Term
|
Definition
| A sudden, unforseen, unintended, and unplanned event. Example: the explosion of a steam boiler. |
|
|
Term
|
Definition
An event that results in a loss. it includes an accident, but is a broader definition because it includes continous or repeated exposure to harmful conditions that results in property damage. Example: Mold, fungus, or wet rot that results from the accidental discharche or overflow of water or steam within a plumbing, heating, or air conditioning system. |
|
|
Term
|
Definition
The termination of an insurance policy before its expiration date. Either the insured or the insurer may cancel the policy. |
|
|
Term
|
Definition
The cancellation of a policy for which a refund is made of the unearned premium calculated in proportiion to the time the policy was in force. When the insurer cancels the policy, the unearned premium is refunded to the insured on a pro rata basis. |
|
|
Term
|
Definition
The cancellation of a policy for which the premium refund is calculated according to a short rate table whereby the insurer retains a portion of the unearned premium. Whe the insured request cancellation of the policy, the unearned premium is redunden to the insured on a short rate basis. |
|
|
Term
|
Definition
The cancellation of a policy on the date the policy becomes effective. this type of cancellation requires the full return of the paid premium. |
|
|
Term
|
Definition
The termination of an isnurance policy after its expiration date by the insurer. |
|
|
Term
|
Definition
| A cause of potential loss. |
|
|
Term
|
Definition
The cause that sets other causes un motion when multiple causes combine to produce loss or damage. The cause without which a given result would have not occurred. Example: A fire that causes a subsequent explosion or some damage; without the fire there would not have been a subsequent explosion or smoke damage. |
|
|
Term
|
Definition
A fire that produces a visible spark, flame, or glow and leaves the area in which it was intended to be kept. Example: A spark jumps from a fireplace and ignites a nearby area rug. |
|
|
Term
|
Definition
A condition or defect that exists within property itself that causes the property to spoil, break, become defective, or destroy itself. Insurance policies typically exclude inherent vice. ExampleL The quality of materials used in a paitning allows the painting to fade or lose luster with time. |
|
|
Term
|
Definition
| A document that temporarily provides insurance coverage until a policy is issued. The binder specifies the perils covered, the amount of coverage, the effective date of the coverage, and the name of the insurer providing the coverage. The binder does not state the premium amount. |
|
|
Term
|
Definition
| the process whereby a disputed claim is decided by a neutral third party. Arbitration is sometimes used to resolve differences between the insured and insurer. |
|
|
Term
|
Definition
| The right of the insurer to take possession of damaged property after the loss to the property has been paid. the salvage belongs to the insurer. |
|
|
Term
|
Definition
| a written amendment attached to the policy by the insurer to broaden or restrict coverage, or to further define certain policy provisions. Once attached, the endorsement takes precedence over the original provision of the policy. An endorsement may also refer to as a rider. |
|
|
Term
|
Definition
| A situation where there are 2 causes resulting in a loss an 2 of the causes is excluded while the other cause is not excluded. Unless the policy specifies otherwise, the loss is covered. Example: A policy that excludes earth movement will still pay a loss due to fire or explosion that ensues directly from the earth movement. |
|
|
Term
|
Definition
| A situation under which at leas 2 policies provide identical coverage for the same risk. When policies are concurrent, each policy pays that proportion of a loss that its limits bear to the total of all policies. Example: A building is covered for a total of $500,000. Company A provides$250,000 of the total. Company B provides $250,000 of the total, and the building sustains a $100,000 covered loss. Company A would pay $50,000 of the loss, and Company B would pay $50,000 of the loss. |
|
|
Term
|
Definition
A situation under which at least 2 policies cover an insured's property against damage or destruction, but since the limits of coverage, kinds of property, and perils covered are not the same under all policies, the insured may not be fully covered in the event of a loss.
Example: A building is covered for a total of $500,000. Company A provides $250,000 of the total and provides theft coverage. Company B provides $250,000 of the total and does not cover theft, and the building sustains a $100,000 theft loss. Company A would pay $50,000 of the loss, and Company B would pay nothing. |
|
|
Term
|
Definition
| An individual or organization who has taken into its care, custody, and/or control the property of another for servicing, repair, or storage. Example: Dry cleaners, jewelers, furriers, etc. |
|
|
Term
|
Definition
| An individual who retains the ownership of property that has been taken into the care, custody, and/or control of a bailee. Example: The owner of the clothing to be cleaned, the jewelry to be repaired, or the fur to be stored. |
|
|
Term
|
Definition
| Property coverage that provides benefits up to the limits of a policy, regardless of other policies in effect. |
|
|
Term
|
Definition
| Property coverage above the primary amount of insurance. Excess insurance does not pay until any primary insurance has been exhausted. Example: Primary insurance is $250,000, and the excess insurance is $1,000,000. After the loss exceed $250,000, the excess insurance will pay for the losses up to a total of $1,000,000. |
|
|
Term
|
Definition
| A property that contains personal property or contents but has no occupants is described as unoccupied. |
|
|
Term
|
Definition
| A property that has neither occupant nor personal property is described as vacant. |
|
|
Term
TYPES OF PROPERTY LOSSES
1.- DIRECT LOSS |
|
Definition
| Damage to property in which the proximate cause of the loss is an insured peril. Example: Fire damage to an insured residence, or water damage to the residence resulting from a ruptured water pipe. |
|
|
Term
TYPES OF PROPERTY LOSSES
2.- INDIRECT LOSSES (CONSEQUENTIAL/CONTINGENT LOSS) |
|
Definition
| A second or financial loss occurring as the result of a direct loss. Example: Additional living expenses incurred as the result of private residence being rendered uninhabitable as the result of a fire or other type of direct loss; loss of rental income caused by a direct loss, loss of business income and extra expenses caused by a direct loss. |
|
|
Term
SCOPE OF COVERAGE (2 types in terms of the perils covered)
1.- NAMED PERIL |
|
Definition
| Coverage applies only to losses caused by perils that are specifically stated in the policy. Example: Fire, lightning, wind, hail, aircraft, riot, vehicles, explosion, smoke, etc. |
|
|
Term
SCOPE OF COVERAGE (2 types in terms of the perils covered)
2.- OPEN PERIL (SPECIAL FORM) |
|
Definition
| Coverage applies to all losses cause by all perils except for those specifically excluded. Open peril coverage us sometimes referred to as all risk coverage. Example: some of the perils typically excluded are earth movement, ordinance or law, power failure, nuclear hazard, etc. |
|
|
Term
LOSS VALUATION
1.- ACTUAL CASH VALUE (ACV) |
|
Definition
| The policy pays for the cost to repair or replace the damaged property at the time of loss, less depreciation. Example: A building has a roof with a 20-year life expectancy destroyed by hail 5 years after its installation, and the cost to replace the rood at the time of the loss is $10,000. The current replacement value of $10,000 less depreciation of $2m500 (25%), equals the actual cash value of $7,500. |
|
|
Term
LOSS VALUATION
2.- REPLACEMENT COST |
|
Definition
The policy pays the full cost to replace or repair the damaged property (not exceeding policy limits) at the time of the loss without an adjustment for depreciation. Example: Under the same scenario in item 1 before, the full $10,000 would be paid.
Note #1: The replacement cost method of loss valuation requires that the coverage amount at the time of the loss be at least equal to 80% of the cost of replacement.
Note #2: The replacement cost method of valuation requires repair or replacement to the damaged property with like kind and quality of material. |
|
|
Term
LOSS VALUATION
3.- FUNCTIONAL REPLACEMENT COST |
|
Definition
| A property policy provision that changes the valuation method otherwise applicable (ACV or Replacement Cost) to valuation that allows replacement with less costly property that is functionally equivalent. Example: The replacement of damaged property with identical property is impossible due to some technological or environmental change. |
|
|
Term
LOSS VALUATION
4.- MARKET VALUE |
|
Definition
| A property policy provision that changes the valuation method otherwise applicable (ACV or RC) to a valuation method that allows reimbursement to the insured for damaged property according to the price a willing buyer would pay for the property purchased from a willing seller. Example: Goods and commodities whose value fluctuates with market conditions: namely agricultural products. |
|
|
Term
LOSS VALUATION
5.- AGREED VALUE |
|
Definition
| An option for property policies insuring various classes of property whose actual value or replacement cost is difficult to determine. The insured and insurer agree, at the time of insuring, on an amount of insurance to be paid in the event of a loss. Example: Fine arts and antiques are classes of property insured on an agreed value basis. |
|
|
Term
LOSS VALUATION
6.- STATED AMOUNT |
|
Definition
| An amendment to the valuation method of a property insurance policy insuring an unusual or valuable piece of property that establishes, at the time of insuring, a maximum amount of insurance to be paid in the event of a loss. Example: Antique and classic automobiles are types of property insured on a stated amount basis. |
|
|
Term
LOSS VALUATION
7.- VALUED POLICY |
|
Definition
| Many states have passed legislation known as a Valued Policy Law that requires an insurer to pay the full amount of insurance on an insured structure in the event of a total loss. Example: A Building that is insured for $500,000 sustains what is determined to be a total loss as the result of a fire. the insurer pays the full $500,000 regardless of the value of the building at the time of loss. |
|
|
Term
METHODS OF WRITING PROPERTY INSURANCE LIMITS
1.- SPECIFIC COVERAGE |
|
Definition
| This method of writing coverage is used when insuring 1 property on 1 policy for 1 specific amount of insurance. |
|
|
Term
METHODS OF WRITING PROPERTY INSURANCE LIMITS
2.- SCHEDULED COVERAGE |
|
Definition
| This method of writing coverage is used when insuring more than 1 property on 1 policy with a specific amount of insurance on each property. |
|
|
Term
METHODS OF WRITING PROPERTY INSURANCE LIMITS
3.- BLANKET COVERAGE |
|
Definition
| This method of writing coverage is used when insuring more than 1 property on 1 policy for a single amount of insurance that applies to all properties covered under the policy. the amount of insurance must equal at least 90% of the value of all of the properties insured. Example: Commonly used to insure business personal property or contents at multiple locations with no specific limits per location. |
|
|
Term
CLASSIFICATIONS OF CONSTRUCTION
1.- FIRE RESISTIVE |
|
Definition
| The materials that are used in the walls, floors, and roof of a structure must resist damage from fire for not less than 2 hours. Approved masonry or reinforced concrete must be used for exterior ans interior bearing walls. |
|
|
Term
CLASSIFICATIONS OF CONSTRUCTION
2.-MODIFIED FIRE RESISTIVE |
|
Definition
| The materials that are used in the walls, floors, and the roof of a structure must resist damage from fire for at least 1 hour, but less than 2 hours. |
|
|
Term
CLASSIFICATION OF CONSTRUCTION
3.- MASONRY NONCOMBUSTIBLE |
|
Definition
| The exterior walls must be of masonry material with the floor and roof or metal or other noncombustible materials |
|
|
Term
CLASSIFICATION OF CONSTRUCTION
4.- NONCOMBUSTIBLE |
|
Definition
| The materials that are used in the exterior walls, floor, and supports must be made of metal, asbestos, gypsum, or other noncombustible materials. |
|
|
Term
CLASSIFICATION OF CONSTRUCTION
5.- JOISTED MASONRY |
|
Definition
| The exterior walls must be of masonry material with the floor and roof of combustible material. |
|
|
Term
CLASSIFICATION OF CONSTRUCTION
6.- MILL OR HEAVY TIMBER |
|
Definition
| A type of joisted masonry construction characterized by heavy timber girders and columns with flat smooth surfaces running the length of the building with few corners. |
|
|
Term
CLASSIFICATION OF CONSTRUCTION
7.- FRAME |
|
Definition
| A structure with walls and interior structural components made of wood or other combustible materials. |
|
|
Term
|
Definition
D DECLARATIONS
D DEFINITIONS
I INSURING AGREEMENT OR CLAUSE
a Additional/Supplementary Coverages
C CONDITIONS
E EXCLUSIONS
E ENDORSEMENTS |
|
|
Term
POLICY STRUCTURE
DECLARATIONS |
|
Definition
The Declarations Page of the Policy contains basic information about the policy including:
1.- Who - Names the insurer and insured, including legal representatives in the event of the insured's death.
2.- What - A description of the property being insured.
3.- Where - The address or legal description of the property being insured.
4.- When - The effective and expiration dates of the policy.
5.- How much - The limits of insurance coverage, the deductible, and how much premium. |
|
|
Term
POLICY STRUCTURE
DEFINITIONS |
|
Definition
| Definitions are used to clarify the policy language and may be found in different places in various policies depending on how the policy is organized. |
|
|
Term
POLICY STRUCTURE
INSURING AGREEMENT OR CLAUSE |
|
Definition
| The insuring agreement or clause states that the insurer will indemnify the insured of a covered loss. It is the insurer's promise of protection to the insured. A description of the covered causes of loss (perils), that determines the coverage provided, is contained therein. |
|
|
Term
POLICY STRUCTURE
ADDITIONAL/SUPPLEMENTARY COVERAGES |
|
Definition
| Coverage for incidental expenses that frequently occur in connection with causes of loss (perils) stated in the policy. Example: Debris removal, Fire Dept, Service Charge, Property Removed, etc. |
|
|
Term
POLICY STRUCTURE
CONDITIONS |
|
Definition
| The portion of the policy that sets forth the rights, rules, duties, and obligations of the insurer and insured to follow throughout the policy period. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
1.- POLICY PERIOD |
|
Definition
| specifies that coverage applies only to a loss or losses that occur during the policy stipulated on the Declarations Page of the policy. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
2.- POLICY TERRITORY |
|
Definition
| Specifies the geographic area in which the property must be damaged in order for coverage to apply. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
3.- CONCEALMENT OR FRAUD |
|
Definition
| Specifies that the policy may be voided if there is material concealment, misrepresentation, or fraud on the part of the insured. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
4.- LIBERALIZATION CLAUSE |
|
Definition
| Specifies that if the insurer broadens coverage with no increase in premium, the broadened coverage automatically applies to existing policies without the need for an endorsement. Example: Expanding the time frame for damage caused by earth movement from 72 to 168 hours as a single event under the Earthquake Cause of Loss Form to the Commercial Package Policy. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
5.- CANCELLATION |
|
Definition
The following provisions apply:
a) The name insured may cancel the policy at any time by giving written notice to the insurer.
b) If the policy has been in effect for less than 60 days, and it is not a renewal, the insurer may cancel the policy for nonpayment of premium by giving 10 days written notice, and 30 days written notice for any other reason. Cont... |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
5.- CANCELLATION. CONT... |
|
Definition
c) If the policy has been in effect for 60 or more days, and it is not a renewal, the insurer may cancel the policy for nonpayment of premium, by giving10 days written notice, and 30 days written notice for the following specific reasons:
1) Material misrepresentation by the insured.
2) Substantial change in risk.
Note: Proof of mailing of the Notice of Cancellation will be sufficient proof of notice. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
6.- NON-RENEWAL |
|
Definition
| The insurer may elect to non-renew the policy, after its expiration date, by giving to the named insured 30 days written notice. the reason for the non-renewal must be clear and specific. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
7.- ASSIGNMENT |
|
Definition
| Specifies that the insured may not transfer rights of ownership or interest in an insurance policy to another party without the insurer's written consent. written consent. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
8.- SUBROGATION |
|
Definition
the legal process by which an insurer seeks recovery of the amount paid to the insured from a third party responsible for having caused the loss. Subrogation transfers an insured's legal right of recovery to the insurer that has paid a claim, and also:
a) Prevents the insured from collecting twice for the same loss.
b) Helps the insurer maintain lower insurance rates.
c) Ultimately holds the responsible third party accountable for the loss. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
9.- CHANGES |
|
Definition
| Specifies that any changes to the policy must be made by the insurer's written endorsement. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
10.- INSURABLE INTEREST AND LIMIT OF LIABILITY |
|
Definition
| Specifies that the insurer will not be responsible for an amount which is greater than the financial interest of an insured person or more than the limit of liability stated on the Declarations page of the policy. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
11.- RESTORATION/NONREDUCTION OF LIMITS |
|
Definition
| Specifies the sum and circumstances under which an insurer charges the insured, usually a business firm, to restore a policy to its initial face value or not reduce limits of coverage after the insurer has paid a claim either to the insured business or a third party on behalf of the business. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
12.- YOUR DUTIES IN THE EVENT OF LOSS (NOTICE OF LOSS) |
|
Definition
Specifies the obligations the insured in the event of a loss under the policy. these obligations are:
a) giving prompt notice of the loss to the insurer.
b) Notifying the police if a law has been broken.
c) Cooperating with the insurer in the investigation of the loss.
d) Forwarding any demands regarding the loss to the insurer. Cont... |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
12.- YOUR DUTIES IN THE EVENT OF LOSS (NOTICE OF LOSS) CONT... |
|
Definition
e) Protecting the damaged property from further loss and separating damaged property from undamaged property.
f) Preparing an inventory of the damaged property.
g) Submitting proof of loss to the insurer, including:
1) the time and cause of loss.
2) any other insurance that may cover the loss.
3) Any appropriate receipts, evidence, or affidavits to support the loss. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
13.- CLAIM SETTLEMENT |
|
Definition
| Specifies the valuation method(s) used to pay the losses. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
14.- APPRAISAL |
|
Definition
| Specifies that if the insured and insurer cannot agree on the amount of a loss, either may demand on appraisal. If demanded, the insured and the insurer will each select an appraiser, who then jointly select an umpire. The appraisers will appraise the loss and either agree or submit their differences to the umpire. An agreement by any 2 of the 3 parties is binding, and each party will pay the cost of its own appraiser and share equally the cost of the umpire. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
15.- OTHER INSURANCE(A.K.A. APPORTIONMENT OR PRO RATA LIABILITY) |
|
Definition
| Specifies the process to be followed when more than 1 policy covers the loss. Each policy pays no more that its share of the loss. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
15.- OTHER INSURANCE
E X A M P L E |
|
Definition
| Policy A is written for $200,000. Policy B for $300,000, and Policy C for $500,000 on a building. The building sustains a loss in the amount of $100,000 that is covered by all 3 policies. Policy A represents 20% of the total amount of coverage and therefore would pay $20,000 of the loss. Policy B represents 30% of the total amount of coverage and therefore would pay $30,000. Policy C represents 50% of the total amount of coverage and therefore would pay $50,000. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
16.- LEGAL ACTION AGAINST US |
|
Definition
| Specifies that the insured may not bring suit against the insurer until the insured has complied with all of the terms of the policy. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
17.- LOSS PAYMENT |
|
Definition
| Specifies the time frame within the insurer must pay a loss to the insured after the insurer has received the insured's proof of loss and reached an agreement with the insured. Personal Lines forms = 60 days. Commercial Lines = 30 days, |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
18.- ABANDONMENT OF PROPERTY |
|
Definition
| Specifies that the insured may not abandon or relinquish ownership of damaged property to the insurer for disposal or repair. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
19.- STANDARD MILEAGE CLAUSE (A.K.A. MORTGAGE CLAUSE) |
|
Definition
| Specifies and protects the mortgagee's (lender's) financial interest in property insured by the policy. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
20.- NO BENEFIT TO BAILEE |
|
Definition
| Specifies that the insurer will not recognize any assignment or grant any coverage that benefits a person or organization holding, storing, or moving the insured property for a fee. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
21.- RECOVERED PROPERTY |
|
Definition
| Specifies the procedure to be followed if the insured or insurer should recover any property for which the insurer has made payment under the policy. Each party shall notify the other of any recovery, and at the insured's option the property will be returned to or retained by the insured or it will become the insurer's property. If the recovered property is returned to or retained by the insured, the loss payment will be adjusted based upon the amount the insured received for the recovered property. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
22.- BANKRUPTCY CLAUSE |
|
Definition
| Specifies that bankruptcy or insolvency of the insured does not relieve the insurer of any of its duties or obligations under the policy. |
|
|
Term
POLICY STRUCTURE
CONDITIONS INCLUDE
23.- DEATH |
|
Definition
| specifies that in the event of death of the insured named on the Declarations Page of the policy, the insurer will insure the legal representative of the deceased covered under the policy at the time of death. |
|
|
Term
POLICY STRUCTURE
EXCLUSIONS |
|
Definition
| The portion of the policy that specifies the causes of loss (perils), or property not covered, or any circumstances under which coverage does not apply. A few of the typical property exclusions would be earth movement, flood, war, wear and tear, insect and vermin, inherent vice, and neglect of the insured to protect the property by any reasonable means at and after time of loss. Sometimes it is stated that the exclusions deny coverage for perils, hazards, and locations that are uninsurable by their nature. |
|
|
Term
POLICY STRUCTURE
ENDORSEMENTS |
|
Definition
| endorsements are written amendments attached to the policy to broaden or restrict coverage, or to further define certain policy provisions. Endorsements are typically attached to the policy at inception, but may be added during the policy term and are subject to insurer approval. |
|
|
Term
|
Definition
1.- Insured
2.- Named Insured
3.- First named insured
4.- Additional Insured |
|
|
Term
TYPES OF INSUREDS
1.- INSURED |
|
Definition
| the party to an insurance contract whom the insurer agrees to indemnify for losses, to provide benefits for, or to render services to. The definitions of insured may also include others whose names do not even appear on the Declarations page of the policy. Example: the insured's spouse, resident relatives of either, and others under age 21 that are in their care, custody, and control |
|
|
Term
TYPES OF INSUREDS
2.- NAMED INSURED |
|
Definition
| Any person, firm, or organization specifically designated by name on the Declarations Page of the policy. |
|
|
Term
TYPES OF INSUREDS
3.- FIRST NAME INSURED |
|
Definition
| the person, firm, or organization whose name appears in the first position of the declarations page of a policy when several names are listed. The first named insured may also at times referred to as the Key or Primary insured. |
|
|
Term
TYPES OF INSUREDS
4.- ADDITIONAL INSURED |
|
Definition
| Another person, firm, or organization, usually added to the policy by endorsement, which is granted the same coverage and protections as any named insured. Example: a bank or lender. |
|
|
Term
|
Definition
| A deductible is a specified dollar amount of each covered property loss than an insured must bear. In addition, deductibles can help reduce the number of frivolous claims that an insured might otherwise consider submitting, and can also be a cost control factor. Essentially, the higher the deductible the an insured chooses, the lower the premium will be. |
|
|
Term
|
Definition
| Coinsurance is a provision contained in most policies insuring commercial property, and is used to encourage the insured to purchase and maintain insurance to value, and to establish the basis of payment in the event the insured fails to maintain a specified percentage of that value. The higher the coinsurance percentage the insured agrees to purchase and maintain throughout the policy period, the lower the rate the insured pays for the insurance. Coinsurance applies only in the event of a partial loss, as total losses typically are paid in accordance with the Valued Policy Law. |
|
|
Term
COINSURANCE
FORMULA THAT IS APPLIED IN THE EVENT OF A PARTIAL LOSS |
|
Definition
| (AMOUNT OF INSURANCE CARRIED/AMOUNT OF INSURANCE REQUIRED) * AMOUNT OF LOSS = THE AMOUNT THE INSURER PAYS. NOTE: DO NOT FORGET TO SUBTRACT THE DEDUCTIBLE AMOUNT. |
|
|
Term
|
Definition
| Insurance is a social device for spreading the change of financial loss among a large number of people. By purchasing insurance, a person shares risk with a group of others, reducing the individual potential for disastrous consequences. |
|
|
Term
|
Definition
| Any event, whether past of present, which may cause loss or damage to a person having an insurable interest, or any such event that may create a liability against him/her. |
|
|
Term
|
Definition
| Risk is uncertainty concerning a loss. The change, likelihood, probability, or potential for loss. |
|
|
Term
|
Definition
1.- SPECULATIVE: risk for which there exists a possibility of loss, no loss, or gain. Ex.gambling. It is this type or firs that insurance won't cover.
2.- Pure risk: Risk for which there exists a possibility of loss or no loss. Is the type of risk that insurers accept. There is the possibility that a certain event will occur, for ex, accident or sickness. |
|
|
Term
|
Definition
| Loss is defines as reduction in the value of an asset. |
|
|
Term
|
Definition
| The extent to which one may be affected by a peril. |
|
|
Term
|
Definition
| A cause of a potential loss. |
|
|
Term
|
Definition
| Something that increases the risk, or change of loss. ` |
|
|
Term
|
Definition
1.- Physical hazard
2.- Moral Hazard
3.- Morale Hazard |
|
|
Term
|
Definition
| A Physical condition that increases the probability of loss. Examples: A dead tree next to your house that could blow over during the next windstorm causing damage to your roof; flammable material stored near a furnace, or property located next to a dynamite factory. |
|
|
Term
|
Definition
| Dishonesty. Ex: a dishonesty client who intentionally damages their own property. |
|
|
Term
|
Definition
| Indifference to loss, or the failure to take proper care to protect property from loss. Example: Leaving one's house or vehicle unlocked. |
|
|
Term
|
Definition
The determination of what types of protection are required to meet an insured's needs. The steps are: 1.-Identification and analysis of risk.
2.- Methods of handling risk. |
|
|
Term
RISK MANAGEMENT
1.- IDENTIFICATIONS AND ANALYSIS OF RISK. |
|
Definition
| Risk managers evaluate risks for loss frequency (probability of loss), severity, and potential dollar losses over time. A survey of the insured's operations, assets, and exposures that could give rise to losses, and their potential frequency and severity. Example: Physical inspections, flowcharts, etc. |
|
|
Term
RISK MANAGEMENT
2.- METHODS OF HANDLING RISK |
|
Definition
| A risk may be retained, avoided, reduced, or transferred. A risk is retained when a person decides to assume financial responsibility for certain events. To avoid risk, a person might stay home rather than drive somewhere; after potential areas of hazard have been identified, it may be found that some exposure to risk can be eliminated entirely. Cont... |
|
|
Term
RISK MANAGEMENT
2.- METHODS OF HANDLING RISK CONT... |
|
Definition
A risk is reduced when a person practice living a healthier lifestyle, thereby reducing the chance of major illness; techniques for the prevention or reduction of potential loss, such as sprinkler systems, burglar alarms, etc.
A risk may be transferred in two ways: If someone's negligence causes an injury, the person injured could sue the negligent party, transferring the burden of the risk to the negligent party. The second method of transferring risk is accomplished through the use of insurance. The risk of loss is transferred to the insurance company.
the characteristics for determining which group of individuals share a common risk are such thing as AGE, GENDER, and OCCUPATION. |
|
|
Term
|
Definition
| The law of large numbers allows an insurance company to predict the expected losses of a group. The basic principle of this law is that the larger the number of separate risks of a like nature combined into one group, the more predictable the number of future losses of that group within a given time period. Insurance companies can only predict the number of losses expected for a group, not for each individual. |
|
|
Term
|
Definition
| To be insurable, a risk must involve the possibility of loss only, and not gain, and the applicant must have a legitimate interest in the preservation of the life or property insured. this requirement is called insurable interest. |
|
|
Term
| ELEMENTS OF INSURABLE RISKS |
|
Definition
1.- There must be a large number of homogeneous units.
2.- The loss must be calculable (monetary value)
3.- The loss must be uncertain (accidental)
4.- The loss must cause economic (financial) hardship.
5.- The policy must exclude of Catastrophic Perils (war, nuclear hazard, and illegal operations). |
|
|
Term
|
Definition
| Many exclusions are also designed to prevent adverse selection, such as the exclusion if damage due to flood on most property insurance policies. From the insurer's point of view, offering coverage for flood damage would constitute adverse selection, since only those clients living in potential flood zones would buy it. As a result, the insurer would very likely lose money writing this coverage. To solve this problem, flood insurance is available in designed flood areas though the federal government's National Flood Insurance Program (NFIP) |
|
|
Term
|
Definition
| The Principle of Indemnity restores the insured person, in whole or in part, to the condition he or she enjoyed prior to the loss. Restoration may take the form of payment, repair, or replacement. |
|
|
Term
|
Definition
| Insurance is provided to the public by three major sources: private commercial insurers (profit-making), private noncommercial insurers (nonprofit service organizations), and the United States Government. |
|
|
Term
| SPECIFIC TYPES OF INSURERS |
|
Definition
1.- Stock insurers: Stockholders. the board of directors control the management and elect the officers who conduct the daily operations.
2.- Mutual insurers: there are no stockholders, ownership rests with the policyholders. Gains = policy dividends and may never be guaranteed and are not taxable.
3.- Reciprocal insurers: Subscribers are the members. Administration is handled by an attorney in fact.
4.-Fraternal Insurers: Social organizations, policyholders. Cont... |
|
|
Term
| SPECIFIC TYPES OF INSURERS: CONT... |
|
Definition
5.- Reinsurance: Reinsurance is a form on insurance between insurers.
6.- Captive insurers: Formed to serve the insurance needs of their stockholders. Most captive insurers are non-admitted alien corporations.
7.- Surplus lines: When the risk is very large or unusual in nature.
8.- Lloyd's Association: unincorporated group in the area of surplus lines.
9.- Government insurers: Federal government. |
|
|
Term
| DOMESTIC, FOREIGN, AND ALIEN INSURERS. |
|
Definition
Domestic: Insurer incorporated under the laws of the state which it conducts business.
Foreign: Insurer conducts business in a state where it is not resident.
Alien: insurer conducts business in a country other than US. |
|
|
Term
| AUTHORIZED VS. UNAUTHORIZED INSURERS |
|
Definition
| Authorized insurer: Receives a license from the Dept of Insurance. |
|
|
Term
| MARKETING AND DISTRIBUTION SYSTEMS. |
|
Definition
1.- Independent Agent.
2.- Exclusive Agent.
3.- Direct Writer.
4.- Direct Mail. |
|
|
Term
|
Definition
| A person who enters into agency agreements with more that one insurer. Has ownership of the business written; usually receives a higher rate of commission than an exclusive agent does, but the agent must finance his/her own agency; pays the cost of office space, clerical support, marketing, and for the collections of renewal information. |
|
|
Term
|
Definition
| A person that represents a single insurer, or a group on insurers. The insurer normally provides services to its exclusive agents, such as office space and clerical support, preparing contracts, mailing renewals, and handling claims. |
|
|
Term
|
Definition
| A salaried representative or a captive agent. |
|
|
Term
|
Definition
| A marketing system that does not use an agent. Mail campaigns, newspaper, radio, tv, and magazine advertising. |
|
|
Term
| OPERATING DIVISIONS OF INSURERS |
|
Definition
1.- Actuarial: Gather and interpret statistical information to aid in rate-making/setting.
2.- Underwriting: Responsible for risk selection and rating.
3.- Marketing/sales: advertising and selling.
4.- Claims: Provides service in the event of a loss.
5.- Executive Staff: Oversees and regulates the business. |
|
|
Term
|
Definition
Property and casualty agents appointed by property and casualty insurance companies generally are granted more authority than life and health agents. These agents may bind or commit their companies by oral or written agreement.
Property and casualty agents are also often licensed as brokers in some states. A broker is not a direct representative of any particular company, a broker is an independent salesperson who selects for her/his client insurance coverage from whatever company best fills the client's need. An agent is a person authorized to act on behalf of another person, who is called the principal. |
|
|
Term
| THE AUTHORITY OF AN AGENT IS OF THREE TYPES: |
|
Definition
1.- Express: is the authority the principal gives to the agent as set forth in her contract.
2.- Implied: the authority that the public assumes the producer/agent has, filing out applications, providing quotes, accepting premiums for the insurer.
3.- Apparent: Is the authority an agent seems to have, created when a producer/agent exceeds the authority expressed in his/her contract. Ex: The producer/agent accepting premiums on lapsed policies. |
|
|
Term
|
Definition
| Insurance policies are contracts. |
|
|
Term
| 4 ESSENTIAL ELEMENTS OF CONTRACTS |
|
Definition
"COAL"
1.- Consideration: the exchange of something of value between the parties.The client pays the premium and the insurance company promises to provide coverage.
2.- Offer: Made by the client when he completes and signs the applications and writes out his check for the first premium payment.
3.- Acceptance of the offer: Done when the underwriter approves the applications and issues the policy.
4.- Legal purpose and legal capacity: All parties to a contract must be competent to contract, meaning they must be of age, of sound mind, and not under the influence of drugs or alcohol. |
|
|
Term
|
Definition
| The Dwelling policy is primarily used to insure private residential property that is not occupied by its owner; such as rental property, or private residential property that is occupied by its owner but does not qualify for a Homeowners policy because of age, value, locations, or some combination thereof. |
|
|
Term
DWELLING POLICY
ELIGIBILITY |
|
Definition
1.- Must be used principally for dwelling purposes and may not have more than 4 apartment units, and not more than 5 roomers or boarders in total.
2.- Mobile homes are eligible if they are permanently located, but only on the Basic Form. The coverage would not include an attached carport.
3.- Incidental business occupancies are permitted, providing a service type, such as beauty shop, professional office, music lesson studio, etc. and do not involve retail sales or manufacturing, or have more than 2 persons at work at any 1 time.
4.- Dwellings located on farms are insured under farm property coverage forms. |
|
|
Term
|
Definition
* DP-1 (Basic Form)
* DP-2 (Broad Form)
* DP-3 (Special Form) |
|
|
Term
|
Definition
1.- The perils that are covered are fire, lightning, and internal explosion.
We can add ECE Extended Coverage Endorsement to cover the perils of wind, hail, aircraft, riot, vehicles, volcanic eruption, explosion, and smoke. The perils of vandalism, and malicious mischief may be covered by adding the optional Vandalism and Malicious Mischief Endorsement VMM.
2.- Even the VMM is added, it excludes loss for vandalism occurring after 60 days of vacancy.
3.- Losses to the dwelling, other structures, and contents are paid on an actual cash value basis. |
|
|
Term
|
Definition
1.- The perils covered are those included under the DP-1 with the ECE and optional VMM, plus damage by burglars; falling objects; wight of snow, ice and sleet; accidental discharge; and sudden and accidental damage from artificially generated electrical current.
2.- The burglary damage peril includes damage to the covered property caused by the burglars, but not theft of property. The vehicle peril does not include loss to a fence, driveway, or walk caused by a vehicle owned and operated by the insured. The smoke peril does not include loss cause by smoke from agricultural smudging or industrial operations.
3.- Losses to the dwelling and other structures are paid on a replacement cost basis, and losses to contents are paid on an actual cash value basis to the insured. |
|
|
Term
| DESCRIBE DP-3 SPECIAL FORM |
|
Definition
1.- The dwelling and other structures are covered for all direct physical damage (open peril), except for perils specifically excluded.
2.- theft of property that is par of the dwelling or other structures is covered as long as the dwelling or other structures are not under construction or have not been vacant for more than 30 days immediately preceding the loss.
3.- Personal property or contents are covered for the DP-2 perils.
4.- Losses to the dwelling and other structure are paid on a replacement cost basis and losses to contents are paid on an actual cash value basis. |
|
|
Term
|
Definition
COVERAGE A - DWELLING
COVERAGE B - OTHER STRUCTURES
COVERAGE C - PERSONAL PROPERTY
COVERAGE D - FAIR RENTAL VALUE
COVERAGE E - ADDITIONAL LIVING EXPENSE |
|
|
Term
| DWELLING COVERAGE A - DWELLING |
|
Definition
| COVERAGE A - DWELLING: Dwelling and structures attached to the dwelling. Includes materials, equipment. Does not apply to land. |
|
|
Term
| DWELLING COVERAGE B - OTHER STRUCTURES |
|
Definition
| COVERAGE B - OTHER STRUCTURES: Garage, carport, storage, building; does not apply to land. |
|
|
Term
| DWELLING COVERAGE C - PERSONAL PROPERTY |
|
Definition
| COVERAGE C - PERSONAL PROPERTY: Household and personal property owned by insured or by members of the insured's family residing with the insured. Property of a tenant is not covered. It also applies to personal property the insured removes from location to a newly acquired residence for 30 days or until policy expiration. Excludes: accounts, bank notes, coins and currency; birds, animals, and fish, watercraft; motor vehicles, electronic data; and credit cards. |
|
|
Term
| DWELLING COVERAGE D - FAIR RENTAL VALUE |
|
Definition
COVERAGE D - FAIR RENTAL VALUE
Is an indirect loss property coverage that applies following a direct loss to property in Coverages A, b, or C. Pays the fair rental value of the part of the described location that is rented to others. |
|
|
Term
| DWELLING COVERAGE E - ADDITIONAL LIVING EXPENSE |
|
Definition
| Is an indirect loss property coverage that applies following a direct loss to property describe in Coverage a,b, or c and is automatically included only in the DP-2and DP-3. It pays the additional living expense incurred when an owner occupied dwelling sustains a direct loss. Includes the increase auto expense of driving a greater distance to and from work. |
|
|
Term
| DWELLING GENERAL EXCLUSIONS |
|
Definition
-Ordinance or Law
-Earth movement
-Water Damage
-Power failure
-Neglect
-War
-Nuclear Hazard
-Intentional loss |
|
|
Term
|
Definition
NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS:
1.- This organization recommends model legislation and attempts to standardize insurance laws.
2.- All commissioners are members of the NAIC.
3.- The organization does not exercise official legislative power. |
|
|
Term
|
Definition
1.- FAIR CREDIT REPORTING ACT OF 1971 (FCRA)
2.- FRAUD AND FALSE STATEMENTS - FRAUDULENT INSURANCE ACT. |
|
|
Term
FEDERAL REGULATION
1.- FAIR CREDIT REPORTING ACT OF 1971 FCRA |
|
Definition
a) This act protects the consumer's right to privacy.
b) A credit report may be obtain to determine the financial and moral status of an applicant.
c) When application is taken, an agent must advise the applicant that he/she can review the files of the consumer agency that provided the credit report.
d) If applicant challenges the information, the credit reporting agency is required to re-investigate. Any inaccurate information given out within the last 2 years must be forwarded to the applicant.
e) When the consumer reporting agency receives a request to issue corrected information, they have a maximum of 6 months to re-investigate the facts.
f) A person who has been denied insurance because of inaccurate information is entitled to certain rights.
g) the consumer report must not contain adverse information on lawsuits over 7 years old or information on bankruptcies over 14 years old.
h) The insured cannot require the insurer to correct any reports. |
|
|
Term
FEDERAL REGULATION
2.- FRAUD AND FALSE STATEMENTS - FRAUDULENT INSURANCE ACT. |
|
Definition
a) All applications and claim forms for group or individual insurance issued by an insurer shall clearly contain a warning substantially as follows: "Any person who, with intend to defraud or knowing that he/she is facilitating a fraud against an insurer, submits an application, or files a claim containing a false or deceptive statement, is guilty of insurance fraud".
b) Fraudulent Insurance act, means an act committed with the knowledge and intent to defraud in presenting, or causing to be presented, any information, to an insurer, agent, broker, or underwriter. Is not intended to modify, in any way, the privacy of an individual and protects the agent if fraudulent information is presented ad the agent presents it as the truth. |
|
|
Term
| HOMEOWNERS COVERAGE FORMS |
|
Definition
HO-2 BROAD FORM
HO-3 SPECIAL FORM
HO-4 CONTENTS BROAD FORM (A.K.A. RENTER'S OR TENANT'S FORM)
H0-5 COMPREHENSIVE FORM
HO-6 UNIT-OWNERS FORM
HO-8 MODIFIED FORM |
|
|
Term
|
Definition
1.- NAME INSURED
2.- BODILY INJURY
3.- INSURED
4.- INSURED LOCATION
5.- PROPERTY DAMAGE
6.- RESIDENCE PREMISES |
|
|
Term
|
Definition
| The person name on the declarations page and their spouse, if a resident of the same household. |
|
|
Term
HOMEOWNERS
BODILY INJURED |
|
Definition
| Bodily harm, sickness, or disease, including required care, loss of services, and death that results. |
|
|
Term
|
Definition
| You and residents of your household who are your relatives , including children under the age of 24, who are away at school and other persons under the age of 21, who are in your care. Your relatives living with you are insureds, but not named insureds. |
|
|
Term
HOMEOWNERS
INSURED LOCATION |
|
Definition
| Your residence premises, any part of premises where an insured is temporarily residing, vacant land (other than farm land) owned by an insured. Also family cemetery plots or burial vaults of insured. |
|
|
Term
HOMEOWNERS
PROPERTY DAMAGED |
|
Definition
| Physical injury to, destruction of, or loss of use of tangible property. |
|
|
Term
HOMEOWNERS
RESIDENCE PREMISES |
|
Definition
| Up to a four family dwelling plus other buildings and the grounds where you reside and which is shown in the Declarations. |
|
|
Term
| HO SECTION I: PROPERTY COVERAGES |
|
Definition
A) Dwelling
B) Other Structures
C) Personal Property
D) Loss of use. |
|
|
Term
HO SECTION 1: PROPERTY COVERAGES
COVERAGE A - DWELLING |
|
Definition
| The policy cover the Residence Premises shown on the Declarations page including structures attached to the dwelling and any materials and supplies located on or next to the Residence Premisses and used to construct, alter, or repair the dwelling. |
|
|
Term
HO SECTION 1: PROPERTY COVERAGES
COVERAGE B - OTHER STRUCTURES |
|
Definition
| The policy covers other structures on the Residence Premises set apart from the dwelling by a clear space (unattached), including structures connected by only a fence or utility line. Business and farm structures are not covered. This coverage is an additional 10% of Coverage A, so in the event a covered loss destroyed the welling and the outbuilding, you could collect for both. |
|
|
Term
HO SECTION 1: PROPERTY COVERAGES
COVERAGE C: PERSONAL PROPERTY |
|
Definition
| The policy covers Personal Property (Contents) owned or used by an insured while it is anywhere in the world for the Perils named on the policy. At the option of the insured, Property of Others on the Residence Premises, including that owned by a guest or residence employee, is also covered. Coverage C is 50% if Coverage A, in addition, except for off-premises coverage. |
|
|
Term
HO SECTION 1 : PROPERTY COVERAGES
OFF-PREMISSES PERSONAL PROPERTY COVERAGE |
|
Definition
| Personal property located away from the residence premises is only covered yo ti 10% of the limit for Coverage C, or $1,000, whichever is more. For example: lets say you purchased an HO-3 with $100,000 coverage on the Dwelling. Your Coverage C Personal Property coverage would automatically be $50,000. Of this $50,000. 10% ($5,000) would automatically be extended to cover your Personal Property off-premises anywhere in the world. |
|
|
Term
|
Definition
The HO policy was probably the first true insurance "package policy". It has two parts: Section 1 covers Property and Section II covers Liability.
The HO Property section is similar to the Dwelling Forms. The HO-1 Basic Form, HO-2 Broad Form, and HO-3 Special Form pretty much parallel the DP-1, DP-2, and DP-3 forms. |
|
|
Term
HO SECTION 1: PROPERTY COVERAGES
COVERAGE D - LOSS OF USE |
|
Definition
| This is an indirect coverage that applies when the Residence Premises is not fit to live in due to a covered loss. Sometimes called Additional Living Expense. Coverage d will pay any necessary increase in living expenses that may be incurred so that your household can maintain its normal standard of living. |
|
|
Term
HO SECTION 1: PROPERTY COVERAGES
ADDITIONAL COVERAGES |
|
Definition
| In addition to the Section 1 Property coverages, all HO policies also contain several Additional Coverages, sometimes called Extensions of Coverage require no additional premium charge. These are: Debris removal, Caredit card and forgery, trees, scrubs and plants, fire department service charge, ordinance or law, glass breakage and grave markers. |
|
|
Term
HO SECTION 1: PROPERTY COVERAGES
ADDITIONAL COVERAGES
DEBRIS REMOVAL |
|
Definition
| This expense is included in the policy limit (not an additional coverage) unless the amount to be paid for the loss plus the Debris Removal totals more than the policy limits, in which case and additional 5% of the Coverage A limit is available. |
|
|
Term
HO SECTION 1: PROPERTY COVERAGES
ADDITIONAL COVERAGES
CREDIT CARD AND FORGERY |
|
Definition
|
|
Term
HO SECTION 1: PROPERTY COVERAGES
ADDITIONAL COVERAGES
TREES, SHRUBS, AND PLANTS |
|
Definition
| The policy will pay up to 5% of Coverage A but no more than $500 for any one tree, shrub, or plant. |
|
|
Term
HO SECTION 1: PROPERTY COVERAGES
ADDITIONAL COVERAGE
FIRE DEPARTMENT SERVICE CHARGE |
|
Definition
|
|
Term
HO SECTION 1: PROPERTY COVERAGE
ADDITIONAL COVERAGE
ORDINANCE OR LAW |
|
Definition
| Up to 10% of the Coverage A limit is available as additional insurance for the increase costs incurred due to the enforcement of any ordinance or law which regulates the repair of that part of a covered building damaged by a peril insured against. |
|
|
Term
HO SECTION 1: PROPERTY COVERAGE
ADDITIONAL COVERAGE
GLASS BREAKAGE |
|
Definition
| Breakage of glass is covered unless the dwelling has been vacant for more than 60 consecutive days immediately before the loss. |
|
|
Term
HO SECTION 1: PROPERTY COVERAGE
ADDITIONAL COVERAGE
GRAVE MARKERS |
|
Definition
|
|
Term
| HO SECTION II: LIABILITY COVERAGES |
|
Definition
-Coverage E Personal Liability: The insurer will pay for damages for which an insured is legally liable and will provide a defense at company expense by a lawyer of the insurer's choice.
-Coverage F Medical Payments to others: The insurer will pay medical expenses incurred within 3 years from the date of an accident causing bodily injury |
|
|
Term
HO CONDITIONS
HO SECTION 1 CONDITIONS |
|
Definition
| In the property area of an HO, the conditions are virtually the same as the Dwelling Property forms. |
|
|
Term
HO CONDITIONS
HO SECTION II CONDITIONS |
|
Definition
| In the liability section conditions include the insured's Duties after a loss, limit of liability. |
|
|
Term
|
Definition
| Exclusions are causes of Loss that are never covered, such as War. |
|
|
Term
|
Definition
-Wear and tear
-Inherent vice or latent defect
-Mold, fungus or wet rot
-Discharge of pollutants
-Settling or expansion of pavements, wall or roofs
-Damage cause by birds, vermin, rodent or insects.
Other Exclusions are: Ordinance or law, earth movement, water damage, power failure, neglect, war, nuclear hazards, intentional losses. |
|
|
Term
|
Definition
| Exclusions that apply to liability are: Intentional acts of the insured, business pursuits, off premisses rental properties, failure to render professional services; operation of a motor vehicle unless is a trailer not attached to a car, unlicensed recreational vehicle used on-premises only, golf cart used on a golf course, unlicensed vehicle used to service the premises or to assist the handicapped; operation of a water craft unless is one with 25 total hp or less or a sailboat less than 26 feet in length; operation of an aircraft, war, transmission of a communicable disease by an insured, sexual molestation,corporal punishment or physical or mental abuse, sale of controlled substances, property damage to property owned by the insured, bodily injury to any person eligible to receive workers' compensation. |
|
|
Term
|
Definition
Optional endorsement require additional premium and are:
-Inflation Guard Endorsement: to keep pace with inflation.
-Permitted Incidental Occupancies Endorsement: Office in the home, Professional activity, private school, studio. |
|
|
Term
| HO'S FORMS FOR DWELLING STRUCTURES AND PERSONAL CONTENTS COVERAGE |
|
Definition
HO-1 Basic form: Named peril form on both Dwelling structures and contents. Theft is included.
HO-2 Broad Form: is also a Named Peril form on both Dwelling structures and contents. It contents more named perils that HO-1, theft is included.
HO-3 Special form: Is the most popular provides the best coverage for the money.
HO-4 Comprehensive form: Is no longer available with most companies.
-There is no HO-7
HO-8 Modified form: is especially designed for older homes. |
|
|
Term
|
Definition
| Every motor vehicle operated on a state highway, except farm vehicles are operated only incidentally, must satisfy the minimum financial responsibility requirements. This is done through an Auto Liability Insurance Policy. The PAP is a personal lines policy that covers damages resulting from the noncommercial use of an automobile. It is designed to cover an individual's or family's personal use of an auto. |
|
|
Term
| State's financial responsibility law requires: |
|
Definition
| 1) $15,000 per person for Bodily injury liability 2) $30,000 per occurrence per Bodily Injury, and 3) $10,000 per occurrence for Property Damage liability. |
|
|
Term
| How is expressed a Split Limit Policy |
|
Definition
|
|
Term
| The PAP is formed by 6 parts: |
|
Definition
| A) Liability Coverage B) Medical Payments Coverage C) Uninsured Motorists Coverage D) Coverage for Damage to your Auto E) Duties After and Accident or Loss F) General Provisions |
|
|
Term
| There are 3 areas of Auto Insurance to be fully aware of: |
|
Definition
Rates: Rate classifications tables are based on age, gender, driving record, and territory, from statistical data provided to the state Dept of Insurance. Underwriting: Underwriting rules help keep the insurance company profitable and in business by keeping a balance between the risk and the premium paid by the insured.
Coverage: The PAP is the industry standard, both for the state exam and for your sales efforts. it provides very broad coverage and is strictly underwritten. |
|
|
Term
|
Definition
| Auto insurance rates depend on who is driving the car and where the car is being driven.Insurance rates are based on the Law of Large Numbers. |
|
|
Term
|
Definition
| It is the insurance company's goal make a profit on its policies after paying all claims and expenses. In the process of underwriting, the underwriter considers and investigates the application, and upon acceptance, she actually signs her name to the applications. The underwriter draws on several sources of information in making a decision about a policy application, for example: Motor Vehicle Report (MVR), Consumer Investigative Report. The underwriter's job is protecting the company by following its rules regarding risk. |
|
|
Term
|
Definition
| It is important to understand not only the rate and underwriting, How can you sell a product to the public if you do not understand it thoroughly?? |
|
|
Term
Part A) Liability Coverage
-Insuring Agreement |
|
Definition
| -Insuring agreement: the insurer will pay damages for bodily injury or property damage for which any insured becomes legally responsible due to an auto accident, the insurer will settle of defend any claim or suit asking for such damages, will also pay all defense costs. The insurer will not defend or settle any suit or claim that is not covered under the policy. Insured is the named insured or any family member (even if not licensed), any person using the covered auto with permission. (a Mechanic who is test driving an insured auto would not be covered. |
|
|
Term
Part A) Liability Coverage
-Supplementary Payments |
|
Definition
In addition to the limit of liability, the insurer will pay on behalf of the insured:
1. Up to $250 for the cost of bail bonds required because of an accident, including related traffic law violations.
2. Premiums on appeal bonds.
3. Interest accruing after a judgment is rendered in any suit defended by the insurer.
4. Up to $200 a day for the insured's loss of earnings due to attendance of trials or hearing at the insurer's request.
5. Other reasonable expenses incurred at the insurer's request. |
|
|
