Unit 2 Policy Structure

Declarations

The section of an insurance policy containing the basic underwriting information, such as the insured’s name, address, amount of coverage and premiums, and a description of insured locations. It also contains any supplemental representations by the insured

The first page of the policy

Declaration

Definitions

Components of an insurance policy clarifies terms used in the policy. Typically word in bold, italics, or quotations

Insuring agreement

The section of an insurance policy that establishes the obligation of the insurance company to provide the insurance coverages as stated in the policy

Agreement

What lists the parties contract, effective and renewal dates, the description of coverage provided, and perils

Additional coverage

A provision in an insurance policy that provides an additional amount of coverage for specific expense, at no additional premium

Conditions

The section of an insurance policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy

Inspections, changes to the policy, liberalization clause, and return of premium

What are examples of conditions

Inspections

May be made as needed by the insurer. The insurance company reserves the right to inspect or examine the insured’s location or books to determine the exact exposure for underwriting and rating purposes

Changes to the poicy

Must be made by the insurer and be in writing

The liberalization clause

Ensures that if the insurer introduces improved coverage free of charge, the insured will get the benefit of the new coverage immediately and will not have to wait for policy renewal

Return of premium

Dictates the metho that will be used to calculate how much the insured will receive when policy is cancelled before expiration date

Exclusions

Details the perils that are not insured against and what person are not insured

Endorsements

Printed addendums to a contract that are used to change the policy’s original terms, conditions, or coverages

Certificate of insurance

Written evidence showing that an insurance policy has been issued

Insured

Anyone covered under the policy

Named insured

Means the individual(s) whose name appears on the policy’s declarations

First named insured

The individual whose name appears first on the policy’s declaration

Additional insureds

Individuals or businesses that are not named as insureds on the declaration page but are protected by the policy, usually in regard to a specific interest

Protect damaged property from further damage, prepare inventory of damaged property, cooperate with the insurer in settling the loss, notify the police in the case of theft, and submit signed proof of loss to insurer

In the event of a loss what is the insured required to do

Assignment

Transfer of a legal right or interest in an insurance policy

With the prior written consent of the insurer

In property and casualty insurance, assignment of polices are valid only

Waiver

The voluntary act of relinquishing a legal right, claim or privilege

Estoppel

A legal process that can be used to prevent a party to a contract from re-asserting a right or privilege after that right or privilege has been waived. A legal consequence of a waiver

Policy period

Time period, stated on declaration page, during which the policy provides coverage

Polic territory

The location where coverage will be provided

Policy limits

The maximum amount an insured may collect, or for which an insured is protected under the terms of the policy

Cancellation

Termination of an in force insurance policy prior to the expiration date shown in the policy

Nonrenewal

Termination of an insurance policy at its expiration date by not offering a continuation of the existing policy or a replacement policy

Deductable

Dollar amount an insured must pay on a claim before the insurance policy provides coverage

Coinsurance

States that in consideration of a reduced rate, the insured agrees to maintain a certain minimum amount of insurance on the insured property

Coinsurance penalties

The amount of insurance carried over the amount of insurance the insured should have had, multiplied by the loss, which equals the reduces payment for loss

Other insurance

A provision in an insurance policy that defines how the policy will respond there is other valid insurance written on the same risk

Nonconcurrency

Other insurance written on the same risk, but not on the same coverage basis

Primary policy

Pays first in the event of a covered loss

Excess policy

Only pays for a loss after the primary plan has paid up to its limit

Pro rata

A provision found in some property insurance policies that provides for the sharing of loss with other insurance that may be written on the same risk in the same proportion as their limits of insurance bear to the total of coverage of all policies covering the risk, whether collectible or not

Contribution by equal shares

When 2 or more insurers issue policies on the same loss at the same level. Each insurer (primary or excess) contribute an equal amount to the loss settlement until the loss is paid, or until each insurer has exhausted its limits of insurance

Limits of liabiliy

The insurer’s liability for payment as stated in an insurance policy. The maximum amount of money the insurance company will pay for a particular loss during a period of time

Per occurrence

A sublimit in a liability policy that puts a ceiling on the payment for all claims that arise from a single accident/occurrence

Aggregate limit

The maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims made or the number of accidents that occur

True

Aggregate limits are restored at the anniversary of the policy

Per person

The maximum amount available for payment of bodily injury to a single person in an accident, regardless of the policy limit stated in the policy for bodily injury claims

Split limits

Are separately stated limits of liability for different coverages

Combined single

A single dollar limit of liability applying to the total of damages for bodily injury and property damage combined, resulting from one accident or occurrence

Vancancy

Insured structure in which no people have been living or working, and no property has been stored for the period of time required as stated in the policy (usually 60 days)

Unoccupancy

An insured structure in which no people have been living or working within the required period of time but some property stored

Insured provisions

Used in the event of loss to repair or replace damaged property with property of like kind and quality or to adjust the loss and make payment to the insured or a person legally entitled to receive payment within 60 days of receiving the insured’s proof of loss

Liberalization

A property insurance clause that extends broader legislated or regulated coverage to current policies, as long as it does not result in a higher premium

Subrogation

The insurers legal right to seek damages from third parties, after it has reimbursed the insured for the loss

Third party provisions

address the rights of a third party that may have secured financial interest in the insured property

Standard mortgage clause (loss payable clause)

A basic provision of all property policies for real property (nonmovable property such as houses and other structures) In the event of loss to real property, payment will be made to the insured and the mortgagee as their insurable interest appears

Loss payable clause

Used to cover the interest of a secured lender in personal property

No benefit to bailee

Excludes any assignment or granting of any policy provision to any person or organization holding, storing, repairing, or moving insured property for a fee