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Insurance 101 > Terms, Concepts > Flashcards

Terms, Concepts Flashcards

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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
Q

Where does health insurance fall in here?

A

Licensing statutes authorize P&C agents sales

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26
Q

Fraternal Insurers

A

primarily life ins providers - many are church related or members of a society

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27
Q

Admitted carrier

A

licensed to do business in the state

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28
Q

Non-admitted carrier

A

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

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29
Q

Risk Retention Group

A

insureds insuring each other, helps to decide if additional funds are needed

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30
Q

Mail Order Insurance

A

Insurance sold through mass marketing techniques like the snail mail. *Life ins has to be given by an agent that receives commission

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31
Q

Reinsurance

A

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

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32
Q

Peril

A

cause of a loss

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33
Q

Hazard

A

introduces or increases the chance of loss from a peril

3 types: Physical, Moral, Morale

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34
Q

Physical Hazard

A

physical characteristics of an object that increases severity of loss

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35
Q

Moral Hazard

A

intentional loss from a conscious mental attitude of NI

Ex) arson and insurance fraud

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36
Q

Morale Hazard

A

Unconcious mental attitude of the NI leading to accident proneness, carelessness, and no pride in property

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37
Q

Proximate Cause Doctrine

A

Unbroken connection between a covered occurrence and the damage from the occurrence - what started the event

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38
Q

Direct Loss

A

physical harm to tangible property

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39
Q

Indirect Loss

A

Economic loss as a consequence of the direct loss and is frequently underestimated

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40
Q

Consequential Damage

A

Damage from direct loss

Ex) Loss of spoilage from loss of power

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41
Q

Insured

A

Buyer of the policy - pays premium, transfer the risk

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42
Q

Insurer

A

Insurance company - accepts the risk

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43
Q

How does Property Insurance work?

A

pays the insured for damage to their property

44
Q

How does Liability Insurance work?

A

defends the insured; pays others for bodily injury

45
Q

Lenders Interest

A

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
Q

Principle of Indemnity

A

One should not profit

Actual Cash Value (ACV) = Replacement Cost (RC) - Depreciation

47
Q

Florida Value Policy Law

A

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
Q

(Agreed) Valued Policy

A

Insurer agrees in advance to a Stated Amount

49
Q

Market Value

A

the price that would have to be paid to purchase an asset in that market

50
Q

Coinsurance

A

(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
Q

Specific Insurance

A

Seperate limit for each building and contents in them

52
Q

Blanket Insurance

A

Single limit of two or more covered items

53
Q

Types of Deductibles

A

Straight, Franchise, Percentage, Hurricane

54
Q

Straight Deductible

A

Deduct flat amount from loss payment

55
Q

Franchise Deductible

A

Pay the loss from dollar one if the loss equals or exceeds the stated deductible

56
Q

Percentage Deductible

A

A % amount is deducted from the loss (% of property value or % of policy limits)

57
Q

Hurricane Deductible

A

insurer must offer 2%, 5%, or 10% (or higher if insured signs handwritten note)

58
Q

627.701 Rules soley for Hurricane Deductible

A

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
Q

Residential Policies for Hurricanes

A

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
Q

Secured deductible

A

(Mortgage property) $500 ded - next $5,000 loss has a copay. Remaining loss subject to stated % deductible, different than statutory %ages

61
Q

Commercial Residential Policies

A

Annual basis; applies to each hurricane

62
Q

define hurricane

A

a storm system that has been declared to be a hurricane by the National Hurricane Center of the National Weather Service

63
Q

Vacancy

A

Absence of ppl and personal property in building

64
Q

Unoccupied

A

without occupants but has personal property in building

65
Q

Theft

A

any unlawful taking of property

66
Q

Robbery

A

taking property by causing/ threatening body harm

67
Q

Burglary

A

taking of property by breaking&entering, leaving visible signs of forced entry/exit

68
Q

Mysterious dissappearance

A

vanishing if insured property in an unexplained manner

69
Q

premium

A

amount of money an insurer charges to proved the coverage described in the policy

70
Q

Deposit premium

A

required by the insurer on forms of insurance subject to the periodic premium adjustment

71
Q

Earned Premium

A

the portion of a policy’s premium that applies to the expired portion of a policy

72
Q

Premium financing

A

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
Q

Audit

A

review of the financial records of a person/organization conducted annually to determine exposures, premiums, etc

74
Q

Negligence

A

failure to act as a prudent person would in the same circumstances (causes to be liable)

75
Q

Liability

A

Any legally enforceable obligation.. to pay a monetary award for

76
Q

Legal Liability

A

Comparative Negligence vs Contributory Negligence

77
Q

Comparative Negligence

A

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
Q

Contributory Negligence

A

If plaintiff is 1% at fault - not entitled to recover damages from others

79
Q

Types of Liability

A

Absolute
Strict
Vicarious

80
Q

Absolute Liability

A

imposed on the wrongdoer without proof of carelessness or fault

81
Q

Strict LIability

A

(Defective Products) Where the manufacture is liable to a 3rd party regardless of degree of care

82
Q

*Vicarious Liability

A

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
Q

Compensatory Damages

A

the monetary amount necessary to replace what was lost

84
Q

Punitive Damages

A

damages to punish the wrongdoer for anti-social actions, rather than compensating for loss

85
Q

Exemplary Damages

A

Damages awarded to make an example of the wrongdoer

86
Q

Accident

A

A sudden fortuitous event (produced by chance)

87
Q

Occurrence

A

An accident, including continuous and repeated exposure to substantially the same harmful exposure

88
Q

Liability Policy Insuring Agreement

A

“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
Q

Liability Policy Limits

A

Expressed as single limit, split limit, or aggregate limit

90
Q

What kind of limit is not a liability limit?

A

A statutory limit

91
Q

Insurance Policy Conditions do what?

A

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
Q

SUBROGAGTION

A

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
Q

Proof of Loss

A

a document stating details and claim amounts

94
Q

Fiduciary

A

a person or institution which has responsibility for the money, property or financial affairs of another

ex) the insurance agent

95
Q

Misappropriate

A

unlawfully withheld money belonging to insureds, beneficiaries, or others received in the conduct of business under the license

96
Q

Waiver

A

The voluntary or intentional relinquishes a known right. It may be express or implied

97
Q

Expressed Waiver

A

insurer/representative knowingly gives up rights under the contract

98
Q

Implied Waiver

A

may result from some act or negligence on part of the agent/adjuster

99
Q

Estoppel

A

stopped from reasserting a known right

100
Q

Liability Statute of Limitations

A

4 years (applied to automobile policies)

101
Q

TRIA: Terrorism Risk Insurance Act of 2002

A

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
Q

Insurance Services Office (ISO)

A

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
Q

Sources of Underwriting Information

A

An UW’s primary sources of information include: The application, a company questionnaire, the inspections form, in-house indexes, the producer, public records

104
Q

Insurance to Value

A

Insurance written in an amount approximating the value of the subject of insurance or that meets coinsurance requirements

105
Q

Affiliated Party

A

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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