Flashcards in Section 2 Deck (34):
1st page of the policy
It contains the named insured and the insurer.
It contains the address of the property covered and the policy limits.
States what coverage is provided; consideration clause
Apply to both parties; duties of each party.
Duties of insured: give notice of loss and protect from further loss
Duties of insurer: promise to provide coverage
Cancellation provisions are in the conditions.
A list of things NEVER covered
(Flood, war, earthquake, intentional loss, and purposeful neglect)
To find out who is an insured,
Read the definitions
On an HO, it will be you, your spouse, relatives in HH, and people under 21 in your care and residing in your HH
Duties of Insured After a Loss:
Found in Conditions.
1. Protect property from further damage
2. Give immediate written notice of claim
3. Furnish proof of ACV
Obligations of the insurance company
Found in insuring agreement
Obligations vary depending upon which policy is purchased.
Insuring agreement states which losses will be covered, what property is covered, and which perils are insured against.
Rights granted to the lender. They have the right to notice of cancellation and the right to continue paying the premium themselves.
Proof of Loss
Completed Claims Form the insured sends back to the insurance company with a pending claim
Notice of Claim
Give immediate written notice to the company of any loss. It's a duty found in the conditions section.
Immediate means as soon as reasonably possible.
Applies to property and auto insurance;
If insured and insurer fail to agree on the ACV or R/C of a claim, each hires an appraiser. Then both appraisers hire an umpire.
Bound to decision by 2 of the 3 parties involved.
AKA Pro-Rata Liability Clause.
This protects the insurance company against a client who purchases more than one policy on the same property.
If a loss occurs, each policy will pay a proportionate share. Limit over Total Limit fraction. This is accordance with the Principle of Indemnity.
Pro-Rata liability is not necessarily equal.
Ownership of the policy itself is changed.
Assignments are NOT effective until approved by the insurer.
When another party damages your property but your insurance pays the claim, but then they take your right of recovery and sue the negligent other party to recover money they paid out to you. They stand in your place.
Elements of a Contract
C=Consideration Clause (An exchange of values)
Insurer's consideration is to provide coverage
Insured's consideration is to pay the premium
Application is the offer.
Issuing the policy is the acceptance
Legal Purpose and Capacity
All parties must have legal capacity, and not be under the influence of drugs or alcohol.
Guarantees of truth
Examples: burglar alarm, fire alarm, and sprinkler system
A substantial truth; truth to the best of your knowledge.
Applicant tells the truth to the best of their knowledge on the application.
If a client knowingly lies, this is a misrepresentation.
Material Representations have the effect of voiding the policy.
Literal Truth; guarantee of truth.
"Failure to disclose a material fact on the application, lying by omission"
Sources of Insurability Information
Application answers and agent's report,
Actual Inspections/Photographs, and Consumer Investigative Reports
Consumer Investigative Reports
Personal info about applicant's credit and character
Compliance with provisions of Fair Credit Reporting Act
No one can order this without the applicant's written permission in advance. This is known as "pre-notification"
Fair Credit Reporting Act
Requires pre-notification and post-notification.
If co. rejects app or cnxs policy based on info received in one of these reports, they must advise client of the specific reason for cancellation and tell them which credit reporting agency supplied this negative info.
The client has the right to go the consumer reporting agency and
Request a free copy of their credit report.
If info in report is incorrect, the agency must correct it.
Financial Modernization Act of 1999
Aka GLBA or Gramm-Leach-Bliley Act includes provisions to protect consumers' personal financial information held by financial institutions.
Privacy notice must be given to customers initially when relationship is est. and annually as long as customer relationship lasts.
Main source of underwriting---questions answered by insured with representations.
A willful misrepresentation will VOID the policy.
To omit a material fact is concealment, which will also VOID the policy.
The insurer will ask that the application make warranties regarding items like burglar alarms, sprinkler systems, and fire alarms.
A breach of warranty will VOID policy as well.
When app is attached to the policy, it becomes part of the contract.
TRIA aka Terrorism Risk Insurance Act
All commercial policies must cover acts of terrorism
Insurer can change the terms of the contact as long as the change benefits the insured and no additional premium is charged.
The liberalization clause allows the insurer to enhance coverage at any time.
Owned by stockholders who own shares in the company. Individual stockholder provides capital for the insurer.
Issue non-participating policies, not participating in dividends.
You cannot project dividends on a non-participating policy since the policyholder will never get the dividend.
No stockholders; ownership rests with the policyholders.
They vote for a board of directors.
Funds not paid in claims or paying for costs of operation can be returned to PH in the form of policy dividends. Dividends may never be guaranteed or taxable.
Issue participating policies in dividends.
4 parts of a policy
Declarations=named insured, insurer, property limits, premium, effective date and time
Insuring Agreement/Clause=describes the property's coverages
Conditions= duties that apply to both insurer and insured
Exclusions= things that are never covered