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Webinar Flashcards

1
Q

Uncertainty concerning a loss

A

Risk

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2
Q

A cause of a potential loss

A

Peril

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3
Q

Increases the chance of a loss

A

Hazard

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4
Q

A physical condition that increases the probability of a loss

A

Physical Hazard

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5
Q

Dishonest tendencies

A

Moral Hazard

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6
Q

Indifference to loss, or failure to protect one’s property from loss

A

Morale Hazard

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7
Q

The exchange of a small certain expense for a large uncertain loss

  1. Transfers the risk
  2. Protects against uncertainty
  3. Shares the loss
  4. Reduces anxiety
A

Insurance

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8
Q

The larger the number of exposures, the closer the losses will equal the underlying probability of loss

A

The Law of Large Numbers

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9
Q
  • Must exist in every enforceable contract
  • Potential for financial hardship in the event of a loss
  • Must exist at the time of loss in Property & Casualty Insurance
A

Insurable Interest

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10
Q

Elements of a Legal Contract

A
  1. Competent Parties
  2. Legal Purpose
  3. Agreement
  4. Consideration
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11
Q

Parties must have legal capacity to enter into a contract

A

Competent parties

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12
Q

May not be issued for illegal/immoral purpose

Every insured must have an insurable interest at the time of loss

A

Legal Purpose

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13
Q

The ______ is a two-step process that involves an:

  • offer
  • acceptance
A

Agreement

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14
Q
  • What two parties exchange in value to abide by the conditions of the contract
  • The application and payment of premium is Insured’s consideration
  • Insurer’s promise to indemnify in event of a loss
  • Mutual agreement is reached when the insurer delivers the policy upon initial premium payment
A

Consideration

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15
Q

A sudden, unintended, and unplanned event from which damage results
Example: the explosion of a steam boiler

A

Accident

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16
Q

An event that results in a loss including continuous or repeated exposure to harmful conditions
Example: Mold, Fungus, or Wet Rot resulting from accidental discharge

A

Occurrence

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17
Q

Termination of a policy before expiration; insurer or insured may cancel

A

Cancellation

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18
Q

Insurer refunds premium proportionately

A

Pro-rata Cancellation

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19
Q

Insurer refunds after keeping funds to cover cost

A

Short-rate Cancellation

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20
Q

The cancellation of a policy on or before the effective date

A

Flat cancellation

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21
Q

Termination of policy at expiration

A

Nonrenewal

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22
Q

Proof of temporary insurance coverage until a policy can be issued

  • issued for a maximum of 60 days
  • ends when policy is issued
  • must include name of insurer
A

Binder

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23
Q

A form added to a policy to change or add provisions

A

Endorsement

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24
Q

The portion of a loss not paid by the insurer and assumed by the insured

A

Deductible

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25
Q

As the deductible increases, the premium decreases

A

Benefit to Insured

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26
Q

Fewer small claims are submitted

A

Benefit to Insurer

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27
Q

Responds first to a loss, regardless of all other insurance in place on the same risk

A

Primary Insurance

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28
Q

Responds to a loss after primary insurance responds

A

Excess Insurance

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29
Q

Has no occupants, but does have contents

A

Unoccupancy

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30
Q

Building contains insufficient property or furnishings to support its intended occupant or use

A

Vacancy

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31
Q

Direct damage to covered property without an intervening cause

A

Direct Loss

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32
Q

Loss resulting from direct damage to covered property

A

Indirect loss

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33
Q

Covers losses by perils that are specifically stated in the policy

A

Named peril

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34
Q

Cover losses caused by all perils except for those specifically excluded

A

Open peril

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35
Q

The value of replacing property with material of like kind and quality, at current prices, without deduction for depreciation

A

Replacement Value

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36
Q

The current replacement cost of an item minus applicable depreciation and obsolescence

A

Actual Cash Value (ACV)

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37
Q

The amount agreed by the insurer and the insured that will be paid in the event of a total loss–regardless of the property’s actual value at the time of loss

A

Stated (Agreed) Value

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38
Q

A policy that states the value of property to be the amount shown on the Declarations page in the event of a total loss, rather than one of the types of values listed above

A

Valued Policy

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39
Q

One item of property, one policy, one limit of coverage

A

Specific limit

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40
Q

Multiple items of property, one policy, different limits of coverage

A

Scheduled limit

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41
Q

Multiple items of property, one policy, one limit of coverage

A

Blanket limit

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42
Q
  • Contains the insurance company’s promise to make payment on behalf of the insured
  • Offers broad scope of coverage that is narrowed through other policy sections, such as the Conditions and Exclusions
A

Insuring Agreement

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43
Q

States the rights, rules, duties and obligations of the Insurer and the Named Insured

A

Conditions

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44
Q

Coverage only applies to covered losses that occur during the policy period

A

Policy Period

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45
Q

If the insurer broadens coverage with no increase in premium, the broadened coverage automatically applies to existing policies

A

Liberalization Clause

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46
Q

No coverage is provided to an insured who has intentionally misrepresented any material fact, made false statements, or engaged in fraud

A

Concealment or Fraud

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47
Q

States the terms under which a policy may be cancelled

A

Cancellation

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48
Q

What the insurance company must do if electing not to renew coverage

A

Nonrenewal

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49
Q

Named Insured must obtain written consent of insurer if assigning policy benefits to another

A

Assignment

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50
Q

Insurer is entitled to the Named Insured’s rights of recovery against any party responsible for a loss if the insurer makes payment of the loss

A

Subrogation

51
Q

When the amount of a loss is disputed by either insurer or insured, either party may request a binding appraisal of damaged property. Each selects an appraiser who then jointly select an umpire. Insurer and insured each pay for the cost of their own appraiser and split the cost of the umpire.

A

Appraisal

52
Q

If a covered loss is also covered by other insurance, this condition explains how the policy will respond to claims. In most cases, the insurer only pays its proportional share of the loss.

A

Other Insurance

53
Q
  • Protects mortgagee’s financial interest in the insured property if insured fails to perform his or her duties
  • Mortgagee must perform certain duties to protect its interest
A

Mortgage Clause

54
Q 
Specific perils are NOT covered by the policy. In addition to the policy's statement of various exclusions throughout the policy's statement of various exclusions throughout the policy, the Exclusions section states NO coverage is provided for:
Ordinance or Law
Earth movement
Water
Power failure
Neglect
War
Intentional loss
A

Exclusions

55
Q

The party named on the Declarations; receives the broadest coverage of all insureds

A

Named insured

56
Q

Individual or entity whose name appears first on the Declarations with Special Rights
-has right and responsibilities not applying to other insured. very important on commercial policies

A

First Named Insured

57
Q

Other individuals and entities designated in the policy (children)

A

Insured

58
Q

A person or organization granted insured status by endorsement not normally an insured

A

Additional insured

59
Q
  • Contained in most commercial property policies
  • Encourages insured to purchase insurance to value
  • The higher the coinsurance percentage the lower the rate
  • Applies only in the event of a partial loss
  • Total losses paid per any applicable Policy Law
A

Coinsurance Provisions

60
Q

Formula used when a penalty is applied to partial losses:

A

Coinsurance formula

61
Q
  • Building’s replacement value is $100,000
  • Building is insured for $40,000
  • Policy has an 80% Coinsurance clause
  • Building sustains $10,000 fire loss

How much will the insurer pay?

A

$5,000

62
Q

Also called third party insurance
1st party insured
2nd party insurer
3rd party claimant

A

Liability insurance

63
Q

The responsibility, under law or contract, for an act or failure to act

A

Legal Liability

64
Q

A wrongful act that violates a duty or the rights of another for which compensation may be sought from the responsible party

A

Tort

65
Q

A deliberate act

A

Intentional tort

66
Q

An act, or failure to act, committed without reasonable care

A

Unintentional tort

67
Q

Liability assigned to one party for the actions of another

A

Vicarious liability

68
Q
  1. Awarded to injured party for actual loss
  2. Awarded for tangible losses
  3. Awarded for losses that cannot be objectively calculated
A
  1. Compensatory damages
  2. Special damages
  3. General damages
69
Q

Awarded to punish the wrongdoer and discourage similar behavior

A

Punitive damages

70
Q

Bodily harm, sickness, or disease, including resulting death. Examples of bodily injury include
a broken arm, a concussion, and food poisoning

A

Bodily injury

71
Q

Physical injury to property, including its destruction or loss of use. Examples include vehicle damage after an accident and the vehicle owner’s inability to use the vehicle because it is not drivable (loss of use)

A

Property damage

72
Q
  • Includes necessary medical expenses
  • Payments made regardless of fault
  • Does NOT require legal liability of the insured
A

Medical payments to others

73
Q

Liability for certain injuries, other than bodily injury or property damage, that arise from offenses named in the policy - such as false arrest, libel, slander, invasion of privacy, and copyright infringement

A

Personal Injury Liability

74
Q

An unforeseen, unexpected, and sudden event from which damage or loss results

A

Accident

75
Q

An event, either an accident or continuous or repeated exposure to the same general conditions, that causes injury or damage to a third party

A

Occurrence

76
Q

Insured must notify insurer, in writing, as soon as possible of any loss and include the:
Policy number
Named insured
Name and address of witnesses

A

Notice of loss

77
Q

Verifies how and when a loss happened and includes other required information

A

Proof of loss

78
Q

A document indicating insurance was in effect on a particular date

A

Certificate of Insurance

79
Q

The failure to use the same level of care a reasonable person would have used given the same knowledge and set of circumstances

A

Negligence

80
Q

In some circumstances, an insured will be legally liable even in the absence of negligence

A

Absolute liability

81
Q
  • Applies to products liability

- Manufacturers are held strictly liable for damages to others caused by defective products or their failure to warn

A

Strict liability

82
Q

The one listed first of the named insureds with special rights

A

First Named Insured

83
Q

Person specifically named in the policy

A

Named insured

84
Q

Persons covered by the policy in addition to other insureds

A

Additional Insured(s)

85
Q

Insured cannot transfer policy ownership without the written consent of the insurer

A

Assignment

86
Q

Provision that spells out the obligations of the parties when they wish to cancel or nonrenew the policy

A

Cancellation and Nonrenwal

87
Q

The amount of loss retained by the insured (most liability policies do not have a deductible)

A

Deductibles

88
Q

Specifies when coverage applies

A

Policy period

89
Q

Policy makes payment before all other policies in place

A

Primary insurance

90
Q

Policy makes payment after the primary policy exhausts its limits or denies coverage

A

Excess insurance

91
Q
  • When more than one policy is on a risk
  • Each policy will only pay its pro-rata share of a loss
  • A clause designed to prevent the insured from collecting more than the actual extent of loss
A

Pro Rata Liability

92
Q
  • When two or more insurers’ policies cover at the same level
  • Each insurer contributes an equal amount to the loss settlement until the loss is paid, or until each insurer has exhausted its limits of insurance
A

Contribution by Equal Shares

93
Q

DP-1 (Basic Form)

A 
Covered perils are:
-fire or lightning
-internal explosion
Extended Coverage
-windstorm or hail
-explosion
-riot or civil commotion
-aircraft and vehicles
-smoke
-volcanic eruption
Vandalism & Malicious Mischief
94
Q

DP-2 (Broad Form)

A

Includes DP-1 perils plus:

  • damage by burglars
  • falling objects
  • weight of ice, snow, or sleet
  • accidental discharge or overflow of water/steam
  • freezing
  • sudden and accidental damage
95
Q

DP-3 (Special Form)

A

Open perils: coverage for dwelling and other structures

Named perils: coverage for personal property

96
Q

Coverage A

A

Dwelling

97
Q

Coverage B

A

Other structures

98
Q

Coverage C

A

Personal property

99
Q

Coverage D

A

Fair Rental Value

100
Q

Coverage E

A

Additional living expense

101
Q

Coverage A insures:

A
  • The dwelling and attached structures
  • Materials & supplies to construct or repair
  • Building and outdoor equipment
  • NO coverage for land
102
Q

Coverage B insures:

A
  • Other structures NOT attached to the dwelling
  • NO coverage for structures rented to others
  • Insurance limit is up to 10% of Coverage A
103
Q

Coverage C insures:

A
  • Personal property usual to a dwelling occupancy AND owned or used by an insured or resident relative AND while on the premises
  • At insured’s request, personal property owned by a guest or servant while on the premises
104
Q

Coverage D insures:

A
  • Loss in rental value sustained by insured if covered loss under Coverage A, B, or C makes dwelling not fit for normal use
  • Insurance limit is up to 20% of Coverage A
105
Q

Coverage E insures:

A

Additional living expenses sustained by insured if covered loss under Coverage A, B, or C makes dwelling not fit for normal use

106
Q

Other coverages

A
  • Debris removal
  • Improvements, alterations, and additions
  • Reasonable repairs
  • Property removed
  • Trees, shrubs, and other plants
  • Fire department service charge
  • Collapse
  • Glass
  • Ordinance or law
107
Q

Up to $500 for contractual liability when fire department is called to protect covered property fro a covered peril

  • does not apply if property is located within the city limits of responding department
  • additional insurance
  • no deductible applies
A

Fire Department Service Charge

108
Q

If a building collapses what is covered

A

-DP-2 & DP-3 only provide coverage for abrupt falling down or caving in of a building
-Damage is covered if caused by the following:
hidden decay
hidden damage by insects, etc.
weight of contents, animals, people, etc.
defective material or workmanship
-No coverage is provided for cracking, bulging, settling, shrinking, or expanding soil
-Damage must be caused directly by collapse

109
Q

General exclusions

Dwelling forms do not cover loss caused by:

A 
Ordinance or law
Earth movement
Water damage
Power failure
Neglect
War
Nuclear hazard
Intentional loss
Government action
110
Q

What are the 6 basic forms of homeowners insurance

A 
HO-2 basic
HO-3 special
HO-4 tenant
HO-5 comprehensive
HO-6 condo
HO-8 modified coverage
111
Q

Which basic homeowners forms provide all 6 coverage’s?

A

HO-2
HO-3
HO-5
HO-8

112
Q

Which basic homeowners forms only provide 4 coverage’s? (C, D, E, F)

A

HO-4

HO-6

113
Q

Owner occupied dwelling with no more than 4 residential units; the named insured must live in one of the units
Which forms are eligible?

A

HO-2
HO-3
HO-5
HO-8

114
Q

Residence or apartment is rented, not owned

Which forms are eligible?

A

HO-4

115
Q

Condo or cooperative unit may be rented or owned

Which forms are eligible?

A

HO-6

116
Q

HO-2 broad form includes coverage’s for?

A

Coverage A & B for named perils

Coverage C for named perils

117
Q

HO-3 special form includes coverage’s for?

A

Coverage A & B for open perils

Coverage C for named perils

118
Q

HO-4 contents broad form includes coverage’s for?

A

Coverage C for named perils

119
Q

HO-5 comprehensive form includes coverage’s for?

A

Coverage A, B, and C for open perils

120
Q

HO-6 unit owners form includes coverage’s for?

A

Coverage A and C for named perils

121
Q

HO-8 modified coverage form insures what?

A

Older homes where the replacement and market values are:
-disproportionate, or
-insuring to RC creates a moral hazard
Written for market value of dwelling

122
Q

Who is the insured’s?

A

You (the named insured & resident spouse)
Residents
-relatives
-under age 21 & in the care of you or a resident relative
-full time student under 24 who was a resident before going away to school and IS a relative OR under age 21 and in the care of you or a resident relative

Under section ll (Liability coverage’s)

  • any person or organization legally responsible for covered animals or watercraft
  • persons using covered motor vehicles on insured locations with your permission
123
Q

What are insured locations?

A
  • Residence premises
  • Premises, structure, and grounds as a residence and wither shown on Dec page or acquired during policy period
  • Non-owned premises where insured resides temporarily
  • Vacant land (other than farm land)
  • Land on which 1-4 family dwelling is being constructed
  • Individual or family cemetery plots or burial vaults
  • Premises rented occasionally for non-business use (time share)

Insurance (6 decks)

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