property and casualty exam flashcards

insurance

the transfer of risk of loss

- in exam if risk isn't an option, chose loss 2nd

risk

the uncertainty or chance of loss occurring

what are the two types of risk?

pure risk and speculative

pure risk

loss or nothing- no chance of gain. only insurable risk.

speculative

loss or gain, ex: gambling

handling risk

sharing, transfer, avoidance, reduction, retention

exposure

the unit of measurement to determine rates for an insured based on how risky they are

hazards

increases the chance of the risk occurring

physical hazards

material and structural things you can see and touch

moral hazards

lying on purpose; ex lying on insurance application

morale hazards

a sense of carelessness

loss

the reduction or disappearance of value

peril

the cause of loss like fire, rain, hail etc.

the law of large #'s

says the more stats you have to look at, the more predictable losses will be

reinsurance

when a company indemnifies another

certificates of authority

allow insurer to sell in that state making them admitted and authorized

stock companies are

owned by shareholders, issue non participating policies and dividends are taxed

mutual companies

owned by the policy owners, issue participating policies and dividends are not taxed

domestic

insurer is a state they are incorporated (headquartering & selling)

hint: one state

foreign

insurer is a state where they are not head quartered, but they are selling

hint : two states

alien

completely outside of the US

hint : country

law of agency

agent that represents the insurer and the knowledge of the agent is knowledge to the insurer

elements of a legal contract

1. agreement

2. consideration

3. acceptance

agreement

offer and acceptance

offer

customer submits and application

acceptance

insurer issues policy

consideration

both parties bring something of value

consideration on the side of the insured

application + premium

consideration on the side of the insurer

promise to pay claim

competent parties

not under the influence of drugs or alcohol, sound mind, legal age

legal purpose

cannot be against public policy or break the law

adhesion

insurer write the policy, customer either takes it or leaves it

aleatory

unequal exchange

assignment

the insured assigns a policy to another person

unilateral

one sided promise, only the insurer is legally bound to do anything

conditional

both parties have rules/duties/ behaviors they must do

reasonable expectations

a customer can expect the coverage if an agent implied it through the sale

indemnity

restore the insured to their previous financial condition

representation

statements that are believed to be true but are not guaranteed to be true

misrepresentation

an untrue statement

warranty

absolutely true statements

concealment

with holding or hiding on the application

fraud

deceive or lying to cheat the insurance company

agent authority : expressed

written/contract

Agent Authority: Implied

assumed by the insurer

agent authority : apparent (perceived)

is assumed by customer (business cards/letterhead/stationary)

fiduciary responsibility

agents submits premium collected to the insurance company

does dwelling require the owner to live in the house? aka owner occupied

no

does the homeowners policy require the owner to live in the house?

yes

which type of policy must come with liability and contents coverage?

homeowners

which policy has liability/content coverage as an add on?

dwelling

what is coverage a for both dwelling and homeowners?

roofs and walls

what is coverage b for both dwelling and homeowners?

other structures (shed, fences etc)

what is coverage c for both dwelling and homeowners?

contents ( personal items, furniture etc. )

what is coverage d for homeowners policy?

loss of use ( rental value & additional living )

what is the coverage d for the dwelling policy?

fair rental value

who is a dwelling policy usually purchased by?

landlords

what is coverage e for the homeowners policy?

liability (damages, injuries at fault)

what is coverage f for the homeowners policy?

medical payments

what is coverage e for the dwelling policy?

additional living

what are the different types of dwelling policies?

dp1, dp2, dp3

what coverage level is dp1?

basic level

what coverage level is dp2?

broad level

what coverage level is dp3?

special level

what coverage level is dp4?

extended coverage

what is the liability policy?

coverage against any damages/injuries insured caused

what is the contents policy?

all your belongings protected against loss/damage

material representation

information given that is not true and DOES affect the insurer's decision

underwriting

risk selection process

insurable interest

must have interest in the person/item insuring. must be related/married

named peril

a policy that will only cover perils listed

open peril

a policy that cover any perils EXCEPT what's excluded, does not list what is covered in policy

vacancy

a house is vacant when there are NO people and NO stuff. At 61 days of being vacant, a house will begin to lose coverage

Unoccupency

a house that has stuff, but no people that intend to come back

direct loss

the direct physical damage to property, which includes proximate cause of loss too

ex: house on fire, car accident etc.

indirect loss

consequential loss after a direct loss

ex: lost income, extra costs, damage costs etc.

a property insurance clause that extends broader coverage to current policies; no premium increase

liberalization

the amount of money realized from the sale of damaged merchandise

salvage

increase the probability of a loss

hazard

What type of property insurance policy covers a certain kind or unit of property?

Specific insurance

What does specific insurance cover?

A certain kind or unit of property for a set amount of insurance

replacement cost minus depreciation equals

acv

the replacement cost method of loss valuation is defined as

cost to buy brand new today

a policy based on a fair valuation for the property

agreed value

a policy based on the max amount of money the insurer will pay in the event of a loss

stated value

the other party's negligence or fault will not necessarily defeat the claim

comparative negligence

the injured party must be completely free of fault in order to collect

contributory negligence

how are auto policy coverages described?

parts

what is part (a) in auto policies?

liability; whoever is at fault and their insurance company is paying for damages

what is part (b) in auto policies?

medical payments; helps pay medical expenses related to injuries sustained by the insured or their passengers

what does the total bodily injury cover?

medical injuries and property damage insurer caused by you or passengers

what is part (c) in auto policies?

uninsured motorist coverage; protects you if you are involved in an accident with someone w no insurance

what is part (d) in auto policies?

coverage for damage to auto; covers collision or accidental damage to your own car, excluding personal items.

printed addendums to a contract are

endorsements

termination of a policy during the terms is

cancellation

provides for the sharing of loss with other insurance that may be written on the same risk

pro rata

factor that determines the premium to be charged

loss valuation

proximate cause of loss

primary & significant event that led to the cause of a loss

what is the extra coverage available for auto policies

underinsured motorist coverage, which helps pay for damages when you are in an accident with a driver who has insufficient insurance.