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IA&B PC Insurance > Chapter 3: Property & Casualty Basics > Flashcards

Chapter 3: Property & Casualty Basics Flashcards

1
Q

Insurable Interest

A

financial interest a person has in the person/property being insured

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2
Q

liberalization

A

if coverage is changed during policy period, insureds under the insurance company’s existing insurance policies will receive the benefit of broadened coverage
*must broaden coverage, no increase in premium

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3
Q

Underwriting- Purpose/Process

A

Performed by both producers and underwriters during the risk selection process
Information gathered from producer’s application, physical inspections, government reports (vehicle, credit, financial)
Avoid adverse selection

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4
Q

Rate vs. Premium

A

Rate is price per unit, Premium is rate per unit multiplied by the number of units

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5
Q

Rate

A

price structure to cover claims and other expenses; provides a profit for the insurer

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6
Q

Judgement Rates

A

rates determined & applied to individual insureds by the insurance company

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7
Q

Manual or Class Rates

A

insureds with similar characteristics (homogeneous) are placed into classes, charged same rate.
Manual rates are only rate used in many lines of insurance, used to start developing a merit rate

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8
Q

Merit Rate

A

Consider the characteristics of a particular risk which increases/decreases a premium. They measure individual loss history and actions taken to reduce/prevent loss

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9
Q

Experience Rating (merit)

A

looks to past individual experience to predict future rates

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10
Q

Retrospective Rating (merit)

A

applies the loss history for the current policy period to develop a “final premium” for that same policy year

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11
Q

Hazard

A

specific condition/situation which increases the probability of loss or the extent of loss

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12
Q

Physical Hazard

A

structural, operational, or material characteristics of a risk

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13
Q

Moral Hazards

A

character flaws in a person that could lead to create a loss or expand a loss

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14
Q

Morale Hazard

A

irresponsibility, carelessness or indifferences to a loss

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15
Q

Named peril

A

will list each and every peril covered

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16
Q

Open Perils (special form)

A

covers all causes of loss or damage except those which are specifically stated to not be covered

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17
Q

Basic Named Perils

A

Fire, lightning, windstorm, hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism, sprinkler leakage, sinkhole collapse, volcanic action

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18
Q

Broad Named Perils

A

theft, falling objects, weight of snow/ice accidental discharge/overflow of water, sudden/accidental tear apart of appliance, freezing of plumbing, sudden and accidental damage from artificially generated electrical current

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19
Q

Direct loss

A

loss/damage as a direct result of a covered peril or cause of loss

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20
Q

Consequential/indirect loss

A

loss results in insured’s inability to use property because it suffered a direct loss

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21
Q

Specific Insurance

A

specific limit of insurance on a specific property at one specific location

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22
Q

Blanket Insurance

A

specific limit of insurance applying to more than one type of property or more that one location; uses total blanket limit to pay losses

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23
Q

Scheduled Coverage

A

specific insurance covering more than one location; specified limit is provided for each item on location

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24
Q

Frame Construction

A

generates the most expensive premium

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25
Types of Construction (numbered)
1. Frame 2. Joisted Masonry 3. Non-combustible 4. Masonry non-combustible 5. Modified Fire Resistant 6. Fire Resistant
26
Fire Resistive
fire insurance premium is least expensive
27
Replacement Cost
cost to replace damaged property (new for old)
28
Actual Cost Value (ACV)
replacement cost at the time of loss minus physical depreciation
29
Functional Replacement Cost
original insured property can be replaced with more commonly used material functionally equivalent at lower cost
30
Market Value
value of property as determined by the amount of money people would pay for the property knowing relevant facts
31
Agreed Value
Insured and insurance company agree on a value, amount of insurance carried must be equal to the agreed value
32
Valued Policy
declares the amount which will be paid in the case of a total loss of the property
33
Declarations Page (what is found)
Information that personalizes the policy Named insured, address, location, coverages, amounts of insurance, effective dates, limits of endorsements
34
Insuring Agreement (clause)
outlines promises made by insurance company to insured
35
Additional/Supplementary Coverages
specifically list additional coverages that provide coverage beyond the basic policy, at no additional cost
36
Conditions
obligations/duties required of the insured and insurance company to carry out the policy provisions
37
Exclusions
limit/restrict coverage
38
Endorsements
add, modify or exclude coverage, changing the original terms of the policy
39
Certificate of Insurance
Requested by third party to verify existence of insurance coverage
40
Named insured
specifically named on dec pages
41
First Named Insured
more than one named on dec pages, the first listed
42
Additional Insured
not usually named on dec pages, added to policy as insured by endorsement
43
Automatic Insureds
granted insured status because they fit into category described in policy provisions
44
3 Cancelation Provisisons
Pro Rata- insured gets back exactly what entitled to, based on cancelation date Short Rate- company changes small fee for cancelation Flat Rate- policy not taken by insured, no coverage taken and no premium earned
45
Earned Premium
applies to the time the policy was in effect
46
Unearned Premium
applies to the unused time left in a policy
47
Nonrenewal
action by the insurance company to terminate insurance coverage at the expiration date or renewal of the policy date
48
Other Insurance (what is it & how to handle)
insured has more than one policy to pay the loss Primary Insurance, Excess Insurance, Pro Rata, Contribution by equal shares
49
Other Insurance Options- Primary & Excess
Primary- insurance coverage pays first Excess- policy only responds after other insurance is paid out full limit
50
Other Insurance - Pro Rata
each policy will pay its proportionate share based on its limit of insurance written compared to the total limit of all insurance written
51
Other Insurance- Contribution by equal shares
each company will pay an equal amount of each loss, remaining policy continues to pay
52
Nonconcurrancy
policies do not insure for the same level of perils, resulting in gap in coverage
53
Coinsurance (did/should)
- Requires insured to carry specified percentage of the value of the property; only for partial losses - Insured has not insured the property to the required values, insured will be required to share in a portion of most covered losses
54
Vacancy
absence of both people/personal property Commercial prop.- must rent/use at least 31% of the building
55
Unoccupency
building contains furnishings and other personal property but has not had people occupying the space for a period of time
56
Duties of insured after a loss
report claims, cooperate in investigation, submit damages for inspection, make inventory of lost property, submit proof of loss
57
Assignment
insured giving away ownership of the policy/rights to another person
58
Waiver of Rights
Either party to contract voluntarily gives up one of the rights/requirements in Conditions section of policy
59
Insurer Provisions (liberalization & subrogation)
Liberalization- if policy is changed during policy period, insureds under existing policies will receive benefit of broadened coverage Subrogation- insurance company seeks recovery from a negligent third party who caused a loss to insured's property
60
Claims Settlement Options
Options to put insured into previous financial condition - Repair - Replace - Pay cash to repair/replace
61
Third Party Provisions- Standard Mortgage Clause (Lienholders Rights)
rights/duties of a mortgagee when the lender is named in the policy as the mortgagee
62
Third Party Provisions- Loss Payable Clause
any loss payment must include the financial interest of the lender named on the dec page or attached endorsements
63
Third Party Provisions- No Benefit to the Bailee
Bailee- rightful possession of the property of another avoid situation where bailee tried to escape legal liability for a loss to an insured's property (preserve insurer's subrogation rights)
64
Legal Liability
established under Common Law, Statutory Law, Contract Law
65
Tort
civil wrong against another party
66
Common Law
One party has committed a tort
67
Statutory Law
person violates a statue(law)
68
Contractual/Contract Law
assumed the responsibility of another through a contract
69
Negligence
failure to exercise that amount of care an ordinarily prudent person would use to protect others from unreasonable risk/harm/injury *must have all four elements for negligence
70
Legal Duty/Standard of Care (negligence)
legal duty to act or not act in a given situation
71
Breach of Duty (negligence)
you didnt do what others would have in a similar situation
72
Proximate Cause (negligence)
unbroken chain of events leading to the damages
73
Actual Loss or Damage (negligence)
third party must suffer actual injury or damage
74
4 Common Law Defenses
Assumption of Risk, Act of God/Nature, Intervening Cause, Contributory Negligence
75
Assumption of Risks- Law Defense
one knowingly/voluntarily exposes a known danger and the consequences of that danger
76
Act of God/Nature- Law Defense
event produced by a physical cause of nature, not within human control or intervention
77
Intervening Cause- Law Defense
separate act that breaks the direct connection between the proximate cause of loss and sets in motion a new chain of events causing injury/loss
78
Contributory Negligence- Law Defense
person adds in any way and is not entitled to collect damages from the other party
79
Comparative Negligence
an injured party can recover damages as long as their % is not great than the negligence of the other party
80
Statute of Limitations
any statute which prescribes the time limit in which a legal action must be brought Injury suit- 2 years Contractual Liability suit- 4 years
81
Damages
sum of money which compensates an injured party
82
Compensatory Damages
compensate the injured party for damages incurred
83
Special Damages (economic)
measurable dollar amounts of an actual loss or out of pocket costs
84
General Damages (non-economic)
subjective and hard to measure; pain and suffering, disfigurement, loss of consortism
85
Punitive Damage
sum of money in excess of the amount required to compensate for loss and which is imposed to punish the negligent party for the reckless indifference now and deter similar conduct in the future
86
Absolute/Strict Liabaility
imposes liability w/o regard to fault or negligence Strict- holds sellers, distributors and manufacturers responsible for hazardous products Absolute- explosives, mining or blasting, lions and tigers
87
Accident
taking place in an instant rather than continuously over time
88
Occurance
including continuous or repeated exposure to substantially the same general harmful conditions
89
Duty to Defend
policy to provide a defense to the insured for any/all covered claims under the policy
90
Per person liability limit
the most the policy will pay for bodily injury to any one person
91
Per Occurrence (accident) Liability Limit
the most an insurance company will pay arising out of any one occurrence of a covered loss, no matter how many people were injured
92
Split Limit Liability
limit that is divided between two types of insurance coverages; usually Bodily injury and property damage
93
Combined Single Limit Liability
combined single limit for bodily injury and property damage; advantage is flexibility
94
Aggregate Limit Liability
the most we will pay for all claims that occur during one policy period, also contain a per occurrence limit. Written on per policy, per location, per project basis; not reinstated until next policy term
95
Purpose of PA Property & Casualty Insurance Guaranty Association
pay covered claims under certain property & casualty policies which have not been paid by an insurance company because of insolvency (inability to pay debts)
96
Guaranty Association- Range of Authority
only covers property/casualty policies written by admitted/authorized insurers
97
Standard Fire Policy
conditions/provisions are basis of most property policy's (dwellings, homeowners, comm. property and businessowners policy)
98
Binder
temporary contract of insurance; issued for a period not to exceed 30 days
99
Insurance Consultation Services Exemption Act
protects insurers from liability actions resulting from performing or failing to perform services.

IA&B PC Insurance (21 decks)

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