Property Insurance Basics Flashcards
An actuarial term describing the degree of accuracy in forecasting future events based on statistical reporting of past events
Credibility
Reduction in value, particularly due to wear and tear
Depreciation
The portion of premium paid in advance that now belongs to the insurer because it applies to the elapsed part of the policy
Earned premium
Used as a measure of the rating units or the premium base of a risk (exposure units multiplied by the rate results in the premium)
Exposure units
The degree to which items are similar
Homogeneity
A legal term meaning that a product is suitable for its intended purpose and that it fits an ordinary buyer’s expectations
Implied Warranty
The date at which the insurance policy goes into effect
Inception
The failure to use the care that a reasonable, prudent person would under the same or similar circumstances
Negligence
Depreciation in the value of a property due to becoming outdated
Obsolescence
A written law passed by a legislative body
Statute
- Financial (a monetary interest)
- Blood (a relative)
- Business (a business partner)
Are the 3 elements of __________________________
Insurable risk
An insurable interest must exist at the _______ ___ _____
time of loss
(Incurred losses + Loss adjusting expense) / Earned premium =
Loss ratio formula
Loss ratio formula
(Incurred losses + Loss adjusting expense) / Earned premium =
The amount charged for a particular amount of coverage
Insurance rate
The practice of computing a price per unit of insurance that applies to all applicants possessing a given set of characteristics
Class rating (or manual rating)
- Judgment rating
- Schedule rating
- Experience rating
- Retrospective rating
- Merit rating
Are all types of ______________________ rate-making approaches
Individual
_____________________ rating is used when credible statistics are lacking or when the exposure units are so varied that it is impossible to construct a class.
Judgment
Rates are developed by applying a schedule of charges and credits to some base rate to determine the appropriate rate for an individual exposure
Schedule rating
In ______________________ rating, the insured’s own past loss experience enters into the determination of the final premium
Experience
_____________________ rating is a self-rating plan under which the actual losses during the policy period determine the final premium, subject to minimum and maximum premium with a deposit premium being required at the inception of the policy
Retrospective
The type of rating where the insured’s premium is based not on the actual loss record, but on other factors that indicate the probability that loss will occur. Most commonly used in personal auto insurance.
Merit rating
Rating method developed by ISO
Loss costs
Factors that determine rates including loss reserves, loss adjusting expenses, operating expenses, and profits
Components
A condition or situation that creates or increases the probability of or extent of a probable loss from a peril
Hazard
Physical, Moral, and Morale are all types of ________________
Hazards
A specific cause of loss is a ________________
Peril
______________________ is a term used in property insurance to describe the breadth of coverage provided under an insurance policy form that lists specific covered perils
Named peril
________________ is a term used in property insurance to describe the breadth of coverage provided under an insurance policy form that insures against any risk of loss that is not specifically excluded.
Open peril
The two types of property losses are _____________ and _____________
direct and indirect
An _______________ is a sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected nor intended
Accident
An __________________ is a broader definition of loss than accident because it includes those losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected.
Occurrence
______________________ is a single property insurance policy that provides coverage for multiple classes of property at one location, or for one or more classes of property at multiple locations.
Blanket Insurance
The _____________________ method of valuation reinforces the principle of indemnity because it recognizes the reduction of value of property as it ages and become subject to wear and tear and obsolescence.
Actual Cash Value (ACV)
Current replacement cost - Depreciation =
Actual Cash Value
The cost to replace damaged property with like kind and quality at today’s price, without any deduction for depreciation is the definition of ___________________________
Replacement Cost
________________ ______________ _______________ is the cost to replace damaged property with less expensive and more modern construction or equipment.
Functional replacement cost
____________________ is a method of casualty claim settlement used when the insured and insurer cannot agree on how to settle a claim
Arbitration
The four primary elements of:
1. Legal duty
2. Standard of care
3 Unbroken chain of events
4 Actual loss or damage
Must all be present in order to prove ____________________
Negligence
Any deliberate act that causes harm to another person regardless of whether the offending party intended to injure the aggrieved party
Intentional tort
Any written or printed untrue statement that injures a person’s or company’s reputation is _________________
Libel
__________________ is any oral or verbal untrue statement that injures a person’s or company’s reputation
Slander
__________________ liability is imposed upon a person or company engaged in hazardous or potentially dangerous business when, by negligence or by an omission, causes harm or injury to another person or property
Absolute
_______________ liability is commonly applied in product liability. A person or business that manufactures or sells a product make an implied warranty that the product is safe
Strict
__________________ Liability transfers liability from one person to another person with greater ability to pay. (Employers are liable for the acts of their employees)
Vicarious
Every ____________________ or __________________ policy is comprised of
Declarations
Definitions
Insuring agreement
Additional coverage
Conditions
Endorsements
Exclusions and policy limits
property or casualty
__________________ is the section of a policy containing the basic underwriting information such as the insured’s name, address, amount of coverage and premiums and description of insured’s locations.
Declarations
Component of an insurance policy that clarifies terms used in the policy
Definitions
________________________ is the section of a policy that establishes the obligation of the insurance company to provide the coverages as stated in the policy. Lists the parties to the contract, eff and renew dates, description of coverage and perils
Insuring Agreement (or Agreement)
A provision in an insurance policy that provides an additional amount of coverage for specific loss expense, at no additional premium
Additional (or supplementary) coverage
The general rules or procedures that the insurer and insured agree to follow under the terms of the policy.
Conditions
______________________ detail the perils that are not insured against and what persons are not insured
Exclusions
___________________ are printed addendums to a contract that are used to change the policy’s original terms, conditions, or coverages
Endorsements
An _________________ insured is anyone who is covered under a policy, whether named or not. (unnamed spouse, resident relative etc.)
Insured
The individual(s) whose name appears on the declaration
Named insured
The individual whose name appears first on the policy’s declaration.
First named insured
___________________ ______________ are individuals or businesses that are not named as insureds but are protected by the policy, usually in regards to a specific interest. Usually added by endorsement
Additional insureds
The termination of an in-force policy by either the insured or the insurer prior to the expiration date
Cancellation
___________________ is the termination of an insurance policy at its expiration date by not offering a continuation of the existing policy or replacement policy
Non-renewal
A dollar amount an insured must pay on a claim before the policy provides coverage.
Deductible
The ____________________ clause states that, in consideration of a reduced rate, the insured agrees to maintain a certain minimum amount of insurance on the insured property.
Coinsurance
(Insurance carried / Insurance required) x Loss Amount = Loss payment
Coinsurance penalties formula
Coinsurance penalties formula
(Insurance carried / Insurance required) x Loss Amount = Loss payment
_____________________ is the insurer’s legal right to seek damages from third parties, after it has reimbursed the insured for the loss
Subrogation
The ____ ________ clause is the clause used to cover the interest of a secured lender in personal property
Loss payable clause
Application form; motor vehicle records; interview with neighbors, friends, and employers; inspection of property; and inspection of insurance history are some of the sources that may be used in the ____________________ process
Underwriting
The maximum amount of money an insurer will pay for a particular loss is know as ____________ ___ _____________
Limits of liability
Sets amount for all claims arising from a single accident/occurence
(type of limit of liability)
Per occurrence
Maximum amount payable for bodily injury of a single person
(type of limit of liability)
Per person
Maximum limit of coverage available during a policy year
(type of limit of liability)
Aggregate
Separately stated limits of liability for different coverages
(type of limit of liability)
Split
Single dollar limit which applies to combined damages for bodily injury or property damage as a result of one accident/occurrence
(type of limit of liability)
Combined single
Broader legislated or regulated coverage is extended to current policies at no additional premium
Liberalization
Insurer’s right to seek damages from a third party, after reimbursing insured
Subrogation
Insurer’s requirement to defend insured in lawsuit arising ot of covered liability
Duty to defend
