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PFS Personal Lines > On DEMAND: Property and casualty Insurance Terms & Related Concepts > Flashcards

On DEMAND: Property and casualty Insurance Terms & Related Concepts Flashcards

1
Q

Transfer of loss. Protection

A

Insurance

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2
Q

2 Types of risk

A

pure

speculative

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3
Q

Type of risk that CANNOT be insured

A

speculative

- Gambling

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4
Q

Type of risk that CAN be insured

A

Pure risk

- no financial gain

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5
Q

Increases your possibility of having a loss. Conditions that INCREASE the probability of an insured loss.

A

Types of hazards

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6
Q

Smoking since you were 14 years old is what type of hazard

A

PHYSICAL hazard

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7
Q

Lying on the application is what type of hazard

A

MORAL hazard

- tendency towards risk

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8
Q

“If I’m insured, why should I worry?” is a type of hazard

Drinking and driving. “They’ll pay the claim if something happens.

A

MORALE

- state of mind that causes indifference towards loss. Mindset

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9
Q

The CAUSE OF LOSS. The reason you lost something. In life insurance, the cause is death. Health insurance, its sickness or accident.

A

Peril

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10
Q

A REDUCTION OF VALUE and a BASIS FOR A CLAIM

A

loss

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11
Q

2 types of peril

A

Property

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12
Q

Your personal things, house, car, things inside your home. Your stuff. Income-producing abilities. YOUR CAR in the wreck.

A

Property

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13
Q

Someone ELSE’S BODY or CAR that you are liable to pay for

A

Casualty

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14
Q

The LOSS represents …

A

the money required to fix or restore something

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15
Q

True purpose of insurance is this. To restore you back to the way you were before loss. REIMBURSEMENT.

A

indemnity

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16
Q

Insureds cannot GAIN FINANCIALLY or PROFIT after the loss

A

Indemnity = reimbursement

Indemnify

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17
Q

5 Elements of Insurable risk

A
  • due to chance
  • definite and measurable
  • statistically predictable
  • not catastrophic (insurance companies are businesses and must be profitable)
  • randomly selected/large loss exposure (hits someone sometime in the group, and a large number of people. Larger the group, more accurate the actuaries can be.)
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18
Q

Risk must be due to

A

chance

  • Random
  • Not premeditated
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19
Q

Insurance is spreading risk among a large pool of people with similar exposure.

A

Law of large numbers

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20
Q

Insurance is a _____

A

contract

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21
Q

Property insurance is a ____ party contract

A

two

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22
Q

Property insurance covers losses to _______ or _____

A

possessions or assets

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23
Q

Casualty / liability is a _____ party contract

A

third
(policy pays a third party)
The person was hurt who came onto your property and was hurt

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24
Q

Property insurance is legal liability for _____ or _____ to others

A

Property insurance is legal liability for INJURY or DAMAGE to others

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25
Q

The _______ is the EVENT where someone is injured

A

The ACCIDENT is the EVENT where someone is injured

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26
Q

________ is WHEN it happened that causes the LOSS

A

OCCURRENCE is WHEN it happened that causes the LOSS

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27
Q

FIRE is a covered peril on the policy and your house burns down. This is a ______ LOSS.

A

FIRE is a covered peril on the policy and your house burns down. This is a DIRECT LOSS.

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28
Q

You lost your home to a fire. Where do you go? You might end up in a HOTEL while house is rebuilt. That money that’s out of pocket from loss of house. This is an ______ LOSS.

A

You lost your home to a fire. Where do you go? You might end up in a HOTEL while house is rebuilt. That money that’s out of pocket from loss of house. This is an INDIRECT LOSS.

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29
Q

_______ PERIL POLICY. The PERIL is the CAUSE OF THE LOSS.

FIRE, LIGHTNING, INTERNAL EXPLOSION.

Unless the house is destroyed by these, it’s NOT covered.

A

NAMED PERIL POLICY. The PERIL is the CAUSE OF THE LOSS.

FIRE, LIGHTNING, INTERNAL EXPLOSION.

Unless the house is destroyed by these, it’s NOT covered.

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30
Q

______ PERIL POLICY.

Anything is covered unless it’s in the EXCLUSION AREA in the back of the policy.

More high-end policy.

A

OPEN PERIL POLICY.

Anything is covered unless it’s in the EXCLUSION AREA in the back of the policy.

More high-end policy.

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31
Q

Type of policy Has the largest exclusion section.

A

open-peril

32
Q

TYPE OF COVERAGE

It’s YOUR car. YOUR roof.

A

SPECIFIC

Named

33
Q

TYPE OF COVERAGE

Insurance agency. Covers a GROUP OF PEOPLE.

A

BLANKET

Under the blanket and therefore covered

Multiple Classes. Don’t need to know specific name of it.

34
Q

The rooms are empty. Nothing is in the dwelling. No people. No possessions. Empty building. Not coming back.

A

Vacancy

  • If vacant for more than 60 days, the policy covers nothing. Voids out most contracts.
35
Q

Your stuff is still there but you are not. You’re on vacation. Temporarily gone.

A

Unoccupancy

36
Q
A

1

37
Q

Valid reason for writing insurance on that house.

A

Insurable interest.

38
Q

Insurable interest is provided when?

A

At the TIME OF LOSS.

39
Q

What people do at home office, review applications, order consumer info, to determine what risk you are to the company. If you’re insurable or not.

A

Underwriting

40
Q

Cost of the coverage

A

Rate

“how you’re rated”

41
Q

Loss Ratio formula

A

(Incurred loss + Adjusting expenses)
/ Premium paid into policy
= Loss ratio

42
Q

Agents are judged based on ______

A

loss ratio

- Your book of business’ loss

43
Q

Someone hits you and takes off. No one is there to pay for car except you. File claim. Totaled the car. All on YOUR policy. When you accept the check, you _______ – or turning over the right to find the party who caused lost– to the insurance company. They chase the person to sue by third party

A

Subrogration

44
Q

LOSS VALUATION METHODS

If your house burns down, have it rebuilt for LIKE KIND AND QUALITY AT TODAY’S PRICES. Build it just like it was. Same dry wall etc.

A

Replacement cost

45
Q

LOSS VALUATION METHODS

Replacement cost minus DEPRECIATION.

A

Actual cash value

*Usually you can upgrade to Replacement cost

46
Q

LOSS VALUATION METHODS

Cost to replace with modern, less expensive construction or materials.

You have an older, historic home. No way to replace the carved, wood mantelpiece. Same wood might not be available or cost to obtain is impossible. Or craftsmanship.

A

Functional Replacement

47
Q

LOSS VALUATION METHODS

What a willing buyer will pay a willing seller

A

Market value

48
Q

LOSS VALUATION METHODS

Fair valuation based on the amount of insurance agreed on.

Artwork. Value is great today, 10 years it drops. Or vice versa. Hard to value. At the time of the policy, an appraiser comes possibly. More difficult to value.

A

Agreed value

Agree on a starting point.

49
Q

LOSS VALUATION METHODS

Scheduled amount of insurance, and maximum the insurer will pay

A

Stated value

50
Q

ELEMENTS OF NEGLIGENCE

Duty to act or not to act

Homeowner decides not to clean sidewalks of ice. Someone slips and falls

A

Legal duty

51
Q

LOSS VALUATION METHODS

Defendant used standard of care that breached legal duty

A

Stardard of car

52
Q

LOSS VALUATION METHODS

Unbroken chain of events that caused damage 
Rain
Snowed
Sleeted
Froze
Homeonwer didn't clean
caused the loss
A

Proximate cause

53
Q

LOSS VALUATION METHODS

Actual injury or damage

A

Actual loss or damage

54
Q

TYPES OF NEGLIGENCE

2 types

A

Contributory

Comparative

55
Q

TYPES OF NEGLIGENCE

The injured party must be COMPLETELY FREE OF FAULT

A

Contributory Negligene

Any negligence on the part of the insured party that CONTRIBUTED to the injury will defeat the claim.

56
Q

TYPES OF NEGLIGENCE

More Lenient
Awards for damages are reduced by the PERCENTAGE OF NEGLIGENCE OF EAH PARTY

A

Comparative Negligence

57
Q

TOPIC: Liability

Liability to _____, not ____

A

TOPIC: Liability

Liability to others, not yourself

58
Q

TOPIC: Liability
Types

You own a tiger. The neighbor’s kid is bit.

A

Absolute liability

Obviously hazardous activities
Injured party does not need to prove negligence

59
Q

TOPIC: Liability

Product liability
liable for defective products regardless of fault or negligence

A

Strict

60
Q

TOPIC: Liability

Masters are liable for the acts of servants

A

Vicarious liability

Old English law

61
Q

TOPIC: Liability

3 types of liability

A

Absolute
Strict
Vicarious

62
Q

the maximum amount insurer will pay for a particular loss

A

Limits Of Liability

63
Q

Insurer’s liability for payment as stated in an insurance policy

A

Limits Of Liability

64
Q

Limits Of Liability are expressed in 3 ways

A
  1. Single limit
  2. Split limit
  3. Aggregate limit
65
Q

Limits Of Liability

When you buy a home. If house burns down, they pay. For SITUATION.

A

single limit

66
Q

Limits Of Liability

Usually on car insurance. SEPARATES.

A

Auto insurance

Claim up to a certain amount

67
Q

Limits Of Liability

The absolute maximum the company will pay after all claims.

A

Aggregate

The company cuts you off
Cap
Usually large

68
Q

Insured share of a loss, that is paid BEFORE the INSURER PAYS the policy benefits

A

Deductible

69
Q

Helps make sure that the insurer isn’t just making small claims. Insureds absorb smaller classes; insurer covers large losses

A

deductible

70
Q

The larger the deductible, the lower the policy ______

A

The larger the deductible, the lower the policy premium

71
Q

You have a home.
It burns down.
If you have the proper amount of coverage.
Insurance says they will rebuild to similar or like.

A

Insurance To Value

Provides a REPLACEMENT COST SETTLEMENT t the policyholders who carries adequate insurance

Property insured to the EXACT DOLLAR AMOUNT or PERCENTAGE of its value.

Usually found in HOMEOWNERS POLICIES

72
Q

Insured agrees to maintain a certain MINIMUM AMOUNT OF INSURANCE on the INSURED PROPERTY

Someone carries less coverage than they think is needed to rebuild the whole home. (Contractors who can do the work themselves)

Insurance company: “If you’re going to be cheap, so will we.. When we pay the claim, we pay a lot cheaper”

A

Coinsurance

Opposed to INSURANCE TO VALUE

73
Q

Coinsurance formula

A

Insurance carried /
Insurance required
x Loss amount
= Loss Payment

Home value to rebuild: $100k
Insurance carried: $50k
CLAIM: $10k
= Loss payment

74
Q

Vacancy Vs. Nonoccupancy

Insured structure in which o people have been living or working, and no property has been stored (usually 60 days)

Ex: You move away. Living in other house. The first home is sitting empty and for sale. On the 61st day, you lose coverages.

A

Vacancy

60 days and then you start losing coverage

75
Q

Vacancy Vs. Nonoccupancy

Insured structure in which NO PEOPLE have been living or working, but SOME PROPERTY is stored

Ex: insured is on an extended vacation.

A

Nonoccupancy

Needs to be written as a SECONDARY RESIDENCE if its a summer or winter home. Remains as nonoccupancy that way.

PFS Personal Lines (10 decks)

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