Insurance Transfer
the risk of loss from an individual or business entity to an insurance company.
Law of large numbers
states that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be.
Risk
the uncertainty or chance of a loss occurring; Two types Pure\Speculative
Speculative Risk
situations that involves the opportunity for loss or gain; not insurable;
Ex gambling
Pure Risk
situations that can only result in a loss or no change; noinsurable
Perils
causes of loss insured against in an insurance policy
Hazards
conditions or situations that increase the probability of an insured loss occurring.
Subrogation
legal right to seek damages from third parties. Prevents insured from collecting twice
Indemity
a provision in an insurance policy that states in the event of a loss, an insured or beneficiary is permitted to collect only to the extent of the financial loss.
Accident
sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected/intended.
Occurrence
broader definition of loss, includes losses caused by continuous or repeated exposure to continuous exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected.
Burglary
the crime of forced entry into or out of the premises of another by a person or persons with felonious intent.
Robbery
taking of property from the care and custody of a person by someone who threatened to cause that person bodily harm, or committed an unlawful act witnessed by that person.
Named Peril
lists specific covered perils
Open Peril (all risks)
covers any risk of loss that is not specifically excluded
Theft
any act of stealing and encompasses both burglary and robbery
Salvage
the amount of money realized from the sale of damaged merchandise.
Valued policies
provides payment for payment of the full policy amount in the event of a total loss w/o regard to Actual value or depreciation.
Vacancy
no people living nor working and no property has been stored for the a certain amount of time. (usually 60 days)
Unoccupancy
insured structure where no people have been living or working within the required time but some property is still stored.
Absolute liability
imposed on defendants in hazardous activities. Ex harboring wild animals, using explosives etc.
Strict liability
used in product liability cases.
Vicarious liability
master is liable for the acts of its servants. Ex parents liable for the actions of their children
Replacement value
the cost to replace damaged property with like kind and quality at today's price without any deduction for depreciation.
Actual Cash Value
Current Replacement Cost-Depreciation= ACV
Combined single
a single dollar limit of liability applying to the total of damages for bodily injury and property damage combined, resulting from one accident or occurrence.
Stated amount
an amount of insurance scheduled in a property policy that isn't subject to any coinsurance requirements in the event of a covered loss.
Coinsurance clause
in consideration of a reduced rate, the insured agrees to maintain a certain minimum amount of insurance on the insured property.
Proximate Cause
an act or event considered a natural and reasonably foreseeable cause of the damage or event that occurs and damages property or injures a plaintiff.
Deposit Premium
estimated premium paid in advance at the time the policy is issued that may be adjusted based on actual exposures.
Deposit Premium Audit
condition that allows the insurer to audit the insureds books or records at the end of the policy term to make sure adequate premium has be collected; insurer has up to 3yrs to perform audit.
Elements of a Contract
1. Agreement- offer and acceptance
2. Consideration
3. Competent parties
4. Legal Purpose
Warranty
Absolutely true statment upon whcich the validity of the insurance policy depends.
Concealment
intentional withholding of information of material fact that is crucial in making a decision.
Misrepresentation
Untrue statements on the application
Material misrepresentation
a statement that if discovered would alter the underwriting decison of the insurance company
Consideration
the binding force in a contract. Something of value that each party gives to the other.
Policy Structure
Declarations
Definitions
Insuring agreement
Additional coverage
Conditions
Endorsements
Exclusions and policy limits
Assignment
the transfer of a legal right or interest in an insurance policy
Appraisal
An assessment of property to determine either the correct amount of insurance to be written or the amount of loss to be paid.
Arbitration
Method of claim settlement used when the insured and insurer cannot agree upon the amount of the loss.
Cancellaton
the termination of an in-force insurance policy, by either the insured or the insurer, prior to the expiration date on the policy.
Nonrenewal
the termination of an insurance policy at its expiration date by not offering a continuation of the existing policy or replacement policy.
Mortgage clause
attatched to a policy to protect the interest of the mortagagee in the mortgaged property
Sources used in underwritting process
Application form
Motor vehicle records
Interviews with neighbors, friends, employers
Inspection of property
Inspection of insurance history
Fair Credit Reporting Act
established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly listed.
Notice of claim
a form or statement from an inured to an insurer, informing the insurer that events leading to a possible claim have occurred.
Dwelling (02) Policy
used to insure 1 to 4 unit residential dwelling =s that are not eligible for coverage under the regular homeowners program b/c of age, location, value, or other factors. Not designed to insure farm property.
WHARVES (basic)
Windstorm
Hail
Aircraft/vehicles
Riot
Volcanic
Explosion
Riots
BB BICE GOLF (broad)
Bursing of heating syst
Burglary damage
Breaking of water heaters
Ice, snow, or sleet weight
Collapse of building/part of building
Electrical damag
Glass breakage
Objects falling from outside
Leakage of watr or steam damage
Freezing of plumbinig
DP-1
Basic
DP-2
Broad
DP-3
Special. open peril
Coverage A (Dwelling)
covers structures used for dwelling purposes including all attatched structures and outdoor personal property or equiptment used to maintain or serice premises.
Coverage B (other structures)
covers other seperate structures at the same location.
Coverage C (Personal Property)
includes personal property commonly found in homes owned by the insured or other family members.
Coverage D ( Fair Rental Value)
applies if property undr Coverage A, B, or C becomes damaged or destroyed and unfit for normal use due to damag or destruction.
Coverage E (Additional Living Expenses)
only available if broad or special form dwelling coverage is written. Pays for additinal living expenses while their house is unfit for use or being repaired.
mobile home endorsement
alters the homeowners policy to cover a mobilehome and other structures on land owned or leasd by the resident of the mobile home.
Building and personal property coverage form
the main form used to cover buildings, business personal property, and property of others on the insureds premises.
Building coverage
insures the building described , including outdoor fixtures and furniture , items used to service the property, permanently installed machinery and equiptment, and addtions under construction, including the materials, supplies and equiptment within 100ft
Business personal property coverage
covers business personal property that is located in, or within 100ft of te bulding, including improvements and bettermets and leased personal property that the insured has a contractual obligation to insure.
Personal property of others
covers personal property that is located at he described premises or within 100ft of the premises and in the insureds care, custody, or control.
Components of a Commercial Policy
Commercial policy
General liability
Crime
Equiptment breakdown
Auto
Inland marine
Farmland
Interline endorsements
those that apply, or could apply to more than one coverage part.
Equiptment Breakdown Coverage
used to insad ure most types of business risks and all industrial risks.
Refrigeration Interruption Covrage
endorsement covers perishable property for spoilage to refrigerated covered property or damage caused bu contact with refrigerant.
Refrigeration Interruption-Report of values
written on reporting basis
Business income-report of values
used to report the insureds business income.
Protective safeguards
adds policy condition requiring the insured to maintain protective safeguards. Ex fire alarms, automatic sprinkler syst
Hired autos
autos the insured leases, hires, or borrows but not from employees or any partners or executive officers.
Nonowned autos
autos are autos not owned, leased or borrowed by the insured, but used in business
Hired and Nonowned auto liability
proviedes coverage for liability arising out of the use or maintenance of a hired or nonhired auto
Utility services- direct damage
provides coverage for direct damage caused by utility service disruption stemming from a covered peril. Includes water services, cmmunication services and power supply services.
Utility services- time element
covers the insured loss of business income or extra expense in the event of a direct physical loss to a utility service.
Bill of lading
a contract for the transport of goods between the shipper and the carrier.
Common carrier cargo liability
cov ers the carries legal liability for damage or loss to property i the insurds care and custody for transportaion
Valuable papers and records
provides coverage to replace or reconstruct lost records. Pays up to $1000 for the cost to research, replace, or restore lost information.
Trip transit
used to cover a specific shipment or trip.
Annual transit
used by those business that ship goods on a regular basis
Motor truck cargo policy- truckers form
used by commonn carriers that transport the goods of others for a fee.
Motor truck cargo policy- shippers owners form
private carriers, or owners who ship their goods using their own trucks,
Floor plan merchandise
used to insure financed merchandise held for sale until the merchandise has been sold.
Expediting expense
This coverage extension covers the reasonable cost of temporary repairs and expedition (speeding up) of permanent repairs.
Special Dwelling policy form
The Special form provides Broad form named peril coverage for personal property and open peril coverage for the dwelling and other structures.
Proximate cause
concept applied to determine which peril or event actually caused a loss.
Common law defenses against an employer's liability
assumption of risk
contributory negligence
fellow servant rule