Depreciation
reduction in value, partculary due to wear and tear
Exposure
susceptibility to risk
implied warranty
a legal term meaning that a product is suitable for its intended purpose and that it fits an ordinary buyers expectations
insurance policy
a contract between policyholder(and or insured) and an insurance company which agrees to pay the insured or beneficiary for loss caused by specific events
insurer(principal
the company who issues an insurance policy
obolescence
depreciation in the value of a property due to becoming outdated
premium
the money paid to the insurance company for the insurance policy
The law of large numbers
states that the larger number of people with similar exposure to loss the more predictable actual losses will be- this is how insurance rates are calculated.
Insurable interest
in property insurance this means the insured would incur a financial loss if the insured property was damaged
may be created by the ownership, custody or control of a property.
must be at time of the loss
ex mortgagees and leaseholder
3 elements of insurable risk
1. financial ( monetary interest)
2. Blood (relative)
3. Business ( a business partner)
Risk
is the uncertainty or chance of a loss occurring.
there are two types of risk, pure and speculative. Pure is the only one accepted
Pure risk
refers to situations that can only result in a loss or no change. there is no opportunity for financial gain. this one is the only type of risk that insurance companies are willing to accept
Speculative risk
involves the opportunity for either loss or gain. ex is gambling. this type of risk is not insurable.
Peril
are the causes of loss insured against in an insurance policy
Life Insurance (Perils)
insures against the financial loss caused by the premature death of the insured
Heath insurance (Perils)
insures against the medical expenses and or loss of income caused by the insured's sickness or accidental injury
Property insurance (Perils)
insures against the loss of physical property or the loss of its income producing abilities
Casualty insurance (Perils)
insures against the loss and or damage of property and resulting liabilities
Hazards
are conditions or situations that increase the probability of an insured loss occurring
Classified as physical, moral, and morale.
physical hazards
are those arising form the material, structural, or operational features of the risk, apart from the persons owning or managing it
Moral Hazard
refer to those applicants that may lie on an application for insurance, or in the past have submitted fraudulent claims against an insurer
Morale Hazard
refers to an increase in the hazard presented by a risk, arising form the insured's indifference to loss because of the existence of insurances. (ex. im not going to bother fixing this if it breaks my insurance will pay to replace it.
Indemnity (reimbursement)
is a provision in an insurance policy that states that in the event of loss, an insured or beneficiary is permitted to collect only to the extent of the finical loss and is not allowed to again financially because of the existences of an insurance contrac
Subrogation
is the inures legal right to seek damages from third parties, after it has reimbursed the insured for the loss. Is based on the principle of indemnity by preventing the insured form collecting on the loss twice: once form the insurer and second time form
accident
is a sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected nor intended
occurrence
it includes those losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected
Direct loss
direct physical damage to buildings and or personal property
also includes other damage where the insured peril was the the proximate causes of loss
indirect loss (consequential loss)
are losses considered a result of direct loss. such losses usually result from the time it takes to repair or replace damaged property. Ex extra living expense that my be incurred by the inured while the home is being repaired. ex for commercial risk it i
Peril
specific cause of loss. insured against in standard property policies include fire, wind, hail, and explosions
named peril
is a term used in property insurance to describe the breadth of coverage provided under an insurance policy form that lists specific covered perils. not coverage is provided for unlisted perils
Open peril
describe the breadth of coverage provided under an insurance policy form that insures against any risk of loss that is not specifically excluded.( this term replaced the use of the term all risk)
Negligence
is the failure to use the care that a reasonable, prudent person would have taken under the same or similar circumstances
vacancy
refers to an insured structure in which no people have been living or working and no property has been stored for the period of time required as stated in the policy (usually 60 days)
Unoccupancy(nonoccupancy)
refers to an insured structure in which no people have been living or working within the required period of time but some property is stored
Blanket insurance
is a single property insurance policy that provides coverage for multiple classes of property at one location, or for one or more classes of property at multiple locations.
all insured properties are written for one total amount of insurance
no single inu
specific insurance
is a property insurance policy that covers a specific kind or unit or property for a specific amount of insurance
Loss valuation
is a factor in determining the premium charged and the amount insurance required
Actual Cash Value( ACV)(Loss Valuation)
reinforces indemnity because it recognizes the reduction of value of property as ti ages and becomes subject to wear and tear and obsolescence.
Current replacement cost- depreciation=ACV
Replacement Cost (Loss Valuation)
the cost to replace damaged property with like kind and quality at today's price without any deduction for depreciation.
it may provide the insured with a settlement in excess of the property actual cash value
Market Value ( Loss Valuation)
seldom used method of valuing a loss based upon the amount a willing buyer would pay to a willing seller for the property prior to the loss. Takes into account the value of land and location rather than just the cost of rebuilding he structure itself
agreed value (loss valuation)
property policy with a provision agreed upon by the insurer and insured as to the amount of insurance that represents a fair valuation for the property at the time the insurance is written and suspends any coinsurance or other contribution clauses in the
Stated Value (Loss valuation)
an amount of insurance scheduled in a property policy that is not subject to any coinsurance requirements in the event of a covered loss. this scheduled amount is the maximum amount the insurer will pay in the event of a loss
salvage Value (loss valuation)
is the estimated value an asset will realize upon its sale at the end of its useful life. the property may be sold as a whole or in part. For instance a car may be beyond repair as a complete automobile but some parts may be salvageable and sold
allows th
Absolute liability
is imposed on defendants engaged in hazardous activities, such as harboring wild animals, using explosives etc. the injured party does not need to prove negligence
Strict liability
applied in product liability cases. a person or business that manufactures or sells a product makes an implied warranty that the product is safe. the business is than liable for defective products, regardless of fault or negligence.
Vicarious liability
doctrine comes form the old English law respondent superior. the purpose of this doctrine is to transfer the liability form one person to another person who would probable have a greater ability to pay.
parents my be held liable for negligent acts of thei
limits of liability
are the insures liability for payment as stated in an insurance policy. it is the maximum amount of money the insurance company will pay for particular loss or for loss during a period of time
Per occurrence (accident)
is a sub-limit in a liability policy that puts a ceiling on the payment for all claims that arise form a single accident/occurrence
Per perosn
is the maximum amount available for payment of bodily injury to a single person in an accident, regardless of the policy limit stated in the policy for bodily injury claims
Aggregate-general products - completed operations
aggregate limit
maximum limit of coverage available under a liability policy during a policy year, regardless of the number of claims made or the number of accidents that occur
losses paid under coverage subject to aggregate limits reduce the amount available for future
Split
limits are separately stated limits of liability for different coverage. The limits may be stated on a per person, per occurrence, or per policy period basis, or can be split between bodily injury and property damage.
ex auto liability policies are writte
combined single
single dollar limit of liability applying to the total of damages for bodily injury and property damage combined, resulting form one accident or occurrence. The limit may be used in any combination of amounts, not to exceed the single limit.
Proximate cause
is an at or event considered a natural and reasonably foreseeable cause of the damage or event that occurs and damages property or inures a plaintiff.
the negligence must have been the proximate cause of the damage if the injured party is to collect for t
deductible
is a dollar amount an insured must pay on a claim before the insurance policy provides coverage. a higher amount usually lowers the amount of the premium
coinsurance and insurance to value
clause states that in consideration of a reduced rate, the insured agrees to maintain a certain minimum amount of insurance on the insured property.
- insured maintains a minimum amount of insurance on property
- partial loss pain in full if minimum is me
deposit premium
estimated premium paid in advance of policy being issued
deposit premium audit
insurer may audit insureds books and records to determine adequate premium
Certificate of insurance
written evidence showing the insurance policy has been issued
lists amounts and types of insurance provided