Property Insurance Definitions

Question 1

Accident

Answer 1

An unintended, unforeseen and unexpected event, that takes place at a specific time
and location, that causes bodily injury or property damage.

Question 2

Actual Cash Value (ACV)

Answer 2

The sum of money required to pay for damages or lost property,
computed on the basis of replacement value (at the time of the loss), less its depreciation.

Question 3

Agent

Answer 3

– A licensed producer who represents the insurance company, but serves the public’s
best interest.

Question 4

Appurtenant Structures

Answer 4

(a.k.a. Coverage B…Other Structures) - A structure pertaining or
belonging to the insured structure, such as a tool shed.

Question 5

Bailee

Answer 5

A person or concern having possession of property committed in trust from the owner.

Question 6

Bailee’s Customers’ Policy

Answer 6

A policy providing coverage for loss of or damage to property of
bailee’s customers, payable to customers, regardless of whether the bailee is at fault or not for
the loss.

Question 7

Binder (Binding Receipt)

Answer 7

An acknowledgment from the agent that insurance coverage is in
force whether or not the premium has yet been paid or the policy issued.

Question 8

Bodily Injury Liability

Answer 8

The liability which may arise from injury or death of another person.

Question 9

Bond (3-party contract)

Answer 9

• An obligation of the surety company (a.k.a. guarantor) to protect
  another (a.k.a. obligee) against financial loss caused by the acts of another (a.k.a. principal or
  obligor)

Question 10

Broker

Answer 10

A licensed producer who represents an insured in the solicitation, negotiation or
procurement of contracts of insurance, and who may render services incidental to those
functions. A broker must be bonded with a $2,500 bond OR 5% of the premiums brokered in
the previous calendar year, whichever is greater, not to exceed $100,000, in favor of the people
of the State of Washington.

Question 11

Burglary

Answer 11

Breaking and entering into the premises of another, with felonious intent and with
visible signs of forced entry or exit

Question 12

Business Income Coverage Form (a time element coverage, a.k.a. consequential loss)

Answer 12

A commercial property form providing coverage for indirect losses resulting from property
damage, such as loss of business income and extra expenses incurred. Business income
coverage is a “time element” coverage, since time is a factor (“element”) in determining the
extent of the loss.

Question 13

Cancellation

Answer 13

Termination of a contract of insurance by the insurance company or insured,
effected in accordance with provisions in the contract or by mutual agreement. This is
termination of a contract before the renewal date. It usually requires a premium refund.

Question 14

Casualty Insurance (a.k.a. Liability)

Answer 14

• Insurance that is primarily concerned with losses caused by
  injuries to persons and legal liability imposed upon the insured for such injury or for damage to
  the property of others.

Question 15

Causes of Loss Forms -

Answer 15

Commercial property forms stating the perils insured against, additional
coverage provided, and exclusions that apply. Causes of Loss Forms include Basic, Broad,
Special, and Earthquake.

Question 16

Coinsurance

Answer 16

A provision in insurance that says the insured agrees to insure to a certain value
(such as 80%, 90% or 100%). If there is a loss and the insured has breached this agreement,
only a proportional share of the loss will be paid.

Question 17

Commercial General Liability (CGL)

Answer 17

Coverage Part - General liability coverage which may be
written as a monoline policy or part of a commercial package. The coverage forms include
Occurrence or Claims-Made.

Question 18

Commercial Package Policy (CPP)

Answer 18

A commercial policy that contains more than one of the
following seven coverage parts: Commercial Property, Commercial General Liability, Marine,
Crime, Equipment Breakdown Coverage, Commercial Automobile, and Farm Insurance.

Question 19

Common Policy Conditions -

Answer 19

• Under the latest commercial lines program, a form including
  common conditions which apply to all coverage parts attached to a commercial policy.

Question 20

Common Policy Declarations

Answer 20

• A common declarations page is part of every commercial policy.
  It shows information applicable to the entire policy (policy number, insurer, insured, total
  premium, forms attached, etc.).

Question 21

Concealment

Answer 21

Deliberate failure to reveal facts. If deemed to be material, it would affect the
validity of a policy of insurance. The withholding of facts.

Question 22

Consideration

Answer 22

Element of an insurance contract; acceptance by the company of payment of
the premium and statements made by the prospective insured in the application.
It is the insurance company’s promise to pay for certain losses.

Question 23

Declarations (a.k.a. Dec. Page) -

Answer 23

A term used in insurance for the portion of the contract which
contains information such as the name and address of the insured, the property insured, its
location and description, the policy period, the amount of insurance coverage, and applicable
premiums.

Question 24

Direct Loss

Answer 24

A loss caused by a peril such as a house fire, and the resulting damage caused
from putting out the fire such as water damage.

Question 25

Earned Premium

Answer 25

That portion of a premium for which the policy protection has already been given during the now-expired portion of the policy term. The premium the insurance company has “earned” the right to keep. Unearned premiums belong to the named insured.

Question 26

Earth Movement

Answer 26

A peril including landslide, mudflow, earth sinking, rising or shifting, and earthquake. Usually excluded on property policies.

Question 27

Endorsement -

Answer 27

Provision added to a policy which broadens or restricts coverage; may also be in the form of a rider. Not valid unless signed by an executive officer of the company and attached to the policy.

Question 28

Exclusions

Answer 28

Perils, conditions or property listed in the policy which are not covered and for which no benefits are payable.

Question 29

Extended Coverage Endorsement (EC)

Answer 29

A specific endorsement attached to Fire Policies, usually providing coverage for Riot, Explosion, Vehicular & Volcano damage, Civil commotion Smoke, Hail, Aircraft, and Windstorm (acronym = R.E.V. C. S.H.A.W.)

Question 30

Fair Credit Reporting Act

Answer 30

Federal law requiring an individual to be informed if he or she is being investigated by an inspection company.

Question 31

Fire

Answer 31

Combustion sufficient to produce a spark, flame, or glow, and which is hostile, i.e., not in the place where it is intended to be, as in a furnace. Only hostile fire losses are covered by insurance.

Question 32

Hazard

Answer 32

Anything that increases the chance of a loss, such as an old roof, bald tires, being overweight, or smoking

Question 33

Impaired Property

Answer 33

Tangible property which cannot be used or has become less useful because it incorporates the insured's product or work which is defective or inadequate, or because the insured has failed to fulfill a contractual obligation. Impaired property is usually excluded from property coverage.

Question 34

Indirect Loss

Answer 34

An indirect loss (a.k.a. consequential loss) is a loss which is a result of a direct loss. Indirect losses involve money, whether from loss of income, loss of business, or expenses for lodging and meals after a house fire.

Question 35

Insurable Interest

Answer 35

Any interest in a subject of insurance or any legal relation to it of such a nature that a certain happening might cause monetary loss to the insured. Insurable Interest must exist at the time of the loss.

Question 36

Insurance

Answer 36

A formal social device for reducing risk by transferring the risks of several individual entities to an insurer. The insurer agrees, for a consideration, to assume to a specified extent, the losses suffered by the insured.

Question 37

Insuring Clause (Agreement)

Answer 37

The clause in a policy that specifies in brief the contract's intent. It states the terms under which the policy will pay. This is also known as the heart of the contract

Question 38

Misrepresentation (a lie

Answer 38

- The use of written or oral statements by the insured or insurance company on or at the time of an application , misrepresenting the risks, terms, coverage, benefits, privileges, or estimated future dividends of any policy.

Question 39

Morale Hazard

Answer 39

An attitude that increases the probability of loss from a peril. The attitude of, "it's insured, so why worry about it," is an example of a morale hazard.

Question 40

National Association of Insurance Commissioners (NAIC)

Answer 40

An association of state Insurance Commissioners, active in discussions of regulatory problems and in the formation and recommendation of uniform practices and legislation. Oldest association of state officials.

Question 41

Negligence

Answer 41

The most common way that an insured becomes liable for a third party’s bodily injury. Failure to use that degree of care which an ordinary person of reasonable prudence would use under the given circumstances

Question 42

Nonrenewal

Answer 42

Termination of insurance coverage at an expiration date or anniversary date. This action may be taken by an insurer who refuses to renew, or by an insured who rejects a renewal offer.

Question 43

Offer and Acceptance -

Answer 43

The offer may be made by the applicant by signing the application, paying the first premium and, if necessary, submitting to physical examination. Policy issuance, as applied for, constitutes acceptance by the company.

Question 44

Package Policy

Answer 44

- Any insurance policy including two or more lines or types of coverages in the same contract.

Question 45

Peril

Answer 45

``` - The cause of a loss; the event insured against. Some perils are insured against in property policies (such as fire and lightning), and some perils are NOT insured against in property policies (such as earthquake and flood) ```

Question 46

Personal Injury (P.I.)

Answer 46

a.k.a. Third Party Coverage, pays for injury other than bodily injury arising out of false arrest or detention, malicious prosecution, wrongful entry or eviction, libel or slander, or violation of a person's right to privacy. A liability coverage

Question 47

Personal Injury Protection (P.I.P)

Answer 47

a.k.a. First Party Coverage, pays for bodily injury, lost wages and lost services of family members injured in an insured's auto, regardless of who is at fault.

Question 48

Personal Property

Answer 48

Any property of an insured other than real property. Homeowner policies protect the personal property of family members, and commercial forms are used to protect business personal property.

Question 49

Policy

Answer 49

An instrument, including all endorsements and attached papers, constituting the entire insurance contract. The written contract effecting insurance and including all clauses, riders, endorsements, and papers attached thereto and made a part thereof.

Question 50

Proof of Loss

Answer 50

- A formal statement made by the insured to the insurance company regarding a loss. The purpose of the proof of loss is to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy or bond.

Question 51

Pro Rata Cancellation

Answer 51

The termination of an insurance contract or bond where the premium charge is adjusted in proportion to the exact time the protection has been in force. A cancellation with NO SERVICE FEE.

Question 52

Pro Rata Liability Clause

Answer 52

Provides that losses will be paid in the proportion that the amount of the policy bears to the entire amount of insurance on all policies covering the loss. This provides for insurance companies to appropriately share in the loss when more than one policy exists, yet prevents the insured from collecting in total from several insurance companies and making a profit.

Question 53

Proximate Cause

Answer 53

The effective cause of loss or damage; an unbroken chain of cause and effect between the occurrence of an insured peril or a negligent act, and the resulting injury or damage to property.

Question 54

Rebating

Answer 54

Giving any valuable consideration such as a rebate, discount or reduction of premium to induce a person to buy insurance. Guaranteeing to pay future dividends is an example of rebating. In the State of Washington, it is illegal to rebate premiums.

Question 55

Replacement Cost

Answer 55

The cost of replacing property without deduction for depreciation.

Question 56

Reporting Form

Answer 56

Fire or other direct damage insurance written under a form of policy that covers fluctuating values of stocks of merchandise, furniture, fixtures, improvements and betterments, by means of periodical reports submitted to the insurance company by the insured, with an annual adjustment of premium on the average value.

Question 57

Representations - On an application

Answer 57

facts (written or verbal) that the applicant represents as | true and accurate to the best of his or her knowledge and belief.

Question 58

Risk

Answer 58

The uncertainty of loss. The purpose of insurance is to deal with the transfer of risk from the insured to the insurer. Without risk, there is no need for insurance. Only pure risk is insurable. Pure risk means that only a chance of loss is present and no chance of gain.

Question 59

Robbery -

Answer 59

The felonious taking, either by force or by fear of force, of the personal property of another, commonly known as a hold-up.

Question 60

Scheduled Personal Property Endorsement (Stated Value Coverage)

Answer 60

Provides Special Form coverage for valuable items such as furs, jewelry (the most common), cameras, silverware, etc. Items are generally listed by description and value, with no deductible. The coverage picks up the peril of mysterious disappearance. The items must be insured for their full value.

Question 61

Short Rate

Answer 61

Regarding cancellation, the term short rate cancellation is used to describe the procedure in which the premium returned to the insured is not in direct proportion to the number of days remaining in the policy period. In effect, the insured pays more for each day of coverage than if the policy had remained in force for the full term.

Question 62

Special Coverage Form

Answer 62

Any of the commercial or personal lines property forms which provide coverage on a risks of direct physical loss type basis. These forms provide the broadest coverage and do not list covered perils, but do include a list of exclusions.

Question 63

Subrogation

Answer 63

The legal process by which an insurance company seeks from a third party who may have caused the loss, recovery of the amount paid to the insured. The condition most closely related to indemnification

Question 64

Surplus Lines -

Answer 64

Coverage procured in an unlicensed insurance company by a Surplus Lines Broker because of its unavailability in the state where the insured lives.

Question 65

Temporary License

Answer 65

A person who is licensed to act as an agent for a brief period of time (180 days in Washington) without taking a written examination. A temporary license is commonly granted to allow someone to continue the business of a producer who has died or becomes disabled. The individual must be a legal representative of the producer, such as, spouse, relative, attorney, employee, etc.

Question 66

Theft -

Answer 66

- Any loss of property by stealing, including both robbery and burglary.

Question 67

TRIA - Terrorism Risk Insurance Act

Answer 67

requires insurance companies to offer terrorism insurance to their commercial policyholders. The TRIA directs the Secretary of the Treasury to administer a program for sharing terrorism losses. The government pays 90% of insured losses over the deductible, with the insurer paying 10%. To determine if an act is an "act of terrorism" and covered under the TRIA, it must be agreed upon by these three individuals: 1. Secretary of the Treasury 2. Secretary of State 3. Attorney General

Question 68

Twisting

Answer 68

When a person tries to misrepresent or mislead by comparison, or tries to induce, or tend to induce any insured to lapse, terminate, forfeit, surrender, retain, or convert any insurance policy. Violation is considered Twisting.

Question 69

Underwriting

Answer 69

Process through which an insurer determines whether, and on what basis, an insurance application will be accepted

Question 70

Warranties

Answer 70

Written statements in the contract (policy) guaranteed to be true; that is, they are exact in every detail. This is opposed to representations which are statements on an application believed to be true at that time. Warranties are expressed in the contract (in writing)

Question 71

Watercraft

Answer 71

- Bodily Injury (Section II Liability coverage) in a homeowners policy will extend coverage for usage of owned or rented boats which meet the definition of a “watercraft.”

Question 72

watercraft definition

Answer 72

Watercraft in a homeowners policy means an inboard or inboard-outboard motorpowered boat owned by or rented to the insured that has 50 horsepower or less; sailing vessels of 25 feet or less; and any boat powered by an outboard motor of 25 HP or less.