Insurance Test #2

indemnity

The insurer agrees to pay no more than the actual amount of the loss

Purpose:

•To prevent the insured from profiting from a loss

•To reduce moral hazard

Negligence

Negligence is the failure to exercise the standard of care required by law to protect others from an unreasonable risk of harm

Elements of Negligence

•Existence of a legal duty to use reasonable care

•Failure to perform that duty

•Damage or injury to the claimant

•A proximate cause relationship between the negligent act and the infliction of damages, which requires an unbroken chain of events

Trespasser

A trespasser is a person who enters or remains on the owner's property without the owner's consent

Licensee

A licensee is a person who enters the premises with the occupant's expressed or implied permission

Invitee

An invitee is a person who is invited onto the premises for the benefit of the occupant

Medical Malpractice & Risk Reduction

Methods to reduce medical malpractice costs include:

•Not charging for "never events"

•Laws allowing physicians to apologize without allowing the admission to be used against them

•Prompt disclosure of medical errors

•Remedial action against problem physicians

•Emphasis on risk management principles

Declerations

Declarations are statements that provide information about the particular property or activity to be insured

- Used for underwriting and rating purposes and for identifying the property or activity to be insured.

Insuring Agreement

Summarizes the major promises of the insurer

•Named perils coverage, where only those perils specifically named in the policy are covered.

Open-perils, or special coverage, where all losses are covered except those losses specifically excluded.

Exclusions

3 major types of exclusions in insurance contracts.

•Excluded perils, e.g., flood, intentional act, earthquake

•Excluded losses, e.g., a professional liability loss is excluded in the homeowners policy

•Excluded property, e.g., pets are not covered as personal property in the homeowners policy

conditions

•Conditions are provisions in the policy that qualify or place limitations on the insurer's promise to perform

Deductible

•Deductible is a provision by which a specified amount is subtracted from the total loss payment that otherwise would be payable

The purpose of a deductible is to:

•Eliminate small claims that are expensive to handle and process

•Reduce premiums paid by the insured

•Reduce moral hazard and attitudinal (morale) hazard

Purposes of Coinsurance

•Coinsurance clause in a property insurance contract encourages the insured to insure the property to a stated percentage of its insurable value

•The fundamental purpose of coinsurance is to achieve equity in rating

The purposes of coinsurance in health insurance are to reduce premiums and prevent _______overutilization__________ of policy benefits

Personal Auto Policy Part A (Liability):

It protects a covered person against a suit or claim arising out of the ownership or operation of a covered vehicle

Excludes intentional acts and unauthorized drivers.

Split Limits

Split limits of 250/500/100 means that you have:

A maximum amount of $250,000 for bodily injury to __each__person for any one accident

A maximum amount of $500,000 for the bodily injury to __all_persons resulting from any one accident

A maximum amount of $100,000 paid for __property__ damage resulting from any one accident

No-Fault Insurance

coverage requiring that parties to an automobile accident be indemnified by their own insurance company regardless of who is at fault

Under a ____modified___ no-fault plan, an injured person has the right to sue a negligent driver only if the bodily injury claim exceeds the dollar or verbal threshold (KANSAS:>$2,000 or serious injury)

Arguments for no fault laws

Eliminates difficulty in establishing fault, reduces litigation costs, and speeds up claim payments.

Personal Liability (Coverage E)

Personal liability insurance protects the named insured and family members against legal liability arising out of their personal acts

Homeowners 3 (HO-3) Coverage C Perils

•Personal property is insured for a direct physical loss if it is caused by one of the perils listed in the policy

•The peril must be the ___proximate______ cause of the loss

•Named perils include fire, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism, falling objects, etc.

Excluded Perils (Unendorsed Policy)

•____Concurrent_______ causation losses

•Any loss due to an ordinance or law, except as described in the Additional Coverages

•Losses due to earth movement

•Certain __water___ losses

•Losses due to power failure or faulty design

•Losses which are due to neglect or intentional

•Losses due to war, government action, failure to act, or nuclear hazard

•Losses due to certain weather conditions

Underwriting & Rating Factors

Includes construction type, geographic location, fire protection class, and insurance score (race is illegal/prohibited).

Personal Umbrella Policy (PUP):

The personal umbrella policy protects against a catastrophic lawsuit or judgment

Coverage is broad and includes protection against certain losses not covered by the underlying contracts

Title Insurance

Title insurance protects the owner of property or the lender of money for the purchase of property against any unknown defects in the title to the property under consideration

The premium is paid only once when the policy is issued

The policy term runs indefinitely into the future

Commercial Package Policy (CPP)

Combines multiple coverage parts for convenience, fewer gaps, and lower premiums.

Products Liability

Injury/damage caused by manufactured or sold products.

Cyber Liability

Coverages for data breaches, network security, and cyber extortion.

Ocean Marine vs. Inland Marine Insurance

Ocean Marine: Protects Goods transported over water.

Inland Marine: Protects Goods transported on land (or air/in-transit).

Business Income Insurance

Business income insurance is designed to cover the loss of businessincome, expenses that continue during the __shutdown___ period, andextra expenses because of loss from a covered peril

Workers Compensation

Workers compensation insurance provides medical care, cash benefits, survivor benefits, and rehabilitation services to workers who are injured or die from job-related accidents or disease

Benefits are paid on the principle of liability without _fault_: the employer is held absolutely liable for job-related accidents and diseases regardless of fault