Pure risk
Only a chance of loss not chance of gain
Exposure
Unit of measurement to determine a rate
Physical hazard
Material, tangable
Moral hazard
Lie on the application
Morale
Indifference to an increase in a hazard
Peril
Cause of loss (snow, hail, rain)
Loss
Disapprearance,destruction, or reduction of a thing of value
Avoidance
Works but is impractical
Retention
Assuming financial responsibility
Sharing
Sharing a risk
Reduction
Lowering the possibility or severity of loss
Transfer
Most effective way to handle risk, pay someone else to deal with it
Adverse Selection
Insurance risks that are of the poorer class than the average risk
Law of large numbers
Principle stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the probability of loss
Reinsurance
Contract where one insurance company agrees to indemnify another insurance comoany for it's losses. When on a specific policy it is called faculative and when it is on an annual renewal it is called a reinsurance treaty
Stock
Owned by stockholders
Mutual
Started with policy holder dollars, board of trustees
Fraternal benefit society
Non profit
Lloyds association
Insures high risks (non regulated
Domestic
Office is within state
Foreign
Office is out of state
Alien
In another country
Admitted
Has recieved a certificate
Loss ratio
Incurred losses plus loss adjusting expenses divided by the earned premium
Geographic redlining
Illeagle, refusing to serve a particular area solely because of it's location or beacuse of it's served by a volunteer fire department
Manual/class
Used most often, groups of similar risks homogenous
Judgement rating
When there is no statistical data to support the rate underwriters use best judgement
Experience Rating
Past lost experience at end of policy determined is taken into concideration, lower than .1 for good rating
Retrospective
Self rating plan where the actual losses during the policy period determines the final premium subject to a minimum premium and a deposit premium.
Schedule
Used on a stated value policy where each individual piece of property has it's own stated value as well as premium that applys.
Merit
A type of rating system used in auto rating that rates based on the probability of a loss as opposed to thr loss and driving history of the potiental insured.
Proximate cause
The foreseeable cause ot negligent act that actually led to an injury
Actual loss
The end result of a negligent act
Absolute liability
Hazardous occupation or hobby
Strict
As in strictly stupid to iron with your clothes on.
Vicarious
When the liability is passed on to someone who is more able to pay (parents are held responsible for their children)
Assumption of risk
Assuming you may not be safe with the drunk driver
Comparitive negligence
Splits the negligence between both parties
Contributory
Stricter standard of negligence if the injured party is atleast 1 % negligent they can be barred from recovery
Intervieing cause
An event that interrupted a negligent chain of events
Named peril
Each peril that the property is insured aginst is listed on the dec page
Open perril
Only the exclusions are listed
Blanket policy
Covers multipule peices of property at multipule locations under one policy
Specific
Covers one peice of property at one specific location
Direct loss
Physical damage to buildings or personal property
Indirect loss
Losses that occur due to the direct loss happening first
Fire-resistive
Non combustable for 2 hours (lowest premium)
Frame
Very combustable most expensive premium
DEADICE
Declorations Page-Endorsements-Additional Coverage-definitions-conditions-exclusions
Declorations page
Contains named insured,adress, policy number territory, policy period, coverage purchased, and premiums, endorsements purchased and any discounts
Endorsements
Written changes to the policy, can add or subtract coverage
Additional coverage
Comes with every policy, occurs AFTER A LOSS, extra coverage for med pay, ect.
Definitions
Defines who is insured and other definitions in the policy
Insuring agreement
A simple sentence that sets out what the insurer will do in the event of a loss
Exclusions
The part of the policy that lists what type of property peril that is excluded as well as people that are excluded.
Insured
Anyone who is covered under the policy listed or not
Named insured
The name of the insured who is listen on the policy
First named insured
The person whose name is listed first and who is responsible for the premium payment
Additional insured
Anyone who has financial interest in the property being insured (ex. A bank that placed a lien on your mortgage)
Insurance
Added as an endorsement
Spit liability
25 per person/50 per occurrence- both apply to bodily injury a seperate limit of 10,000 applies to property damage per occurance ( 25/50/10)
Combined single
Everything comes out of one
Aggregate
Everything comes out of one amount and each loss is deducted from the aggregate limit
Pro rata
When two companies insure the same risk, liability is proportioned out per each company liability limit. Step 1, add the two amounts for both companies together
Example:
Company A=50,000
Company B=100,000