received from the sale of the damaged property.
Salvage
It’s ___ to pay value or cost for repai/replacement; take all or part at agreed or appraised value; or repair/replace/rebuild property with like kind & quality.
insurer’s option
___ have a secured financial interest in the property.
Third-Party Provisions
Who would Third-Party Provisions be set for?
Mortgage Company or Lender
What is included in a standard mortgage clause?
Loss payment
Policy Cancelation
Loss Payable Clause
Loss Payee
___ is made payable to both the mortgagee (lender) & insured.
Loss Payment
___ mortgagee must also be given prior written notification.
Policy Cancelation
___ explains the interest of a secured lender in personal property.
Loss payable clause
___ general term for the interest of a secured lender for property.
Loss payee
___ is a person/ organization in temporary custody of property (holding, storing, etc.)
Bailee
Is the bailee coered by the insured’s policy while the bailee has possession of the insured’s property?
No
What is the Louisiana valued policy law?
if a loss occurs the insurer must pay loss at the valued amount.
___ a non-profit association to help consumers if their insurer becomes insolvent.
Louisiana Insurance Guaranty Association (LIGA)
Who is obligated to pay unpaid claims prior to determining an insurer’s inslvency?
LIGA
___ temporary contracts of insurance issued to place insurance in effect prior to policy issue.
Binder
___ is a federal program to share risk of terrorism acts.
Terrorism Risk Insurance Act of 2002
