C81 General Insurance Essentials - Part 1

These flashcards cover essential vocabulary and concepts from the C81 General Insurance Essentials, focusing on insurance contracts, principles, terms related to claims, and financial aspects of insurance.

What is a contract in insurance?

A contract in insurance is defined as an agreement where one party (the insurer) agrees to indemnify another party (the insured) against loss or damage occurring from specific events in exchange for a premium.

Define 'insurable interest'.

Insurable interest is the financial interest a person has in the subject matter of insurance, whereby the insured would suffer a financial loss from its damage or destruction.

What is the principle of 'utmost good faith'?

Utmost good faith is a legal principle requiring both the insurer and the insured to act with the highest level of honesty and to fully disclose all material facts in the insurance contract.

What is the definition of 'premium' in insurance?

A premium is the total cost of an insurance policy, calculated as the price of a unit of insurance multiplied by the amount of coverage.

What does the term 'deductible' mean?

A deductible is an agreed specified amount that the insured must pay on a claim before the insurance company will cover the rest of the claim.

What is 'subrogation' in insurance?

Subrogation is the legal process by which an insurer, after paying a claim, acquires the right to recover that amount from the party responsible for the loss.

Differentiate between 'direct loss' and 'indirect loss'.

Direct loss refers to damage to or loss of the insured property itself, while indirect loss refers to losses resulting from the direct damage but not caused directly by the peril, such as loss of income.

Define 'coinsurance clause'.

A coinsurance clause is a provision that requires the insured to carry insurance equal to a specified percentage of the value of the property to avoid penalties in losses due to underinsurance.

Explain what 'excess insurance' means.

Excess insurance is a coverage provision that activates after other insurance policies have been exhausted, requiring that the other insurance pays first.

What is 'settlement' in claims processing?

Settlement in claims processing refers to the agreement on the amount to be paid by the insurer to the insured for a claim.