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Definition
| The transfer of risk from insured to insurer. |
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To restore policy holder to pre-loss condition; make whole.
- No better - no worse |
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| ▬Insurance companies take on many risks with a reasonable assurance of paying a certain number of claims.▬- As number of loss exposures increase, difference between actual & expected results becomes smaller. - This allows the insurance company to predict potential future losses more accurately. MORE PEOPLE INSURED MORE THEY CAN PREDICT LOSS |
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| Covers the insured's real estate & personal property against damage or loss due to covered perils & consequential losses. |
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| Protects insured from financial loss from non-property insurance losses.. - Non-property insurance coverage |
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The insurance company's insurance company.
- Insurance company determines retention limit & buys reinsurance for the balance. - Also known as "POOLONG THE RISK" |
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| Personal vs. Commercial Lines |
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Definition
▬Personal: Insurance for families & individuals (auto, homeowners, watercraft, inland marine, miscellaneous forms).
▬Commercial: Insurance for business of any size of professionals (doctors, lawyers). - Business Auto & truckers. - Commercial property, -Ocean/inland marine. - Workers compensation. - Crime forms. - Surety bonds. - Miscellaneous forms. |
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Definition
| Uncertainty of financial loss. - PURE RISK: chance of loss only, can be covered by insurance. - SPECULATIVE RISK: chance of loss or gain, gambling, cannot be covered by insurance |
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| Managing Risk (Risk Management) |
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Definition
| The dollar amount of potential risk is determined by statistics of prior losses. -Statistics determine whether risk is insurable.- The analyzing of pure risks to the possibility of loss & determining how to handle these exposures. - Managing risks is a system of choices available to individuals, businesses, & insurance companies |
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Term
| Methods Of Handling Risk (STARR) |
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Definition
| ▬Sharing: Chance of loss is shared among many individuals & called pooling the risk ▬Transfer: Shifting the financial burden of a loss from the insured to another party. THIS IS THE PURPOSE OF INSURANCE ▬Avoidance: Avoiding a particular activity that could turn into a loss ▬Retention: Accepting the possibility of a loss yourself. A deductible is a form of retention -the insured assumes part of the risk by insuring only above a certain dollar amount.▬Reduction: Taking action to reduce the possibility of loss. |
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| Elements of an Insurable Risk CANHAM |
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Definition
| CANHAM - Lost must be:▬Calculable:prior loss statistics are available.▬Affordable:premiums must be affordable to the average consumer. ▬Non-catastrophic:No earthquakes, war, terrorism. Homogeneous exposures:Similar exposures. ▬Accidental:Not intentional. ▬Measurable: Number & dollar amounts |
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| A condition or situation the presents the possibility of loss |
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Definition
| Causes of loss. - Common causes of loss include fire, wind & lightning. - A policy can be written jn one of two forms: ▬SPECIFIED (named), perils covered specifically listed in policy. ▬OPEN PERIL (all risk), Specifically lists exclusions; everything else is covered |
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| Hazards increase the chance of loss. ▬Physical: material characteristics. ▬Moral: Dishonest tendencies. ▬Morale: Careless irresponsible attitude |
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Physical: cracked sidewalk
Moral: Intentionally burn down house
Morale: Leave keys in unlocked car |
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| Unintended, unforeseen damage to property, injury, or amount paid. ▬Direct: Physical loss to property with no intervening cause. ▬Indirect: Consequential loss as the result from a direct loss |
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| ▬Direct: - Lightening strikes a house. - Auto collides with tree. ▬Indirect: - Loss of rental income. -Loss of profits |
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| All insurance contracts are required to contain an element of insurable interest. - Personal/financial interest - Economic loss required - For property & casualty must exist at time of loss |
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Definition
The process of determining the value of the loss. ▬Replacement cost. Today's cost to fully replace lost or damaged property with like kind or quality property " without deduction for depreciation".
▬ Actual Cash Value (ACV): Replacement cost minus depreciation due 2 wear,tear obsolescense
▬Functional replacement cost: Cost to repair or replace with functionally equivalent materials.
▬Market value: the price a buyer would pay & a seller would accept in a competitive market
▬Agreed value: the value of the described property agreed on by both insurer & insured
▬Stated amount: An amendment to the valuation provision of a policy that provides a stated maximum amount for payment of any loss.
▬Valued policy: Valued policy is an exception to the principle of indemnity. Under this provision,the insurer is liable for the full amount of damages up to the policy value |
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Term
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Definition
| The cause responsible for the loss: ▬closely related to direct loss; insured peril is required. ▬Unbroken chain of events. - "Had it not been for this occurring. This would not have occurred" |
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Term
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Definition
| Insurance contracts state the max amount of coverage agreed to be paid in the event of a loss. Limits are stated in 3 diff. ways:▬Combined Single Limit (100K) ▬Split Limits (100/300/50) ▬Aggregate Limit (100K per ocurrence/300K aggregate) |
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Definition
| ▬Requires the insured to pay a specific amount or percentage of loss. ▬Retention limit ▬ Insurer pays in excess of deductible. Reduces premium |
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Term
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Definition
| ▬Requires the insured to pay a specific amount or percentage of loss. ▬Retention limit ▬ Insurer pays in excess of deductible. Reduces premium |
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Term
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Definition
| An event that happens over time. - Can be a series of accidents. - Can be continuous or repeated exposure to conditions. - Result in injury or disease (i.e. black lung disease) |
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Term
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Definition
▬Cancellation: Insurer or insured cancels contract before end of policy period. - Premium refunds: Earned, company keeps proportionate premium used. Unearned premium, proportionate premium not used is returned to the insured. Short-rate, company keeps penalty (service change). Pro rata, Insurer cancelled; insured received full unearned premium; no penalty.
▬Non-renewal: Happens at end of policy period |
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Term
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Definition
▬Initial premium: Down payment can be full amount or partial payment. - Subject to rating/ underwriting charge.
▬Deposit/audit premium: Certain types of commercial policies are subject to premium audit. - Insured pays a deposit premium at policy inception. - "True up" after audit completed at end of policy term. - If different than estimated premium, applicable refund or charge to insured |
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Definition
| The act of assigning or substituting the rights of one party to another for the purpose of collecting a debt or claim. |
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Term
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Definition
| ▬Involves the transfer of a legal right or interest in an insurance contract to another party. ▬ valid only with written consent of insurer |
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| Four Elements of a legal Contract CLAC |
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Definition
| ▬Competent parties, Who's not: minors, mentally/legally incompetent, alcohol/drug influence,enemy aliens. ▬Legal objective: legal purpose. ▬Agreement: offer & acceptance. ▬Consideration: exchange of values(money=promises) |
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Term
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Definition
| ▬Declarations: contains 5 P's: person/property, policy number, policy term, policy limit, premium + mortgage. ▬Insuring agreement: describes coverage provided by insurer & perils covered. ▬Conditions: Obligations of each party to the contract; are stated ground rules. ▬Exclusions: What's not covered. ▬Endorsements(riders): Add, modify or take away coverage |
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Term
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Definition
| The insured is the policyholder, person, business or entity whose interest is protected in the policy. ▬Named Insured: Person, business, or other entity specifically designated by name (named in the declarations) as the insured to whom the policy is issued. ▬First Named Insured: first person listed in the declarations as an insured; the first named insured may have a higher level of duties or rights under the policy. ▬Additional Insured: An individual or company, in addition to the insured, who is listed in the declarations & has an insurable interest in the property insured (mortgage of a home or lien-holder of car) |
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