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Terms, Concepts Flashcards

1
Q

Risk

A

The chance of a financial loss, uncertainty of loss to happen

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2
Q

Assumed Risk

A

Amount of risk the insured is willing to absorb

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3
Q

Pure Risk

A

involves a situation that present the opportunity for loss but not gain - generally insurable

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4
Q

Speculative Risk

A

uncertainty about an event under consideration that could product either a profit or loss such as a business venture or gambling - generally NOT insurable

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5
Q

Insurance

A

A contract where one indemnifies or pays another a predetermined benefit for predetermined contingencies

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6
Q

Law of Large Numbers

A

The larger the # of similar exposure united, the more predictable and accurate the estimate of expected losses. PLUS credibility of the data increases with data size

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7
Q

Policy

A

A written contract/ agreement for or effecting insurance including clauses, riders, and endorsements

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8
Q

Declarations Page

A 
Includes:
NI
Address
Policy Period
Premium
Limits
Loss Payee/ Mortgagee
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9
Q

Insuring Agreement

A

The portion of the ins policy where the insurer (us) promises to make payment for covered perils to or on behalf of the NI (Contained in Coverage form and narrowed by exclusions and definitions)

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10
Q

Conditional Contract

A

The obligation of the insurer may be based on the insured satisfying certain conditions(actions) - aka the rules of the policy

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11
Q

Exclusions

A

Section of the policy that lists property, perils, losses, persons or situations that are NOT covered

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12
Q

What are the components of a policy?

A

D: Declarations Page
I: Insuring Agreement
C: Conditional Contracts
E: Exclusions

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13
Q

Endorsements

A

A written form attached to the policy that alters the policy’s coverage, terms, or conditions

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14
Q

Binders

A

Temporary insurance (no longer than 60 days)

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15
Q

Certificate of Insurance

A

A document providing evidence that certain types of insurance coverages and limits have been purchased by the insured

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16
Q

Contract of Adhesion

A

created by the insurance company - the insured cannot negotiate terms

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17
Q

Unilateral Contract

A

A contract where only one party makes an enforceable promise. (The insurer makes an enforceable promise to pay covered claims)

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18
Q

Personal Contract

A

Covers the financial loss suffered by a person and NOT THE PROPERTY OR OPERATIONS

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19
Q

Definition of Insured

A

Any person or organizations specifically designated by name as an insured in an insurance policy, as well as other that, although unnamed, fall within the policy definition of an insured

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20
Q

Insurable Interest

A

One who has an economic interest. The extent of insurable interest establishes the % paid and must exist at the time of loss.

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21
Q

Limits of Liability

A

max amount a company will pay for a particular loss

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22
Q

Casualty Insurance

A

All other insurance rather than Life and Health

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23
Q

Property Insurance

A

First Party Coverage - carrier pays directly TO the insured

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24
Q

Liability Insurance

A

Third Party Coverage - carrier pays ON BEHALF OF the insured

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25
Where does health insurance fall in here?
Licensing statutes authorize P&C agents sales
26
Fraternal Insurers
primarily life ins providers - many are church related or members of a society
27
Admitted carrier
licensed to do business in the state
28
Non-admitted carrier
A company not licensed but APPROVED by the OIR to do business in a state. Such insurers can write coverage through a surplus lines agent licensed in that state
29
Risk Retention Group
insureds insuring each other, helps to decide if additional funds are needed
30
Mail Order Insurance
Insurance sold through mass marketing techniques like the snail mail. *Life ins has to be given by an agent that receives commission
31
Reinsurance
A transaction that the reinsurance company agrees to indemnify (pay) an insurance company for part or all of the liability assumed by the ins company under a policy it has issued
32
Peril
cause of a loss
33
Hazard
introduces or increases the chance of loss from a peril | 3 types: Physical, Moral, Morale
34
Physical Hazard
physical characteristics of an object that increases severity of loss
35
Moral Hazard
intentional loss from a conscious mental attitude of NI | Ex) arson and insurance fraud
36
Morale Hazard
Unconcious mental attitude of the NI leading to accident proneness, carelessness, and no pride in property
37
Proximate Cause Doctrine
Unbroken connection between a covered occurrence and the damage from the occurrence - what started the event
38
Direct Loss
physical harm to tangible property
39
Indirect Loss
Economic loss as a consequence of the direct loss and is frequently underestimated
40
Consequential Damage
Damage from direct loss | Ex) Loss of spoilage from loss of power
41
Insured
Buyer of the policy - pays premium, transfer the risk
42
Insurer
Insurance company - accepts the risk
43
How does Property Insurance work?
pays the insured for damage to their property
44
How does Liability Insurance work?
defends the insured; pays others for bodily injury
45
Lenders Interest
Insurance assures lenders that collateral property is covered. (1) Make lender a payee in any covered loss (2) Gives mortgagee advenced notice of cancellation/non-renewal/reduction of coverage (3) Mortgagee is covered even if insured is engages in act or omission preventing payment (4) Mortgagee can continue policy if premium is not paid
46
Principle of Indemnity
One should not profit | Actual Cash Value (ACV) = Replacement Cost (RC) - Depreciation
47
Florida Value Policy Law
If a total loss by a covered peril to building, structure, mobile/manufactured housing unit, the company must pay the policy limit regardless of property value
48
(Agreed) Valued Policy
Insurer agrees in advance to a Stated Amount
49
Market Value
the price that would have to be paid to purchase an asset in that market
50
Coinsurance
(DID/ SHOULDXCOINS%) X LOSS = RECOVERY (Limit/ Property ValueXCOINS%) X LOSS = RECOVERY/ Loss Settlement Insured agrees to carry a certain % of the property value and is penalized if not
51
Specific Insurance
Seperate limit for each building and contents in them
52
Blanket Insurance
Single limit of two or more covered items
53
Types of Deductibles
Straight, Franchise, Percentage, Hurricane
54
Straight Deductible
Deduct flat amount from loss payment
55
Franchise Deductible
Pay the loss from dollar one if the loss equals or exceeds the stated deductible
56
Percentage Deductible
A % amount is deducted from the loss (% of property value or % of policy limits)
57
Hurricane Deductible
insurer must offer 2%, 5%, or 10% (or higher if insured signs handwritten note)
58
627.701 Rules soley for Hurricane Deductible
When 2 or more deductibles apply - highest deductible is applicable - Policies limits of 100-250k insurer must renew if insured wants less than $500 ded - Homes limits of 250k+, insurer posts a statement in policy & not need to offer $500 ded
59
Residential Policies for Hurricanes
must display % and representing dollar amount of hurricane deductible on dec page. changes can only be done at renewal. deductibles apply to each structure. based on cal year
60
Secured deductible
(Mortgage property) $500 ded - next $5,000 loss has a copay. Remaining loss subject to stated % deductible, different than statutory %ages
61
Commercial Residential Policies
Annual basis; applies to each hurricane
62
define hurricane
a storm system that has been declared to be a hurricane by the National Hurricane Center of the National Weather Service
63
Vacancy
Absence of ppl and personal property in building
64
Unoccupied
without occupants but has personal property in building
65
Theft
any unlawful taking of property
66
Robbery
taking property by causing/ threatening body harm
67
Burglary
taking of property by breaking&entering, leaving visible signs of forced entry/exit
68
Mysterious dissappearance
vanishing if insured property in an unexplained manner
69
premium
amount of money an insurer charges to proved the coverage described in the policy
70
Deposit premium
required by the insurer on forms of insurance subject to the periodic premium adjustment
71
Earned Premium
the portion of a policy's premium that applies to the expired portion of a policy
72
Premium financing
promissory note where insured promises to pay a premium finance company the amount advanced in premiums w/ a service charge authorized by law *premium finance company has power of attorney-can cx policy
73
Audit
review of the financial records of a person/organization conducted annually to determine exposures, premiums, etc
74
Negligence
failure to act as a prudent person would in the same circumstances (causes to be liable)
75
Liability
Any legally enforceable obligation.. to pay a monetary award for
76
Legal Liability
Comparative Negligence vs Contributory Negligence
77
Comparative Negligence
defendant asserts that the plaintiff in some way contributed to the cause of injuries *Currently in use in FL* Ex) Plaintiff suffered $10,000 was 30% negligent - damages reduces to $7,000
78
Contributory Negligence
If plaintiff is 1% at fault - not entitled to recover damages from others
79
Types of Liability
Absolute Strict Vicarious
80
Absolute Liability
imposed on the wrongdoer without proof of carelessness or fault
81
Strict LIability
(Defective Products) Where the manufacture is liable to a 3rd party regardless of degree of care
82
*Vicarious Liability
aka Contingent Liability Negligence is not directly attributable to the person claimed against, but is negligence of another for whom the person claims against is in some way responsible
83
Compensatory Damages
the monetary amount necessary to replace what was lost
84
Punitive Damages
damages to punish the wrongdoer for anti-social actions, rather than compensating for loss
85
Exemplary Damages
Damages awarded to make an example of the wrongdoer
86
Accident
A sudden fortuitous event (produced by chance)
87
Occurrence
An accident, including continuous and repeated exposure to substantially the same harmful exposure
88
Liability Policy Insuring Agreement
"To pay on behalf of the insured all sums the insured becomes legally liable to pay as damages" - commonly referred to as 3rd party claims
89
Liability Policy Limits
Expressed as single limit, split limit, or aggregate limit
90
What kind of limit is not a liability limit?
A statutory limit
91
Insurance Policy Conditions do what?
Sets for the Rights and Responsibilities of the INSURED, the conditions are provisions inserted into the policy that qualify or place limitations on the insurer's promise to pay/perform. If the policy conditions are not met, the insurer can deny a claim
92
SUBROGAGTION
when an insurer pays the insured for a covered loss, any rights of recovery from an at-fault party are transferred to the insurer in other words, we can sue the at-fault instead of the NI
93
Proof of Loss
a document stating details and claim amounts
94
Fiduciary
a person or institution which has responsibility for the money, property or financial affairs of another ex) the insurance agent
95
Misappropriate
unlawfully withheld money belonging to insureds, beneficiaries, or others received in the conduct of business under the license
96
Waiver
The voluntary or intentional relinquishes a known right. It may be express or implied
97
Expressed Waiver
insurer/representative knowingly gives up rights under the contract
98
Implied Waiver
may result from some act or negligence on part of the agent/adjuster
99
Estoppel
stopped from reasserting a known right
100
Liability Statute of Limitations
4 years (applied to automobile policies)
101
TRIA: Terrorism Risk Insurance Act of 2002
Federal legislation enacted in 2002 to gaurantee the availaibility of reinsureance coverage against acts of terrorism. Commercial insurers are required to offer insurance coverage against such terrorist incidents and are remibursed by the govt for paid claims. Modified in 2005 by the Terrorism Risk Insurance Extension Act (TRIEA) to define an act of terrorism as: 1. an act of terrorism 2. a violent act or an act that is dangerous to human life, property or infrastructure 3. Results in damage within the USA or outside the US in the case of US air carriers as vessels or missions 4. committed to influence the people or affect the conduct of the US govt by coercion No act will be certified by the secretary as an act of terrorism if property and casualty losses do not exceed $5 million
102
Insurance Services Office (ISO)
Organization of member insurers, which collects and analyzes statistics then establishes and files standard rates for many lines of insurance. Also develops standardized forms
103
**Sources of Underwriting Information**
An UW's primary sources of information include: The application, a company questionnaire, the inspections form, in-house indexes, the producer, public records
104
Insurance to Value
Insurance written in an amount approximating the value of the subject of insurance or that meets coinsurance requirements
105
Affiliated Party
Any person who directs the affairs of a licensee and who is an owner or officer controlling the company

Insurance 101 (11 decks)

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