LGST 4100 - Business Law Chapter 50: Insurance

Comprehensive vocabulary flashcards covering insurance terminology, contract clauses, life insurance, homeowners insurance, auto insurance, and business liability based on the LGST 4100 lecture notes.

Insurance

A contract by which the insurer promises to reimburse the insured or beneficiary in the event that the insured is injured, dies, or sustains damage to property as a result of a particular, stated contingency.

Risk

A prediction concerning potential loss based on known and unknown factors.

Risk management

The transfer of certain risks from the insured to the insurance company by contractual agreement.

Policy

The contract between the insurer and the insured.

Insurer

The insurance company.

Insured

The person covered by the policy's provisions.

Premium

The price paid by the insured for insurance protection for a specified period of time.

Underwriter

The insurer; the one assuming a risk in return for the payment of a premium.

Broker

An independent contractor who acts as the agent of the applicant for insurance.

Agent

A person who works for an insurance company and acts as the agent of that insurance company.

Insurable interest

A legal requirement created when there is sufficient interest in property or a person's life such that the insurance does not amount to a wagering contract; you must prove you would suffer financial, economic, or emotional loss.

Life insurance (Insurable Interest Timing)

Insurable interest must exist at the time the policy is obtained, not necessarily when the insured person dies.

Key-person insurance

Insurance obtained by an organization on the life of a person who is important to that organization, such as executives whose death would result in financial loss.

Property Insurance (Insurable Interest Timing)

Insurable interest must exist at the time loss occurs, but not necessarily when the policy is purchased.

Binder

A written, temporary insurance policy that provides coverage until a formal policy is accepted or denied.

Antilapse Clause

A provision stating the policy will not automatically lapse if payment is not made on the due date, giving the insured a grace period to pay the overdue amount.

Appraisal Clause

A provision allowing the valuation of an appraisal to be done by a third party if the two parties cannot agree on a price.

Arbitration Clause

A provision that allows for the use of arbitration to resolve conflicts regarding the insurance policy.

Coinsurance Clause

A clause usually found in property insurance to encourage the insured to maintain insurance up to the full value of the property.

Incontestability Clause

A provision where, after a policy has been in force for a specific time period, the insurer cannot contest statements made in the application.

Multiple Insurance Clause

A clause stating that if the insured has multiple policies covering the same property, the loss will be shared proportionally between insurance companies.

Standard fire insurance policies

Protects homeowners against fire, lightning, and damage from smoke and water caused by fire or the fire department.

Hostile Fires

Fires that begin in places where no fire was intended to burn; these are covered by most insurance policies.

Friendly fires

Burning in a place where there was an intent to burn; these are often not covered by insurance.

Proof of Loss

A formal requirement for the insured to file a claim with the insurer within a specified or reasonable time period after a loss occurs.

Occupancy Clause

A requirement that the premises be occupied at the time of loss; if vacant or unoccupied without insurer consent, coverage is suspended.

Property coverage (Homeowners)

Includes house, garage, private buildings, personal possessions, and additional living expenses incurred due to perils.

Perils

Disasters such as fire, lightning, wind, hail, vandalism, and theft.

Liability coverage (Homeowners)

Covers personal liability when someone is injured on the insured's property or if the insured damages property or injures someone else through negligence.

Auto Liability 100/300/50

For one accident, the policy pays a maximum of $100,000$ for bodily injury to one person, $300,000$ for injury to more than one person, and $50,000$ maximum for property damage.

Umbrella policies

Policies that provide higher liability coverage, triggered once the maximum coverage of the primary policy is reached.

Collision insurance

Covers damage to the insured's car in any type of collision.

Comprehensive insurance

Covers loss, damage, and destruction of a vehicle due to fire, hurricane, vandalism, or theft.

Uninsured motorist coverage

Insures the driver and passengers against injury caused by a driver without insurance or a hit-and-run driver.

Accidental death benefits

Also known as double indemnity; provides for a payment of twice the policy's face amount if the policyholder dies in an accident.

Medical payment coverage

Insurance that pays hospital and medical bills (and sometimes funeral expenses) for all passengers in the insured's car.

Other driver coverage

Also known as the omnibus clause; protects the vehicle owner and anyone who drives the vehicle with the owner's permission.

Comprehensive General Liability (CGL)

Encompasses as many risks as the insurer agrees to cover, including physical and financial loss.

Product liability

Protects manufacturers and retailers from liability for injuries from products they sell, including recalls and defective products.

Professional Malpractice

Insurance that protects professionals from negligence suits.

Workers compensation

Covers payments to employees who are injured in accidents arising from the course of employment.