Study 5 - 10: Key Terms

Question 1

Guaranteed replacement cost

Answer 1

An undertaking by the insurer to pay the cost of repairs to or replace the dwelling building even if it is more than the amount of insurance on the dwelling building, provided certain conditions are met in addition to those that normally govern settlement at replacement cost. Called “enhancement replacement cost” in Quebec.

Question 2

Seepage

Answer 2

A slow flow of water that takes place over a more extended period of time than accidental discharge, usually through porous material.

Question 3

Endorsement

Answer 3

An amendment added to a written document, particularly an agreement between parties, altering its provisions

Question 4

Manuscript wording

Answer 4

Policy wording that does not conform to the standard wording in general use within the insurance industry and that is unique to the policy involved.

Question 5

Floater policy

Answer 5

Additional coverage for movable items, like jewellery or antiques, beyond what’s included in the basic homeowners policy. Also called a “rider” or “endorsement.” A policy designed to cover property that floats, or moves, from location to location.

Question 6

Schedule of insurance

Answer 6

A list of items individually covered by a policy; for example, a list of jewels under a jewellery floater, a list of cars under one automobile policy, or a list of buildings under a fire policy.

Question 7

Personal articles floater

Answer 7

A policy that covers certain kinds of personal property in a principal residence more broadly or for higher limits than do policies, such as a homeowners policy, of more general scope. A property appraisal is often required.

Question 8

Marine survey

Answer 8

Appraisal of a boat for value, mechanical condition, safety, and evidence of damage.

Question 9

Mobile home

Answer 9

Manufactured housing, commonly called house trailers, usually placed in one location and left there permanently, but retaining the ability to be moved, as required in many areas. Behind the cosmetic work fitted at installation to hide the base, there are strong trailer frames, axles, wheels, and tow-hitches.

Question 10

Modular home

Answer 10

A type of manufactured housing that is built in a factory and moved to a building site in large individual sections; is not movable and may be considered a permanent structure.

Question 11

Accommodation sharing

Answer 11

An arrangement set up by means of a website or mobile app in which a property primarily occupied by its owner is rented for a short time period to a third party.

Question 12

Condominium

Answer 12

Individual ownership of a single unit in a multi-unit building or group of buildings, including a percentage interest in the part of the total property owned jointly by all unit owners. Condominium property requires special insurance treatment.

Question 13

Inherent vice

Answer 13

A quality within an object that makes it tend to destroy itself.

Question 14

Replacement cost value (RCV)

Answer 14

The current market value of the cost to replace the lost or damaged insured property.

Question 15

Coinsurance clause

Answer 15

A distinct section or provision in an insurance policy that requires an insured (property owner) to carry separate insurance for a specified amount stated in the policy to be eligible for full coverage. If there is insufficient coverage, the insured must pay part of the loss.

Question 16

Statement of values

Answer 16

The information required when a single rate is to cover more than one item or building. To determine a correct average, the rating bureau requires the policyholder to give the value of each separate risk and its contents.

Question 17

Underwriter

Answer 17

(1) The insurance company or group that underwrites or insures a particular risk. (2) The individual within an insurance company whose responsibility it is to accept or reject business in the particular line in which they specialize and, in this way, choose the risks their principals are prepared to underwrite.

Question 18

Line guide

Answer 18

A listing of the maximum amounts of exposure an insurance company is prepared to accept on various classes of risk.

Question 19

Frequency of loss

Answer 19

This is a measure of how often losses are likely to occur in the future. Assuming the average size of loss is constant, the higher the loss frequency, the worse the loss experience.

Question 20

Severity of loss

Answer 20

This is the average size of the losses. The larger the average loss, the higher the loss severity is said to be. And assuming the loss frequency is constant, the higher the loss severity, the worse the loss experience.

Question 21

Rate

Answer 21

Amount charged to an insured that reflects the expectation of loss for a covered risk, insurance company expenses, and profit. In other words, it is the basis of premium calculation for the insurance provided for the exposure.

Question 22

Actuary

Answer 22

One who specializes in the mathematics of insurance, mortality rates, and the like.

Question 23

Ratemaking

Answer 23

The process of compiling and analyzing data to establish rates that accurately reflect the level of risk. Usually performed by actuaries.

Question 24

Rating

Answer 24

The process by which underwriters apply the rates developed by actuaries to the information that underwriters have gathered to determine premium for individual risks.

Question 25

Premium

Answer 25

The price of insurance protection for a specified risk for a specified period of time.

Question 26

Adjuster

Answer 26

One who investigates insurance claims, makes recommendations regarding the payment of benefits from insurance policies, and negotiates payments and settlements.