Ch 2 - Insurance Basics - 15% of exam

Question 1

How many test questions on Ch 1?

Answer 1

?

Question 2

Do we accept oral agreements?

Answer 2

No

Question 3

What are the four elements for a Contract to exist?

Answer 3

Agreement, Consideration, Competent Parties, Legal Purpose.

Question 4

Test: Competent parties

Answer 4

Legal Capacity. That is, neither party being restricted by minority (age 18), insanity or intoxication. Both parties must be of sound mind. (Look at the context, ie: someone in hospital can’t make a deal.)

Question 5

Legal purpose

Answer 5

The contract is free from illegality, and consistent with public policy. ie: owner of a casino applies for coverage, but has no gambling license, or if a property was stolen.

Question 6

Law of Contracts

Answer 6

Since an insurance policy is a legal contract, it’s subject to the Law of Contracts.

Question 7

Indemnification

Answer 7

The responsibility of the insurer to return the property to a pre-loss condition.

Question 8

Repeated misreps

Answer 8

Fraud

Question 9

Concealment

Answer 9

Partial truth

Question 10

Hazards

Answer 10

Any condition or exposure that increases the possibility of loss.

Question 11

The 3 types of hazards

Answer 11

Physical, moral, morale.

Question 12

Physical hazards

Answer 12

Physical in nature, include conditions such as storing of explosives in a bldg, or a loose railing.

Question 13

Moral hazards?

Answer 13

A person with a poor financial history, or police record.

Question 14

Morale hazards?

Answer 14

A person with an “I don’t care attitude” since the insured is covered.

Question 15

Test: Aleatory Contract

Answer 15

Pay small, potentially receive large.

Question 16

Personal Contract

Answer 16

Betwn two parties, requiring highest degree of good faith. Cannot be transferred.

Question 17

Unilateral Contract

Answer 17

An act is exchanged for a promise. Payment of premium is exchanged for a payment of claims in the event of a loss.

Question 18

Conditional Contracts

Answer 18

Contingent upon certain acts by the insured or claimant. ie: payment of premium required for coverage.

Question 19

Subrogation

Answer 19

The insurer’s right to subrogate against 3rd parties who, due to their negligence, caused the insurer to pay a claim. (ADD EXAMPLE)

Question 20

Material misrep

Answer 20

The insurer withholds info that if revealed would likely cause the prospect to reject coverage.

Question 21

HO1 aka

Answer 21

Basic (called “Fire Policy”, no water damage cov, except water from fire hoses.)

Question 22

HO2 aka

Answer 22

Broad

Question 23

HO3 aka

Answer 23

Special

Question 24

HO1’s Named Perils (11 of them)

Answer 24

Fire, Lightning, Explosion, Windstorm/Hail, Smoke, Aircraft or Vehicles, Riot or Civil Commotion, Vandalism, Sprinkler Leakage, Sinkhole Collapse, Volcanic. (CHECK ON VANDALISM)

Question 25

HO2's Named Perils (14 of them, HO1's + which new 3?)

Answer 25

Falling objects, weight of ice/snow/sleet, water damage (acc. discharge, never flood which is sep. policy.)

Question 26

HO3 (15 of them, HO2's + which new one?)

Answer 26

Special/Open Peril Coverage

Question 27

How is HO5 the Rolls Royce of HO3's if HO3's already cover everything? (What's the difference?)

Answer 27

I think it's: in the event of there being damage and no visible open source of the damage, the property is covered anyway, but not personal property in such a case. (So it's always better for the insured of there's a visible source.)

Question 28

HO4 covers:

Answer 28

Condos

Question 29

HO6 covers:

Answer 29

Renters (is therefor a dwelling policy, covering investment properties)

Question 30

HO8 covers:

Answer 30

Historic Properties

Question 31

Open peril

Answer 31

Covers anything, except exclusions. (Ask how exclusions are defined.)

Question 32

Read Ch2 Page 5: Named perils vs. Open perils

Answer 32

-

Question 33

Test: Actual Cash Value (ACV)

Answer 33

Replacement costs minus depreciation. (What consumer paid for the insured item is irrelevant to the calculation.)

Question 34

Do Ch 2 Prac Test (ask if this Prac Test is helpful?)

Answer 34

-

Question 35

In NJ do all contracts have to be in writing?

Answer 35

Yes

Question 36

Contract of adhesion

Answer 36

Drawn up by one party (ins co) and presented to a a second party (insured) to be adhered to or rejected. Ambiguities are in favor of the insured since no opportunity to change any ambiguous verbiage.

Question 37

What is something to remember whenever determining the value of a property?

Answer 37

Don't pre-judge it's value (ie: based on location)

Question 38

APC 215

Answer 38

I think: is an HO3 policy (from AllState) - CHECK THIS

Question 39

Blanket policy

Answer 39

covers say 3 Wendy's fanchise locations.

Question 40

Blanket vs. special (ASK ABOUT)

Answer 40

-

Question 41

What is another name for an Endorsement?

Answer 41

A rider.