05. Interest, Claims, and Subrogation

Question 1

Claim

Answer 1

A demand for payment in accordance with the terms of an insurance policy ( does not always result in indemnification )

Question 2

Claimant

Answer 2

Someone who has filed a claim

Question 3

Q: what are the two types of claims?

Answer 3

1. First party claim

2. Third party claim

Question 4

First Party Claim

Answer 4

A claim filed by the policyholder against his or her own insurance policy

• must be paid by policyholder’s own insurance

Question 5

Third Party Claim

Answer 5

A claim filed against an insurance policy by anyone other than the person named on that policy

Question 6

Q: what are the five steps of the claims process?

Answer 6

• filing a claim
• acknowledgement
• investigation
• evaluation
• adjustment

Question 7

Filing a Claim

Answer 7

• does not grant immediate indemnification
• when insured parties file a claim, it means they believe they are owed payment by an insurer
• policyholders file claims by calling their insurer

Question 8

Acknowledgement ( after receiving a claim, an insurer must: )

Answer 8

• acknowledge a receipt of the claim
• begin investigating all pertinent facts and insured surrounding the claim

Inductance adjuster: represents the insurer; responsible for evaluating the circumstances of the claim

Question 9

Investigation

Answer 9

• finding the proximate cause of the loss
• examining all damages
• noting all circumstances surrounding the loss
• taking witness statements and reviewing police reports, when necessary
• determining liability, when relevant to the claim
• deciding whether the claim is valid or not

Question 10

Evaluation ( if the claim is deemed valid )

Answer 10

• considering policy limits and deductibles
• calculating lender interest
• determining the value of the loss
• applying all financial provisions of the policy

Question 11

Adjustment ( the final disposition of the claim )

Answer 11

• if claim is accepted, the insurer must pay promptly after notifying that the claim will be paid
• if claim is denied, the insurer must explicitly state its reasons for denial

Question 12

Insurable Interest

Answer 12

Direct financial interest in protecting something or someone

• only parties with insurable interest can insure a property or person
• you cannot insure a house you do not own or have some financial interest in
• you can only insure someone’s life of that person’s death would cause you economic hardship

Question 13

Lender interest

Answer 13

A lenders financial stake in an insured item

• protects a lender who loans money to a buyer
• allows insurers to compensate a lender of a property. In which the lender has a financial interest, is damaged

Question 14

Subrogation

Answer 14

The transfer of rights that allows the insurer to recover its losses after it has indemnified a policyholder

How it works: when a policyholder is indemnified for a loss, she may no longer collect payment for that loss from anyone else. She has transferred this right to the insurer

( basically policyholder allows insurer to collect money owed from responsible party in an incident )

Question 15

Limits to Subrogation

Answer 15

• Subrogation only applies up to the amount that the insurer pays
• the policyholder still has the right to demand payment from the guilty party of any damages that exceed the indemnity

Question 16

Waiver of subrogation

Answer 16

• included in certain types of policies and contracts
• takes away the insurer’s right to recover its losses after paying a claim
• usually involves a higher premium