Exam 3

Who suffers the loss in first party insurance? In third party insurance?

The insured suffers, a person outside of the insurance contract suffers

Who generally receives the benefit of first party insurance? In third party insurance?

The insured, the third party outside of the contract

First party insurance is insuring what?

The insured seeking payment for its own losses

assets, property, home

Third party insurance is insuring what?

Someone outside the insurance contract that the insured is liability for their damage or injury

my negligence to a third party

How do I decide how much first party (usually property insurance) insurance I should buy?

By valuing assets on either a replacement cost or ACV

How do I decide how much third party (liability) insurance I should buy?

You cannot know, but they have limits of not greater than $25 million

What is the only statutorily required coverage if you own an auto?

Coverage A - liability

What are the Georgia minimum required liability limits?

$25k/$50k/$25k

What do the three parts of split liability limits apply to?

Bodily injury per person, bodily injury per accident, property damage liability per accident

What is the only auto coverage where a deductible applies?

Physical Damage Coverage D

Auto liability provides coverage for damages you cause to a third party because of BI or PD. What does BI and PD stand for?

Bodily injury and property damage

What costs are covered by auto liability in addition to the policy limit?

Defense costs (in addition to the limits)

Are ATV's covered by PAP? Owned golf carts? Non-owned golf carts?

ATV are not usually, golf carts are not, but non-owned are

An Insured on the Auto Liability policy includes the named insured any family member that lives at home with the insured, and anyone that is using the covered auto with the insured's permission. What is the phrase that I repeated a thousand times in class about letting someone borrow your car?

Loan your car, loan your insurance

Why are intentional acts normally excluded on every insurance policy?

Moral hazard is not covered

Are you covered on the PAP while you are driving for Uber/Lyft?

No

Are you covered while using your car at a race-track?

no

What happens if I am driving in another state outside my home state and my liability limits on my policy are less than what is required in this other state?

They go up to the minimum limits in another state

Does my PAP provide excess coverage for liability? If so in what situation?

once the non-owned auto coverage is exceeded, mine would kick in

There are two times when the insured is covered for Med Pay on the PAP. What are they?

While occupying an owned-auto, non-owned auto, or struck as a pedestrian by an auto. Any other person who sustains bodily injury while occupying the owned-auto while being sued by you, a resident of your household, or other persons with your permission

Who else is covered for Med Pay on the PAP?

No-fault policy that pays for minor injuries that are caused on people inside the covered auto

Is the Med Pay on PAP usually a big limit or a small limit?

small

Do I have to be proven negligent in order for Med Pay to kick in?

no

Uninsured Motorists provide coverage in what two situations?

If the other driver is at fault and have no insurance at all or hit and run

Does UM provide BI or PD coverage in all states?

Bodily Injury

Part D is auto physical damage which covers damage to the insured vehicle. What are the two parts of Part D?

Collision and other than collision

Part D is the only part of the PAP where a deductible applies. Of the two parts of coverage, which normally has the higher deductible?

collision, because other than collision is not usually anyones fault

If I buy Part D for my owned auto do I have Part D coverage when I am using a non-owned auto?

Yes

Which of the two Part D coverages covers my colliding with an animal or a bird?

Other than collision

Which of the two Part D coverages covers me flipping my car over without colliding with anything

Collision

Part D of the PAP doesn't have a stated limit on the declarations page. What does the PAP pay in the event I have a wreck? (Hint: it's the lesser of two values)

Lesser of actual cash value at the time of loss or cost to repair (this is when the insurance company totals your car)

What is the concept called when I can get compensated for the reduction in value of my auto because it has been involved in an accident (even though it has been fully repaired to its prior condition)?

diminution of value

When you rent a car the rental car company will try to sell you the Collision Damage Waiver (CDW) that will protect you if you wreck the car while you have rented it. Is this cheap or expensive insurance? Under what circumstances should you buy the CDW?

Expensive, you should not buy it because you are covered by your pap. My liability coverage is in excess of their limits

Homeowners (HO) policies are written on a Named Perils Basis or on a Open Perils basis?

open peril

What peril basis is the dwelling and other structures covered on the HO-3?

Dwellings are covered on an open peril basis

Other structures are on a open peril basis

What perils basis is personal property covered on the HO-3?

Moveable property inside your home. Clothes, lamps, furniture. Actual cash value basis (named perils, not open)

What perils basis is personal property covered on the HO-4?

Property in your permitted premises. Named peril basis

What is the HO-4 commonly referred to as?

Renters Insurance

What does Coverage A - Dwelling cover?

The home

How should you determine the limit for Coverage A Dwelling?

Replacement cost

How does the market price of your home and the price of land your dwelling sits on factor into your limit decision for Coverage A?

Replacement cost is for your dwelling, but your land is not covered in an HO3, so the replacement cost would not include the cost of the land

How is the limit for Coverage B - Other Structures determined?

Limit is automatically set at 10% of the Coverage A limit

How is the limit for Coverage C - Personal Property determined?

Actual Cash Value basis with no coinsurance

Are animals covered under a HO3 policy? What if my dog bites someone?

Animals are not covered if something happens to them, but if they bite someone, it is covered under Coverage E and Coverage F

What does concurrent causation mean?

If an event is not covered (flooding) any loss from that event is not covered

flood and earthquake are always excluded

Is fine art jewelry, furs, and other high value-items covered under a HO policy?

Yes, under coverage C

small sublimits for these, can insure separately

What 3 situations does Loss of Use cover under a HO policy?

Additional living expenses, fair rental value, and civil authority prohibiting use

Are intentional torts like libel/slander automatically covered under a HO form?

no unless endorsed

What costs are automatically included in addition to the Coverage E policy limit?

Defense costs

Are defense costs unlimited?

yes

What is the major difference between Med Pay coverage on the HO policy as compared to the PAP?

MedPay on an HO is a third party (insured is not covered)

MedPay on a PAP is for insured and passengers

Why is the schedule of underlying so important on a personal umbrella policy?

It provides excess liability limits and determines whose umbrella will pay the excess of the policy

What coverages can the personal umbrella policy pay excess over as respects HO and PAP policies

In the HO3, its Coverage E (Liability).In the HO4, its Auto Liability and Uninsured Motorists

If you are renting an apartment or home and you don't buy an HO-4 policy where do you get your liability coverage?

You dont

Are the owner of a life insurance policy and the insured on a life insurance policy always the same person?

No

Who are the three parties to a life insurance policy (other than the insurer)?

Owner, insured, beneficiary

Do younger people tend to overpay or underpay for life insurance? What happens to this imbalance as you age?

Younger people overpay

What type of beneficiary gets to collect if all of the primary beneficiaries have died?

Contingent beneficiary

What clause states that the policy cannot be contested after 2 years because of misrepresentation, concealment, or fraud?

incontestable clause

How is suicide handled under life insurance?

If insured dies from suicide within the first 2 years, the policy is canceled and the premiums paid are returned to the insured's estate. After 2 years, suicide is covered and full policy limit is paid

Is term insurance more expensive or less expensive than cash value?

Term insurance is less expensive

Does your premium stay the same for the entire term of a term life insurance policy?

yes

When does your term premium increase?

Your term premium increases when the term ends and you renew the policy

Can your insurer ask you to take a health exam while the policy is in force?

no

For whole-life do premiums stay the same for the policy term?,

yes

When does a whole-life policy expire?

A whole life policy generally does not expire

Does your beneficiary get the cash-value of the policy when the insured dies?

no

What did Dave Ramsey have to say about Whole-Life?

Advises against whole life insurance, it is more expensive and people should buy term life insurance and invest the difference

What is the major difference between whole-life and variable life? Do variable life premiums stay the same throughout the term of the contract?

Variable life allows you to invest the cash value into sub-accounts, whole life has a guaranteed cash value. Yes, variable life premiums are general fixed

What is the phrase that most financial consultants use when it comes to buying life insurance

Buy term and invest the difference