P&C Terms

Premium

The amount paid for an insurance policy

Policy

The contract between the insurance company and the insured

Insured

The person or entity covered by insurance

Insurer

The insurance company

Claim

A request for payment after a loss

Loss

Damage or injury covered by insurance

Risk

The chance of loss occurring

Peril

The cause a loss (fire, theft, windstorm)

Hazard

A condition that increases the chance of loss

Physical Hazard

A tangible condition that increases risk (icy sidewalk)

Moral Hazard

Dishonesty that increases risk (insurance fraud)

Morale Hazard

Carelessness because insurance exists

Declarations

Basic policy information (name, limits, premium)

Insuring Agreement

What the insurer promises to cover

Conditions

Rules both parties must follow

Exclusions

What the policy does not cover

Endorsement

Changes made to a policy

Deductible

Amount paid by the insured before insurance pays

Limit of Liability

Maximum amount the insurer will pay

Actual Cash Value (ACV)

Replacement cost minus depreciation

Replacement Cost

Cost to replace property without depreciation

Coinsurance

Requirement to carry a certain percentage of insurance

Liability

Legal responsibility for damages

Negligence

Failure to use reasonable care

Damages

Money awarded for loss

Bodily Injury

Physical harm to a person

Property Damage

Damage to someone else’s property

Contract

Legally enforceable agreement

Consideration

Something of value exchanged (premium and promise to pay)

Indemnity

Restores the insured to their pre-loss condition

Subrogation

Insurer’s right to recover from the responsible party

Utmost Good Faith

Both parties must be honest

Representation

Statement believed true when made

Misrepresentation

False statement affecting policy issuance

Concealment

Hiding important information

Fraud

Intentional deception for gain

Dwelling Coverage

Coverage A, covers the home itself

Other Structures

Coverage B, covers detached garages, sheds, fences

Personal Property

Coverage C, covers belongings

Loss of Use

Coverage D, pays living expenses if home is unihabitable

Personal Liability

Coverage E, covers liability claims

Medical Payments

Coverage F, pays minor medical expenses regardless of fault

Liability Coverage

Pays for injuries or damage you cause

Collision

Covers damage to your car from a collision

Comprehensive (Other than Collision)

Covers theft, fire, hail, vandalism, etc

Uninsured Motorist

Covers you if the other driver has no insurance

Underinsured Motorist

Covers you when the at-fault driver lacks enough insurance

Medical Payments

Covers medical expenses after an accident

Common Causes of Loss

Fire, theft, vandalism, windstorm

Fire

Covered peril in most policies

Theft

Covered peril in many property policies

Vandalism

Intentional property damage

Windstorm

Damage caused by strong winds

Businessowners Policy (BOP)

Combines property and liability coverage for small business

Commercial General Liability (CGL)

Covers business liability exposures

Workers Compensation

Covers employee work related injuries

South Carolina Department of Insurance (SCDOI)

State agency that regulates insurance, enforces insurance laws, and licensing requirements

Insurance Producer

Legal term for an insurance agent

Unfair Trade Practices

Misrepresentation, false advertising, defamation, rebating, unfair discrimination

Misrepresentation

Giving false or miselading information about a policy

False Advertising

Advertising insurance in a deceptive way

Defamation

Making false statements about an insurer or competitor

Rebating

Offering part of your commission or something of value to induce a sale

Unfair Discrimination

Charging different rates for people with the same risk

What is it called when an agent offers a client a $50 gift card if they purchase a policy?

Rebating

Fiduciary Responsibility

Premiums belong to the insurer and agents must handle premiums honestly and properly

South Carolina Property & Casualty Insurance Guaranty Association

Helps pay covered claims if an insurance company becomes insolvent

South Carolina Wind and Hail Underwriting Association (SCWHUA)

Provides coverage for eligible property owners who can’t obtain wind/hail insurance through the normal market

Financial Responsibility

Drivers must show ability to pay for damages resulting from an accident

Cancellation

Policy ends before expiration

Nonrenewal

Company chooses not to continue coverage after expiration

Surety Bond has 3 Parties

Principal, obligee, and surety

Principal

Person promising to perform

Obligee

Person protected

Surety

Company guaranteeing performance

Formula for Actual Cash Value (ACV)

ACV = Replacement Cost - Depreciation

Calculate the ACV:

Roof replacement cost = $10,000

Depreciation = $3,000

$7,000

Coinsurance Penalty

(Amount Carried ÷ Amount Required) × Loss = Amount Paid

Calculate the Coinsurance Penalty:

• Building value = $100,000

• Coinsurance requirement = 80%

• Required insurance = $80,000

• Insured carries = $60,000

• Loss = $20,000

$15,000

Liability Limits

25/50/25

25/50/25

$25,000 bodily injury per person, $50,000 bodily injury per accident, $25,000 property damage

DP-1

Basic form, most limited coverage that covers perils only.

DP-2

Broad form, includes additional coverages

DP-3

Special form, most comprehensive dwelling form

PAP

Personal auto policy

Part A

Liability coverage

Part B

Medical payments

Part C

Uninsured motorists

Part D

Damage to your auto