Section 2 Flashcards
(34 cards)
Insuring Agreement
States what coverage is provided; consideration clause
Declarations
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.
Conditions
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.
Exclusions
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.
- Protect property from further damage
- Give immediate written notice of claim
- 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.
Mortgagee Rights
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.
Appraisal
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.
Other Insurance
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.
Assignment
Ownership of the policy itself is changed.
Assignments are NOT effective until approved by the insurer.
Subrogation
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-O-A-L
C=Consideration Clause (An exchange of values)
Insurer’s consideration is to provide coverage
Insured’s consideration is to pay the premium
Offer
&
Acceptance
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.
Warranties
Guarantees of truth
Examples: burglar alarm, fire alarm, and sprinkler system
Representations
A substantial truth; truth to the best of your knowledge.
Representations
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.
Warranty
Literal Truth; guarantee of truth.
Concealment is
“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”
