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Property And Casualty Test Flashcards

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1
Q

Insurance

A

Transfer of risk from a person or business to an insurer

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2
Q

Risk

A

Uncertainty/possibility of a loss

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3
Q

Types of Risk

A

Speculative risk

Pure risk

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4
Q

Speculative risk

A

Chance of loss or gain ; not insurable

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5
Q

Pure risk

A

Chance of loss only; insurance companies will insure

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6
Q

Exdposure

A

Possibility that a loss will occur

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7
Q

Peril

A

Cause of loss

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8
Q

Direct

A

Physical loss

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9
Q

Indirect

A

Consequence of the direct loss

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10
Q

Hazard

A

Increases the chance of loss

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11
Q

Physical hazard

A

The hazard can be seen

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12
Q

Moral hazard

A

Dishonesty that intentionally causing a loss is acceptable

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13
Q

Morale hazard

A

Carelessness

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14
Q

STARR

A 
Sharing
Transfer
Avoidance
Retention
Reduction
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15
Q

Contract

A

An agreement between the insured and the insurer

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16
Q

1st party

A

Insured

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17
Q

2nd

A

Insurer

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18
Q

Law of large numbers

A

The larger the group, the more accurately future losses can be predicted

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19
Q

CANHAM

A 
Calculable
Affordable
Non-catastrophic
Homogeneous
Accidental
Measurable
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20
Q

Adverse selection

A

Risks that have a greater than average chance of loss

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21
Q

Reinsurance

A

An insurance company paying another insurance company to take some of the company’s risk

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22
Q

Facultative

A

The reinsurer evaluates each risk before allowing the transfer

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23
Q

Treaty

A

The reinsurer accepts the transfer according to an agreement called a treaty

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24
Q

Stock insurer

A 
Owned by stockholders
Dividend is not guaranteed
Dividend is paid to stockholder
Dividend is taxable to stockholders
Issues non-participating policies
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25
Mutual insurer
``` Owned by the policyholders Dividend is not guaranteed Dividend is paid to policyholder Dividend is not taxable; considered refund of premium Issues participating policies ```
26
Fraternal insurer
Provides insurance and other benefits | Must be a member of the society to get the benefits
27
Reciprocal insurer
Unincorporated Members are required to pay an assessed amount if a loss to any member of the group occurs Managed by an attorney in fact
28
Lloyd’s association
insurance provided by individual underwriters not companies
29
Risk retention group
Liability insurance company created for policyholders from the same industry
30
Risk purchasing group
A group of businesses from the same industry joining together to buy liability insurance form an insurance company
31
Self insurance
A business that pays its own claims Reserves funds to cover losses Retains risk rather than transfers
32
Federal government provides residual market insurance
``` Insurance form the state or federal government War risk insurance Nuclear energy insurance Food insurance Federal crop insurance Unemployment insurance Workers compensation ```
33
Insurance company location
Domestic Foreign Alien
34
Domestic
The state where a company is incorporated
35
Foreign
Company is incorporated in another state or US territory
36
Alien
Company is incorporated in another country
37
Certificate of authority
State license for an insurance company
38
Admitted or authority
State requires the insurance company to have a certificate of authority
39
No admitted or unauthorized
Insurance company not required to have a certificate of authority from the state
40
Surplus lines
Insurance sold by unauthorized/no admitted insurers if on the states approved list of surplus insurers Can only be sold to certain high risk insured Cannot be sold solely for a cheaper rate than licensed/admitted insurers
41
Financial strength rating
A report card of the company
42
Methods of marketing
Independent Exclusive or captive General agents or managing general agents Direct-writing companies
43
Direct reponse
No agent/producer involved
44
Agency
The insurance agent acts on behalf of the principal
45
Agent authority
Express Implied Apparent
46
Express
What the agent’s written contract with the company says
47
Implied
Not written; activities an agent normally does to sell insurance
48
Apparent
Activities an agent does that a reasonable person would assume as authority, based on the agent’s actions and statements
49
Fiduciary trust
Promptly sends premiums to insurer Has knowledge of products complex with laws and regulations Does not commingle funds
50
CLOAC
``` Consideration Legal purpose Offer Acceptance Competent parties ```
51
Consideration
Giving something of value
52
Consideration
Premium and statements made on application
53
Legal purpose
The risk transfer doesn’t violate the law office, and acceptance
54
Offer and acceptance
Offer - insured submits application and first month premium to insurer - insurer accepts or insurer declines the risk Counteroffer - agrees to issue policy but with higher premium or restrictions/exclusions - insured either accepts the conditions or withdraws their application
55
Competent parties
Legal age Mentally sane Sober
56
Adhesion
Policy written by the insurance company Contract is like glue cannot be changed Insured has no input If ambiguous, court will take the side of the insured
57
Aleatory
Not equal value | Small premium for a large amount of coverage
58
Utmost good faith
The insured and insurance company have a right to expect honestly from each other
59
Unilateral
Only one legally enforceable promise made
60
Personal
Contract between the insurance company and the insured; cannot be changed to someone else
61
Conditional
Insured must pay the premium for coverage and file a claim if a loss occurs
62
Indemnity
Makes whole - restores the insured to a pre loss state - pays for the loss with no gain - no more! No less!
63
Representation
Believed to be true | - statements on application are considered representations
64
Misrepresentation
Information given that is not true but would not affect the insurance company’s decision
65
Material misrepresentation
Information given that is not true and DOES affect the insurer’s decision
66
Warranty
Always made by the insurance company - breach of warranty may void the contract May be made by the insured - Breach of warranty may void the contract
67
Concealment
Failure to disclose, hiding information - if intentional and the information is material, coverage could be voided - if NOT intentional, coverage NOT be voided
68
Fraud
Intentional act to cheat another
69
Waiver
Voluntarily giving up a right
70
Estoppel
Once a waiver has been created, it can’t be reinserted
71
Property insurance
Covers buildings and personal belongings Loss caused by covered peril First party losses - insurer pays insured
72
Casualty insurance
Casualty = liability Always pay the other guy, never me Third party losses
73
DICEE
``` Declarations Insuring agreements Conditions Endorsement Exclusions ```
74
Declarations
Who, what, when, where, and how much
75
Insuring agreements
Promise to pay and perils covered
76
Conditions
Rules for the policy
77
Endorsement
Changes to original policy
78
Exclusions
Not covered
79
Supplementary coverage
- payment for additional expenses not normally covered | - may have superheated limit of insurance
80
Named Insureds
In the declarations
81
First-named insured
First in the declarations
82
Insureds
By definition
83
Additional insured
Added by endorsement
84
Policy period
When the policy begins and ends
85
Policy territory
Where a loss must occur
86
Cancellations
Occurs before the policy expiration date - company cancellation requires advance notice - full refund of unearned premiums, pro rats - named insured cancellation - no advance notice - partial refund of unearned premium, short rate
87
Nonrenewal
Occurs at the expiration date - company must give advance notice - no advance notice required by the insured
88
Deductible
Amount of the loss paid by the insured | The higher the deductible, the lower the premium
89
Other insurance provision
Multiple policies insuring the same loss
90
Primary/excess
Primary policy pays first; excess pays what’s left
91
Equal shares
Each policy pays the same up to the smallest policy’s limit
92
Pro rata
Each policy pays its share according to the total insurance
93
Named insured duties after loss
``` Prompt notice to insurer Protect property from further damage Complete proof of loss Make property available for inspection Submit to examination under oath if required Cooperate with insurer ```
94
Assignment
Policy cannot be transferred without written consent from the insurer
95
Abandonment
Insured cannot abandon property that can be repaired and expect to be paid as if the loss was total
96
Salvage
Insurer has the right of salvage, not the insured Salvaged property can lower claim cost for the insurance company
97
Liberalization
Extended coverage to insured No additional premium changed No action required by insured
98
Subrogation
Insurer has the right to sue an at fault party for damages the insurer had to pay the insured - common when at fault party does not have insurance
99
Insurable interest
Financial risk of loss Must be present at time of loss
100
Underwriting
Process of evaluating a risk Field underwriting is performed by the agent or producer Application is the primary source of information Company underwriters decide if a policy is to be issued
101
Application
Primary source of underwriting information
102
Binder
Temporary insurance Usually given by the agents Can be canceled by the company Does not guarantee a policy will be issued Automatically ends if a policy is issued by the underwriter
103
Loss ratio
Compares company’s operations year over year
104
Expense ratio
Cost of doing business
105
Combined ratio
100% is break even point Greater than 100% underwriting loss Less than 100% underwriting gain
106
Judgment
No set rates; based upon underwriters experience
107
Manual
Set rates for specific risk classes
108
Experience rating
Based on insured claim history. Increases or decreases premium. - usually a three-year period
109
Loss costs
Pure claims data - no operating expenses included - no profits included
110
Rate components
Loss costs Claims handling costs Operating expenses Profit
111
Fair credit reporting act
All insurers and producers must comply Notice to the applicant within three days after report was requested Maximum penalty - $5,000, 1 year in prison, or both
112
Terrorism risk insurance program reauthorization act of 2015
Result of 9/11 attacks on U.S. Congress enacted in 2002 Limits exposure of insurers in case of another catastrophic event Triggering event $100 million
113
GRAMM LEACH BLILEY ACT
A consumer is anyone about whom information is collected A customer is someone who has an ongoing relationship with a financial institution The opportunity to opt out must be offered by financial institutions when an account is established and annually thereafter
114
Fraud and False statements
It is illegal to make false statements If guilty - fine, up to 10 years in prison, or both - up to 15 years in prison if false statements jeopardize insurer
115
Types of property
Real property | Personal property
116
Real property
Buildings
117
Personal property
Moveable contents
118
Covered property
Specific/scheduled | Blanket
119
Specific/scheduled
Detailed list of covered items
120
Blanket
All of a certain type of property - single limit of coverage - no detailed list
121
Limits of insurance
Maximum coverage limits | - listed on declarations page
122
Insured perils
Named peril | Open perils
123
Named peril
Only perils on the list are covered
124
Open perils
Covers all perils except those specifically excluded
125
Basic perils
Fire, lightning, and internal explosion Extended coverage - WCSHAVVER - vandalism and malicious mischief
126
BIG AFFECT
``` Burglary damage Ice, sleet, and snow Glass breakage Accidental discharge of water Freezing objects Falling objects Electrical current Collapse Tearing Asunder ```
127
Broad peril exclusions
Weight of ice, snow, or falling objects on awnings, fences, patios, swimming pools, docks, and retaining walls Accidental discharge over water from continuous leaking Flooding from river or lake Burglary if property vacant more than 60 consecutive days
128
Special/open peril coverage
All risks of direct physical loss, except those specifically excluded Common exclusions: - flooding - Earthquake - intentional damage caused buy an insured - losses due to enforcement of building codes - damage caused by a power interruption occurring off premises - governmental seizure
129
Types of Loss
Direct | Indirect
130
Direct
The immediate damage caused by the peril
131
Indirect
Loss over time as a result of the direct loss - loss of income a business suffers when the building burns - cost of rental car because someone ran into your car - additional living expenses while the home is being repaired
132
Classes of construction
``` Class 1 - Frame Class 2 - Joisted Masonry Class 3 - Noncombustible Class 4 - Masonry Noncombustible Class 5 - Modified Fire Resistive Class 6 - Fire resistive ```
133
Loss valuation
How the insurance company determines appropriate amount of loss to be paid - deductible reduces any amount after loss has been valued - insured to collect lesser of: - incurable interest - policy limits - actual cash value - cost to repair - replacement cost
134
Actual Cash Value
Replacement cost based on today’s cost - not what was originally paid for item - cost to replace it now! ACV = replacement - depreciation
135
Replacement cost
current replacement cost; no depreciation | - similar kind and quality
136
Functional replacement
Replace with modern construction
137
Market value
Selling price; seldom used
138
Agreed value
Value of loss is determined before the policy is issued
139
Stated amount
Insured up to this amount
140
Pair and set
Value of the pair or set before the loss minus value of what remains
141
Appraisal
Disagreement on the amount of the loss - company and insured pay their own appraisers - appraisers get an umpire if they can’t agree - agreement of any two of the three determines the amount
142
Arbitration
Disagreement about other areas of the loss
143
Coinsurance
The con insurance requirement is normally 80% of the replacement cost. If the minimum required amount is carried, then claims are paid in full up to policy limits. If the minimum is not carried partial losses are not paid in full. - step 1 determine insurance required. - step 2 do the carry at least this amount - step 3 if no, apply the following formula
144
Vacant
Not property or people present at time of loss | - may affect covered perils and claim value
145
Unoccupied
No people present at time of loss | - does not affect covered perils and claim value
146
Standard mortgage or loss payable clause
Allows lender to pay the premium Lender entitled to receive notice if policy is to canceled Lender can file a claim Lender protected from negligent or dishonest acts of the insured Lender only entitled to receive payment up to the amount of the debt
147
No benefit to Bailee
Bailee is a person or business that has temporary control of the insured’s property Bailee Connacht Benefit from the property owner’s policy
148
Propert
Covers personal belongings and buildings
149
Casualty
Pays the “other guy”
150
Third party losses
The first party is the insured The second party is the insurance company legally representing or defending the insured The third party is the “other guys”
151
Tort
Civil wrong that causes someone else to suffer loss
152
Negligence
Failure to act or not act reasonably
153
Elements of negligence
Owe a duty Breach the duty be the proximate cause damages - a drunk driver is guilty of a crime but is not guilty of negligence unless he causes harm to another.
154
Defenses against a claim of negligence by another
``` Contributory Comparative Assumption of risk Intervening cause Statute of limitations Last clear chance ```
155
Absolute/strict
Liability without negligence
156
Vicarious Liability
Liability for the actions of another
157
Compensatory
Special & General
158
Limited tort
Provable monetary losses
159
Full tort
No monetary losses
160
Pint it every
Gross negligence
161
Bodily injury
Injury to the body | - medical bills, lost wages, pain and suffering, and death
162
Property damage
Injury to property | - cars, buildings, etc.
163
Personal injury
Hurt feelings of a person or business
164
Limits of liability
``` Split - bodily injury - property damage Combined single Per person Aggregate ```
165
Restoration of limits/non-reduction of limits
Payment of a claim restores the occurrence limit for the next claim. Payment of an occurrence reduces the aggregate limit Aggregate limit is restored upon renewal
166
Duties after a loss
Notify company promptly Forward notices Assist the company Don’t assume liability
167
Exclusions
``` Damage to property of an insured Bodily injury to an insured Bodily injury to an employee Nuclear energy liability Intentional damage caused by an insured ```
168
Dwelling
Unique from homeowners policy Not required to be owner occupied Covers risks like rental property, older homes, and hunting cabins
169
Dwelling policy eligibility
``` 1 to 4 unit dwelling with boarders Vacation dwellings Rental dwellings Dwellings under construction Mobile homes Farm dwellings NOT eligible ```
170
Dwelling Property Coverages
``` Dwelling Other structures Personal property on premises; off premise covered at 10% Fair rental value Additional living expense ```
171
Other coverages
``` All basic other coverages Trees, shrubs, and plants - maximum of $500 each - total - 5% of dwelling coverage Collapse-cause by a covered peril Glass Ordinance or law Removal-30 days ```
172
Claim values
Personal property - ACV Dwelling replacement - required to carry 80%
173
DP-1 Basic
Fire, lightning, and internal explosion Only insures fire, lightning, and internal explosion automatically EC-WCSHAVVER V&MM - if has EC
174
DP-2: Broad
``` All of DP-1 available perils plus: Burglar damage Ice and snow weight Glass breakage Accidental discharge or overflow of water Falling objects Freezing pipes Electrical damage Collapse Tearing asunder ```
175
DP-2 Broad Exclusions
Weight of ice, snow, or falling objects on awnings, fences, patios, swimming pools, docks, and retaining walls Accidental discharge of water from continuous leaking Flood Burglary if property vacant>60 consecutive days
176
DP-3 Special
``` Open perils Broad perils Excluded perils - intentional damage - theft - freezing of plumbing - wear and tear - foundations ```
177
General exclusions in all dwelling policies
``` Ordinance or law Earthquake Flood War Nuclear Intentional losses Government seizure ```
178
Loss Valuations
``` Loss settlement Our option Deductible Pair or set Loss payment Other insurance Recovered property ```
179
Personal liability supplements
``` Coverage At fault Bodily injury to others Property damage to others On and off premises ```
180
Coverage M
Medical payments Medical and bills of others No fault 3 years On and off premises
181
Additional Coverages - BAILED
``` Bonds Aid Interest Loss of earnings Expenses Defense ```
182
Residential theft coverage
Not automatically included in dwelling policy On and off premise Broad - owner occupied Limited - not owner occupied
183
Exclusions
``` Animals Credit cards Property in mail Aircraft Other insurance property Tenant’s property Business property Property in custody of others Moron vehicles ```
184
Special limits
Apply to certain classes of property | Limit is total of each category
185
Endorsements
Automatic increase in insurance - automatically increases dwelling and other structure coverage at renewal Dwelling under construction - named insured must be intended occupant Mobile home - permanent foundation
186
Homeowners policy
Package policy Multi line Includes both property and liability
187
Homeowners eligibility
``` Owner occupied No more than 4 family dwelling Primary purpose as a residence Dwellings under construction are eligible Mobile home Farm dwellings NOT eligible ```
188
Insureds
Named insured including a resident spouse Resident relatives Anyone under the age of 21 and in the care of an insured Full-time student under age 24, relative, and prior resident Representative of the name insured in the event of death
189
Cancellation
Cancellation by the insurance company - during the forest 60 days for any reason minimum 10 days’ notice - other reasons after 60 days minimum 30 days’ notice - material misrepresentation - substantial change in the risk - nonpayment of premium 10 days’ advance notice
190
Non-renewal by Insurer
Non-renewal by insurance company - 30 days’ advance notice
191
Standard mortgagee clause
Can pay the premium File a claim up to insurable interest Receive advance notice of cancellation Dishonesty of insured doesn’t prevent mortgagee from collecting
192
Homeowner Policies
``` HO-2 Broad Form: Owner Occupant HO-3 Special Form: owner occupant HO-4 Tenants or Renters HO-5 Comprehensive Form: owner Occupant HO-6 Condominium Owners HO-8 Modified Form ```
193
Property Coverage - Dwelling
Including property attached Materials on the premises used in construction No coverage for a renter
194
Property Coverages - other structures - separated by a clear space
Not attached to dwelling | Not used for business purposes
195
Property Coverages - Personal property
``` Not attached to the dwelling Anywhere in the world Guest’s property Excluded - pets - motorized vehicles - property of renters or boarders ```
196
Loss of use
Indirect losses due to loss of use of home caused by a covered peril - additional living expenses - rental income
197
Additional Coverages in All Homeowners - Debris removal
- expenses paid if caused by covered peril - removal of fallen trees covered if they damaged a covered structure or blocking roadway - maximum of $1,000 for tree debris removal per occurrence and $500 per tree
198
Additional Coverages in All Homeowners - reasonable repairs
- pays cost for repairs necessary to protect from additional loss
199
Additional Coverages in All Homeowners - trees, shrubs and other plants
Maximum of $500 per tree and $1,000 for all fallen shrubs and plants for debris removal Maximum of 5% of coverage in addition to limit
200
Additional Coverages in All Homeowners - Fire Department service charge
Maximum of $500 | No deductible
201
Additional Coverages in All Homeowners - Property removed
Protect from a sure and certain loss | ALL perils for 30 days
202
Additional Coverages in All Homeowners - credit cards, forgery, and counterfeit money
Maximum of $500 | No deductible
203
Additional Coverages in All Homeowners
Broken Glass covered

Property And Casualty (1 decks)

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