Definitions

Question 1

Financial responsibility law

Answer 1

State laws that require owners or operators of autos to provide evidence that they have the funds to pay for auto losses for which they might become liable. Insurance is the usual method for providing this evidence to the state.

Question 2

Fraud

Answer 2

A false statement intended to deceive the insurer and induce it to part with something of value or to surrender a legal right. May void an insurance policy.

Question 3

Insolvency

Answer 3

The insurer’s inability to pay their financial obligations (claims of policyholders)

Question 4

Mine subsidence

Answer 4

A type of peril that involves damage to your dwelling caused by an underground cave in or collapse of mines. This peril of loss is a basic exclusion within property insurance policies.

Question 5

Negotiate

Answer 5

To confer directly with, or offer advice directly to, a purchaser or prospective purchaser of a particular contract of insurance with respect to the substantive benefits, terms, or conditions of the contract, provided the person that is conferring or offering advice either sells insurance or obtains insurance from insurers for purchasers.

Question 6

Sell

Answer 6

to exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurer.

Question 7

Solicit

Answer 7

to attempt to sell insurance, or to ask or urge a person to apply for a particular kind of insurance from a particular insurer.

Question 8

Rebating

Answer 8

“buying Business” - if an agent/solicitor gives any type of monetary consideration (cash, gift, etc.) to a prospective customer to encourage that customer to buy from him

Question 9

Ohio Assigned Risk Plan

Answer 9

a mechanism for individuals unable to obtain auto insurance in the normal marketplace.

• company must offer coverage to the applicant for a three year period.
• policy can only be cancelled due to fraud, misrepresentation, or non-payment

Question 10

Ohio FAIR Plan Underwriting Association

Answer 10

Basic Property, Homeowners, and some limited Farm Insurance coverage available for qualified person who have been unable to secure coverage in normal market.

Question 11

Ohio Commercial Insurance Joint Underwriting Association

Answer 11

the non-profit unincorporated joint underwriting association established under section 3930.03 of the Revised Code

Question 12

Ohio Commercial market assistance plan

Answer 12

the mechanism created to respond to assist commercial insurance buyers in Ohio in obtaining difficult-to-place commercial insurance coverages.

Question 13

Uninsured/Underinsured motorist-

Answer 13

the owner/operator of a motor vehicle that:

• has no bodily injury liability bond or insurance policy covering owner’s liability,
• insurer denies coverage to owner/owner is insolvent
• identity of the negligent owner or operator cannot be determined
• owner has diplomatic or other legal immunity

Question 14

Adhesion

Answer 14

The principle that any ambiguity in the wording of the contract will always be ruled upon in favor of the insured, since they had no chance to negotiate the terms;
one of the four characteristics of insurance contracts

Question 15

Agency

Answer 15

A legal relationship between two parties: Principal and Agent

Question 16

Agency system

Answer 16

Refers to an insurance distribution system that supports a “middle man.” There is a field force of licensed agents and the public buys through them.

Question 17

Aleatory

Answer 17

Refers to unequal exchange of values

ex. the premium paid for protection is a lot less than the actual limit of protection: one of the four characteristics of insurance contracts.

Question 18

Binder

Answer 18

A legal contract that gives immediate temporary coverage for temporary need; a binder may be oral or written

Question 19

Binding Authority

Answer 19

Refers to the ability to issue binders. Agents could have both oral and written binding authority; the overwhelming number of agents has both

Question 20

Broker

Answer 20

One who represents an insured in the solicitation, negotiation, or procurement of contracts of insurance, and who may render services incidental to those functions.
This person is also called an independent agent. By law, the broker may also be an agent of the insurer for certain purposes such as delivery of the policy or collection of premium.

Question 21

Conditional

Answer 21

Refers to the fact that the promise to indemnify is predicated upon conditions.
Ex. can be summarized as if… then; one of the four characteristics of insurance contracts

Question 22

Contract

Answer 22

A legal agreement between two parties for consideration, such as an insurance policy.

Question 23

Estoppel

Answer 23

This concept is related to waiver. Once a person or company waives a known right, the waiver cannot be reversed.

Question 24

Fiduciary

Answer 24

A person who occupies a position of special trust and confidence.

ex. in handling or supervising the affairs or funds of another.

Question 25

General Agent (GA)

Answer 25

An individual appointed by an insurer to administer its business in a given territory. Responsible for building the agency and service force. Compensation is on a commission basis, although there may be additional expense allowances. Often called a Managing General Agent (MGA).

Question 26

Hazard

Answer 26

Anything that increases the possibility of suffering a loss due to peril. ex. improperly stored combustible materials, worn tires, intentional abuse to insured property, or unsafe structural changes.

Question 27

Indemnity

Answer 27

Insurance is designed to restore the policy owner to the same financial condition enjoyed prior to a loss. The intent is to cover the amount of the actual loss only; the insured should not profit from a loss situation.

Question 28

Insurable Interest

Answer 28

A financial relationship you have with property. For something to be insurable, there are six things affecting risk that usually must be true: a large number of homogeneous units involved, loss must be ascertainable or measurable, loss must be uncertain, economic hardship involved, catastrophic perils excluded, adverse selection eliminated. If any one of these six characteristics is missing, an interest is not insurable.

Question 29

Insured

Answer 29

The party to an insurance arrangement to whom, or on behalf of whom, the insurance company agrees to indemnify for losses, provide benefits, or render service.

Question 30

Insurer

Answer 30

The insurance company assuming risk and agreeing to pay claims or provide services.

Question 31

Liability

Answer 31

1. A legal obligation to pay for a loss. 2. Type of insurance needed to cover the situation of being responsible for someone's accident or injury or to provide a defense to settle any claim or suit against the insured. The insurer's duty to settle or defend ends when the amount paid for damages resulting from the occurrence equals the limit of liability.

Question 32

Mass Marketing System

Answer 32

Refers to an insurance distribution system that "cuts out the middle man." The public calls an 800 number and buys direct.

Question 33

Peril

Answer 33

The cause of a loss to a policyholder.

Question 34

Policy

Answer 34

The written contract effecting insurance or the certificate thereof by whatever name called, and papers attached thereto and made apart thereof. a legal document between the insurance company and the policy owner that defines the amount of coverage, the amount of the premiums for that coverage, and what is and isn't covered in the event of a loss.

Question 35

Policy owner

Answer 35

The person who has the right to exercise the privileges and rights in the policy contract. Also called contract holder or policyholder.

Question 36

Premium

Answer 36

1. The consideration for the insurance. | 2. A periodic payment made to keep a policy in force.

Question 37

Property insurance

Answer 37

Insurance that indemnifies a person with an interest in a property for a loss.

Question 38

Risk

Answer 38

The uncertainty of loss that exists whenever more than one outcome is possible.

Question 39

Risk, Pure

Answer 39

A risk in which there is no chance of gain, only loss.

Question 40

Surplus lines insurance

Answer 40

A special line of coverage that is not filed with state insurance departments. Typically includes risks that are very large or unusual, such that most companies will not provide coverage. Carriers of this coverage may be out-of-county.

Question 41

Unilateral

Answer 41

One sided. ex. only one partner in the insurance contract makes an enforceable promise, that being the insurer; one of the four characteristics of insurance contracts.

Question 42

Insurance

Answer 42

a social device for spreading the chance of financial loss among a large number of people.

Question 43

Risk, Speculative

Answer 43

creates a situation that offers the possibility of gain as well as loss. ex. gambling

Question 44

Moral Hazard

Answer 44

a hazard created by a dishonest individual who would be willing to create a loss situation on purpose just to collect from an insurance company; risk of fraud

Question 45

Morale Condition

Answer 45

attitude of the insured; a hazard created by an individuals tendency to contribute to a loss through the individual's own irresponsible acts or carelessness ex. knowing there is ice and snow on the sidewalk and doing nothing about it.

Question 46

Law of large numbers

Answer 46

the larger the number of separate, similar risks combined into one group are within a given time period.

Question 47

Indemnification

Answer 47

The process of making someone financially whole. Restore the insured to the same, or nearly the same, financial condition they enjoyed before the loss.

Question 48

Pro-Rata Liability

Answer 48

Clause in a Property policy that provides a method of sharing loss when more than one policy is applicable. Each company covers no more than its share. Also known as the Other Insurance Clause

Question 49

Rate

Answer 49

The per-unit cost of insurance

Question 50

Replacement Cost

Answer 50

The cost of replacing property with brand new material, without deduction for depreciation

Question 51

Robbery

Answer 51

In Crime Insurance, the forcible and felonious taking of property from a messenger or custodian by violence or threat of violence.

Question 52

Salvage

Answer 52

Property taken over by an insurance company to reduce its loss. The company may dispose of salvage property as it wishes, but on request and proper reimbursement, may return it to the insured.

Question 53

Short-Rate

Answer 53

A percentage penalty charged on insurance canceled by the insured before the end of the policy period. Return premium is calculated on a short rate basis, meaning the insurance company keeps a portion of the unearned premium to cover expenses.

Question 54

Surplus lines Insurers/ Surplus lines Broker

Answer 54

Broker who attempts to place risk with an unauthorized carrier located in another state or country. Exempt from state licensing requirements.

Question 55

Alien Insurer

Answer 55

Incorporated in a country other than the United States.

Question 56

Domestic Insurer

Answer 56

Incorporated in the state in which it does business.

Question 57

Foreign Insurer

Answer 57

Conducts business in a state other than where its offices are located.

Question 58

Fiduciary Responsibility

Answer 58

when one person holds something in trust for another ex. an agent's fiduciary responsibility demands that you always do what is in the best interest of your client

Question 59

Consideration

Answer 59

The exchange of something of value between the parties of a contract

Question 60

Theft

Answer 60

Any act of stealing. Includes larceny, burglary, and robbery.

Question 61

Actual Cash Value (ACV)

Answer 61

The cost to replace a property item at the time of loss; less an allowance for depreciation. Often used to determine amount of reimbursement for a loss.

Question 62

Aggregate Limit

Answer 62

A type of policy found in Liability policies that limits coverage to a specified total amount for all losses occurring within the policy period.

Question 63

Burglary

Answer 63

As it is defined in Crime insurance policies, the unlawful taking of property by forced entry into, or exit from the premises, while the premises are closed for business. There must be visible evidence of forced entry or exit.

Question 64

Co-Insurance

Answer 64

1. In property insurance, a clause under which the insured shares in losses to the extent that the insured is under-insured at the time of loss. 2. In health insurance, a provision that the insured and insurance company will share covered losses in agreed proportion.

Question 65

Combined Loss Ratio

Answer 65

The amount of claims paid out compared to the amount od premiums received over the same period of time; ex. a company receives premiums of $1,000,000 and pays out $400,000 in claims over the same period of time. The loss ratio would be 40%

Question 66

Direct Loss

Answer 66

Loss that is a direct result of a peril, such as fire.

Question 67

Functional Replacement Cost

Answer 67

A compromise between true replacement cost and straight actual cash value (ACV); the insurer will rebuild for the same function or purpose, but rebuild using modern, less expensive building materials.

Question 68

Indirect Loss

Answer 68

Loss that is a result or consequence of a direct loss

Question 69

Loss

Answer 69

An unpredictable reduction in the quality, quantity, or value of something. ex. bodily injury, disease, property damage, physical disappearance of property, incurred expenses, death, etc

Question 70

Negligence

Answer 70

Failure to use that degree of care that an ordinary person of reasonable prudence would use under the same given circumstances. Negligence may be constituted either by acts of omission or commission, or both.

Question 71

Mysterious Disappearance

Answer 71

Vanishing of property with no known explanation

Question 72

Tort

Answer 72

a wrongful act of civil law, not including a breach of contract or trust, that results in injury to another's person, property, reputation, or the like, and for which the injured party is entitled to compensation.

Question 73

Strict Liability

Answer 73

Liability that arises from an extremely dangerous situation. Often found in cases involving explosives. ex. You are strictly liable is you keep a wild animal as a pet.

Question 74

Vacancy

Answer 74

The absence of people and personal property from a building; not expected to return. Property coverage is often restricted when there are long periods of vacancy, especially for the perils of vandalism and glass breakage.

Question 75

Vicarious Liability

Answer 75

Imposed in some states on a person even though the person is not a party to the particular occurrence ex. the owner of a motor vehicle might be vicariously responsible for injuries even though the owner is not driving the car at the time of the occurrence.

Question 76

Underwriting

Answer 76

The process of evaluating a risk for the purpose of issuing insurance coverage on it.

Question 77

Indirect loss

Answer 77

further expense suffered while being without the property

Question 78

All-Risk Policy

Answer 78

policy that list exclusions, or itemizes perils not covered. It can be a short list, or a long and inclusive list. Any peril causing loss not excluded is covered.

Question 79

Bodily Injury

Answer 79

Defined as harm, sickness, disease or death.

Question 80

Insured

Answer 80

The party to an insurance arrangement to whom, or of whom, the insurance company agrees to indemnify losses, provide benefits, or render service.

Question 81

Insured Location

Answer 81

The residence premises and any part of a premise where an insured in temporarily residing (such as a hotel room). It also includes vacant land owned by the insured, as well as cemetery plots.

Question 82

Pro-Rata Liability Clause

Answer 82

Clause in Property policy that provides a method of sharing loss when more than one policy is applicable. Each company covers no more than its share. Also known as the Other insurance clause

Question 83

Property Damage

Answer 83

Physical Injury to, destruction of, or loss of use of tangible property.

Question 84

Subrogation

Answer 84

The transfer to the insurance company of the insured's right to collect for damages. After paying a claim, the company stands in the place of the insured in suing the negligent party, thus preventing the insured from collecting twice.

Question 85

Garage Keepers Legal Liability

Answer 85

A coverage that is part of the Garage Policy. Covers a garage's risk of legal liability for customers' autos in the care, custody, or control of the garage. At the insured's option, can also apply without regard to fault, for an additional premium.

Question 86

Garage Policy

Answer 86

A policy that provides coverage for garage businesses. Includes coverage for liability, physical damage, and garage keepers' losses arising out of owned, non-owned, and hired autos.

Question 87

Personal Auto Policy

Answer 87

Easy-to0read Auto policy that provides broad coverage for both owned and non-owned autos that are used, maintained, and/or operated by the insured and family.

Question 88

Advertising Injury

Answer 88

Refers to misappropriation of advertising ideas, or infringement of copyright, title, or slogan.

Question 89

Contractual Liability

Answer 89

Also known as Hold Harmless Agreement. Refers to when a business agrees to be responsible for someone else's liability.

Question 90

Fidelity Loss

Answer 90

Refers to employees breaching trust of employers

Question 91

Monoline Policy

Answer 91

An insurance policy that provides a single form of protection. A Fire Dwelling Policy is an example of a monoline policy

Question 92

Personal Injury

Answer 92

Refers to civil torts involving issues of libel, slander, defamation of character, or wrongful eviction.

Question 93

Scheduled Object

Answer 93

Part of a Boiler and Machinery Policy; insured lists the machines to be covered under the policy.