Illinois Public Adjuster Examination Study Set

These vocabulary flashcards cover primary concepts, legal terms, and technical definitions found in the Illinois Public Adjuster transcript, ranging from basic insurance principles to specific Illinois regulations and construction terminology.

Pure Risk

The uncertainty of loss where there is only the chance of loss or no loss, and no chance for financial gain.

Speculative Risk

A risk that involves the chance of loss or gain which is taken on voluntarily and is not insurable.

Indemnity

The process of being made financially whole for a loss, ensuring the claimant is paid no more and no less than the actual financial loss.

CLAP for Contracts

A mnemonic for the four elements of a valid contract: Consideration, Legality, Agreement between the parties, and Parties who are mentally competent.

Consideration

Something of legal value exchanged by each party in a contract, defined as "what you give for what you get."

Contract of Adhesion

A contract written by one party (the insurer) only, where vagueness or ambiguity is interpreted in court in favor of the party who did not write it.

Doctrine of Reasonable Expectations

A legal concept where a court interprets vague or ambiguous policy language in favor of the insured’s objectively reasonable expectations.

Obsolescence

The decrease in value or uselessness of property resulting from technological advancements or changes in society’s values and taste, rather than wear and tear.

Adverse Selection

An abuse of the insurance system occurring when people seek coverage only when they have the most risk, such as buying flood insurance as floodwaters approach.

Representations

Oral or written statements made by an insurance applicant or claimant that one reasonably believes to be true at the time.

Material Misrepresentation

A falsified answer dealing with questions that affect the amount of risk involved, the insurer’s insurability, or the pricing decision.

Material Concealment

Hiding, covering up, or purposely failing to disclose facts that affect the risk, such as known hazards.

Hazard

A feature or characteristic existing before a loss occurs that makes a loss more likely.

Physical Hazard

Characteristics of property that make a loss more likely, such as combustible materials, vacancy, or location in a crime-ridden area.

Moral Hazard

Characteristics of people that make a loss more likely, exhibited by applicants who would defraud an insurer or intentionally cause a loss.

Morale Hazard

Characteristics of people showing a poor attitude or lack of concern about a loss because insurance is in place to cover it.

Vacancy

A physical hazard where a building is empty, without occupants, inhabitants, or contents, often resulting in suspended coverage after 60 days.

Insurable Interest

An economic interest or financial stake in property created when a party suffers a financial loss if the property is damaged or destroyed.

Direct Loss

Physical damage, destruction, or theft caused by a peril insured against.

Indirect Loss

Also known as "loss of use" or "time element loss," it occurs when a direct loss makes property unusable, involving lost revenue or temporary rental costs.

Hostile Fire

A fire that has escaped or gotten out of its intended place or receptacle.

Friendly Fire

A fire that stays in its intended place or receptacle, such as a fire in a fireplace.

Concurrent Causation

When a direct loss is caused by more than one peril simultaneously or occurring in a sequence.

Open-Peril Approach

Sometimes called "all-risk" or "special form," this insures against all perils except those specifically excluded.

Deductible

A deduction from the amount of covered loss which is subtracted to determine the insured’s potential recovery.

Actual Cash Value Basis

Settlement based on the replacement cost of property minus the amount of depreciation existed at the time of loss.

Replacement Cost Basis

The amount it will cost to replace damaged property with new property of like kind and quality.

Right of Appraisal

A clause used to settle a dispute over the amount of covered loss involving two appraisers and a third neutral party called an umpire.

Right of Subrogation

The transfer of the insured’s rights to financially recover from a responsible party to the insurer after a loss is paid.

Bailment

The voluntary and temporary relinquishment of non-owned property to another for service, such as storage or repair, where possession changes but title does not.

Binder

A legal agreement issued by an agent or insurer to act as temporary evidence of insurance until the policy is issued.

Estoppel

A legal prohibition against taking a position inconsistent with a position previously taken by a person or their legal agent.

Declarations Page

The section of an insurance policy containing individually-tailored specifications such as named insured, limits, deductibles, and premium.

Standard Fire Policy

The first standardized policy form in the USA, used as the foundation for modern property insurance forms.

HO-3 Form

A homeowner's insurance form that uses an open-perils approach for dwellings and a named-perils approach for personal property.

HO-4 Form

A homeowner's insurance form designed for tenants that covers personal property but does not cover buildings or structures.

Coverage B

Homeowner's insurance coverage for Other Structures detached from the dwelling, with a limit automatically set at 10% of the dwelling limit.

Coverage C

Homeowner's insurance coverage for Personal Property, with a limit automatically set at 50% of the dwelling limit.

Coinsurance Formula

A calculation used to determine payout when limits are too low: $\frac{\text{Policy's Limit}}{\text{Property's Full Value} \times 80\%} \times \text{Amount of Loss} = \text{Payout}$.

Period of Restoration

The reasonable amount of time needed to repair a direct loss during which Business Income and Extra Expense coverage applies.

Inland Marine

Insurance policies, often called "floaters," designed to insure a wide variety of movable and personal property worldwide.

Burglary

A type of theft involving illegal entry or breaking in with actual force and visible marks of physical damage to the exterior.

Robbery

A type of theft involving confrontation with a person and the threat or use of harm or violence.

Flood

A temporary condition where two or more acres of normally dry land or two or more properties are inundated by runoff, overflow, mudflow, or mudslide.

Surety Bond Parties

The three parties involved are the Principal (promisor), the Obligee (receiver of promise), and the Surety (insurer).

Concrete Cubic Yard

A measurement for concrete volume equaling 27 cubic feet, which would pour a 12-inch thick slab covering 27 square feet.

Roof Ridge

The horizontal line at the junction or apex of the top edges of two sloping roof surfaces.

Hip Roof

A roof that rises by inclined planes of the same pitch from all four sides of a building, containing no gables.

Tolling

The act of putting on hold the period within which an insured may bring suit, specifically from the date proof of loss is filed until the claim is denied.

Illinois Insurance Guaranty Fund

A fund established to pay covered claims when a member insurer becomes insolvent and cannot meet state-law deadlines for payment.