Study 4 - Anatomy of a Property Policy (Overview): Key Terms

Question 1

Declarations

Answer 1

Statements included in a policy that are agreed to by the insured and form the basis of the contract of insurance

Question 2

Package policy

Answer 2

Any insurance policy that covers two or more lines or types of insurance in the same policy

Question 3

Adverse selection

Answer 3

Occurs when those with higher risks may purchase insurance in greater amounts than those with lower risks. Much of insurance law and practice is designed to control adverse selection. Insurers protect themselves from adverse selection by attempting to measure risk and either charging more for the higher risks or refusing to cover them at all.

Question 4

Subscription policy

Answer 4

A single policy covering a risk that is divided among a number of insurers; the policy is issued by the “lead” company (usually the one with the largest percentage) and signed by all participating companies.

Question 5

Multiple-limit policy

Answer 5

A type of habitational policy where separate insurance amounts are shown for the building and for the personal property.

Question 6

Single-limit policy

Answer 6

A type of habitational policy where one insurance amount is shown encompassing the building and personal property.

Question 7

Loss payee

Answer 7

A person or entity other than the named insured to whom the proceeds of insurance will be paid

Question 8

Chattel

Answer 8

Any property other than freehold land and leasehold interests in land