Insurance Class

The business of insurance is regulated on the ____

state level

State insurance laws are made by the legislative branch and enforced by the executive branch, represented by the ____

Commissioner, Director, or Superintendent of Insurance

The insurance industry is still subject to certain federal regulations as well. The _______ protects the privacy of consumer credit information by regulating the ways insurers collect, use, and store credit reports.

Fair Credit Reporting Act

The _______ provides consumers with the legal right to opt out of information sharing and requires insurers to provide privacy notices at the time the customer relationship is established and annually thereafter.

Gramm-Leach-Bliley Act (GLBA)

The _______ is a temporary program to provide reinsurance for losses arising from the peril of terrorism, which is generally too catastrophic to be covered in the private market. The act is designed to protect the public and only applies to commercial property and casualty insurance, including excess insurance and Workers' Compensation.

Terrorism Risk Insurance Act (TRIA)

The act does not apply to _______ coverage, commercial auto insurance, or surety insurance

Federal crop and federal flood

The Terrorism Insurance Program is administered by the _______, who determines what is considered an act of terrorism.

Secretary of Treasury

A _______ is an agreement between two or more parties that is enforceable by law.

Contract

In order to be valid, the contract must be made by _______ who have legal capacity to enter into the contract.

Competent parties

The contract must be entered into for a _______ in good faith.

legal purpose

The contract must include an _______ composed of an offer and acceptance.

agreement

The contract must also include the exchange of value, known as _______.

consideration

Insurance contracts are _______ because the insurer writes the contract on a take-it-or-leave-it basis, but any ambiguities in the contract will be interpreted in favor of the insured.

contracts of adhesion

Insurance contracts are also _______, as the uncertainty of loss means there will be an unequal exchange of value.

aleatory contracts

_______ are statements made by the applicant on the application that are believed to be true at the time of application.

Representations

These are different from _______, which are guaranteed to be true.

warranties

_____ false statements contained in the application.

misrepresentations

If a representation or misrepresentation affects the insurer’s acceptance of the risk, it is said to be _______.

material

Material misrepresentations and breached warranties may _______ the policy

void

Contracts of insurance provide protection in the event an accident (a sudden, unforeseen, and unintended event) or an _______ (an accident that includes continuous exposure to the same generally harmful conditions) causes a loss.

occurrence

The policy that responds first is known as _______.

primary insurance

A policy that responds only after that policy’s limits are exhausted is known as _______.

excess insurance

If a loss does take place, the insurance policy is responsible for returning the insured to the same financial or physical condition that existed prior to loss, which is known as the _______.

principle of indemnity

The insured must have the potential to suffer financial or economic hardship if a loss were to occur. This _______ must exist at the time of loss, though the insured will likely need to prove their interest in the policy prior to obtaining coverage.

insurable interest

Before an insurer is able to issue an insurance policy, it may issue a _______, which is a temporary contract to provide insurance coverage for a limited amount of time before the issuance of the full policy.

binder

Evidence that insurance coverage at certain amounts is in place is provided by a _______

certificate of insurance

All property and casualty insurance policies will have similar structures. The _______ includes the name of the named insured, a description of the property, the type of business insured, where the insured property is located, when the policy is in effect (known as the policy period), and any applicable limits and deductibles.

declarations page

The _______ is the insurer’s promise to pay the insured and includes the covered perils.

Insuring Agreement

If the insured wants to add coverages that are not included in the policy, change limits, or otherwise alter the policy, they may add _______, usually for an additional charge.

endorsements

Policies often automatically include _______ without increasing the premium.

Additional Coverages

The _______ section lists the perils not covered by the policy.

exclusions

The _______ section specifies the obligations of the insured and insurer.

Conditions

Property and casualty policies include a number of common conditions. The _______ states that if the insurer broadens coverage with no increase in premium, that coverage will apply to existing policies without the need for an endorsement.

Liberalization Clause

Insurers are also given the right of _______ to recover the cost of claims paid to the insured from the third party responsible for a loss.

subrogration

If multiple insurance policies apply to the same loss, the _______ condition will coordinate coverage.

other insurance

A policy that pays a proportion of the loss based on the ratio of insurance it writes compared to the total of all applicable limits pays on a _______ basis.

pro rata

Policies that pay equal parts of the loss until each insurer has paid its limit uses the _______ basis.

contribution by equal shares

If the insured and insurer disagree on the amount payable for a loss, the disagreement will be settled by _______.

arbitration

The insured’s obligations after a loss are specified in the _______ condition.

Duties in the Event of Loss

The insured must submit a _______ to inform the insurer a loss occurred.

notice of loss

The insured must then submit a sworn _______ within a certain time period that contains more detailed descriptions of the loss, including an inventory of lost property.

proof of loss

The condition also specifies that the insured must protect property from further damage and _______ with an insurer’s investigations.

cooperate

An insurance policy that is terminated before its expiration date is _______.

cancelled

_______ means that no coverage is provided and any paid premium is returned.

flat cancellation

When the insurer cancels a policy, retains the earned premium, and returns the unearned premium, it is known as _______.

pro rate cancellation

When the insured cancels the policy and the insurer charges a financial penalty, it is known as _______.

short rate cancellation

Policies that are not kept in effect for another policy term are considered _______.

nonrenewed

Property insurance is _______ with the insured as the first party and the insurer as the second party.

first party insurance

Property coverage provides protection for damage or loss to _______ (fixed property) and personal property.

real property

It is sometimes referred to as fire insurance because protection against _______ (a fire that burns outside of its intended bounds) is an essential coverage.

hostile fire

This is provided for by the _______, which is the basis of all property policies written today.

standard fire policy

The SFP covers direct loss to property immediately resulting from _______ that are specified in the policy.

named perils

Other policies may have _______ coverage that would provide insurance for all causes of loss the policy does not exclude.

open perils

These covered perils are fire, lightning, and the _______ from premises endangered by covered perils.

removal of property

It does not cover _______, or consequential loss, that results from a direct loss.

indirect loss

When a property policy determines if a loss was covered, they often look for the direct or most important cause of loss, known as the _______, which must be covered by the policy for the insurer to pay the claim.

proximate cause

In some cases that involve _______ by multiple perils that are all the proximate cause, the loss may be covered even if the policy excludes one of the perils.

concurrent causation

Under certain property policies, the circumstances around a loss determine if it is ultimately covered. For example, some policies may deny coverage for _______ property that contains no personal property or occupants.

vacant

However, policies may still allow coverage for _______ property that contains personal property, but no occupants.

unoccupied

Some policies may protect specifically against _______, when property is stolen from property with signs of forced entry or exit.

burglary

Some policies may protect against _______, when property is stolen from someone who was threatened with harm or harmed.

robbery

Some policies may protect against _______ broadly, which includes all acts of stealing.

theft

The SFP usually settles losses on a(n) _______ basis, which is the cost at the time of loss to repair or replace damaged property minus depreciation, but other property policies may use another loss valuation basis.

actual cash value

Valued policies will use a(n) _______ basis to cover property for an agreed-upon amount, regardless of the actual cash value of the property.

agreed value

_______ is the cost to replace property with property of like kind and quality, at current pricing, without a deduction for depreciation.

replacement cost

Policies using this basis usually require the insured to maintain insurance to value under a _______.

coinsurance clause

If the insured does not maintain insurance to a specified percentage, then a proportionate penalty will be applied when the insurer pays for _______.

partial losses

Disputes about the amount that can be paid to the insured will be settled by _______.

appraisal

The amount of a claim paid by the insurer also depends on the limit of liability. A _______ insures a single item of property for a single limit of insurance.

specific limit

A _______ insures multiple properties or types of property at multiple locations for a single limit.

blanket limit

_______ insure multiple items on the same policy, but for separate limits.

scheduled limits

Property policies often require the insured to retain part of the loss by paying a _______. This helps reduce the number of small claims and protects the insurer’s ability to pay more urgent claims.

deductible

Property insurers have the right of _______ to take possession of damaged property after paying for its loss.

salvage

They may refuse to accept damaged property surrendered to the insurer for repair or disposal, known as _______.

abandonment

The financial interest of a mortgagee is protected by the _______.

mortgage clause

The mortgagee is allowed to pay the premium and submit a _______ in the event the insured fails to do so, which would allow the mortgagee to still receive payment.

proof of loss

Similar interests of a creditor or lienholder are protected by the _______.

loss payable clause

Through the No Benefit to Bailee condition, property policies do not pay for losses that would be to the benefit of a _______, who is a person or organization that has taken someone else’s property into their care for servicing, repair, or storage.

bailee

Casualty insurance, also called liability or _______, provides protection in the event the first-party insured is legally liable for bodily injury or property damage to a third party.

third-party insurance

The third party may be owed compensation, or _______.

damages

_______ can be awarded to the injured third party for actual sustained losses.

compensatory damages

Damages for specific and calculable loss amounts are known as _______.

special damages

Damages for noneconomic losses that are difficult to calculate are known as _______.

general damages

Liability insurance usually does not cover _______ against the insured that are ordered by the court to punish the wrongdoer.

punitive damages

A _______ is a wrongful act that violates a duty or the rights of another.

tort

Insurance covers unintentional torts, known as _______, which is a breach in the level of care a reasonable person would exhibit under the same circumstances.

negligence

An act is negligent if it contains a _______ and a breach of that duty was the proximate cause of actual and substantial loss or damage to the third party.

legal duty of care

The loss or damage must be the _______ of the negligent act.

foreseeable consequence