RISK
uncertain prospect of a financial risks
SPECULATIVE RISKS
uncertain prospect of a financial gain or loss and are uninsurable. Example: gambling
PURE RISK
chance of loss or no loss, but no gain, and are insurable
RISK AVOIDANCE
does not get involved in activity leading to a potential loss; don't play with dynamite
RISK ASSUMPTION
assumes expected losses from won financial resources. Example: Insurance policy plus out of pocket cost
RISK TRANFERENCE
transfer risk to insurance company. can transfer risk to an insurance company or another person, as long as they accept it.
RISK SHARING
insured and insurer each accepting part of the risk. Example: Deductible and coinsurance help reduce possibility of loss
RISK REDUCTION
lower the possibility of loss. Example: wearing seat belt
HAZARD
any circumstance that increases a possible loss (peril)
PHYSICAL HAZARD
circumstances that increase the chance of peril occuring
MORAL HAZARD
tendency to commit illegal acts for monetary gain. submitting false claim or arson
MORALE HAZARD
circumstances that increase a risk due to a person's indifferent attitude. leaving doors unlocked or windows open while not home
PERIL
cause of a loss. something that imperils or endangers; fire, lightning, and explosion. Property contracts cover named and open (all risk) perils
ECONOMIC LOSS
total estimated cost resulting from the damage or destruction of property or from liability risk
INDEMNITY
compensation for a loss
INSURABLE INTEREST
expectation of a financial loss that can be covered by insurance. having financial interest in a property or liability exposure because of ownership or use of the property. Insurable interest must exist at inception of policy and at the time of a loss. Ca
DEDUCTIBLE
amount paid after a loss by the insured. out-of-pocket amount
DIRECT LOSS
property loss by an unbroken chain of events from a covered peril (cause of loss)
INDIRECT LOSS (LOSS OF USE)
loss that is not a direct result of a covered peril. covers add'l expenses or losses of income that resulted from the direct loss by a covered peril. Example: Loss of earnings
PROXIMATE CAUSE
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NAMED PERIL
the perils covered are specifically listed in the insurance contract
OPEN PERIL
all perils are covered unless specifically excluded in the insurance contract; most beneficial to insured
SPECIFIC COVERAGE
single insurance for only one kind of property at only one location. Example: rare antique
BLANKET COVERAGE
single policy on the insured's property for: more than one type of property in the same location same type of property in two or more different locations; two or more types of property in two or more different locations. Example: contractor with variety o
ACTUAL CASH VALUE
cost of replacing damaged or destroyed propert with comparable new property MINUS DEPRECIATION or obolescence
REPLACEMENT COST
actual cost of replacing property without a deduction for depreciation
FUNCTIONAL REPLACEMENT COST
cost to put a commercial building back to the functional manner before the loss occurred. may substitute one type of building material for another comparable material if rebuilding or replacing
SALVAGE VALUE
amount insurance company can sell recovered property after paying damages to the insured. help insurer reduce overall loss on a claim. insurer has right to the damaged property after claim is settled
MORTGAGEE
party holding a mortgage of lien on real property
LOSS PAYEE
who insurance company pays in the event of a loss
MISREPRESENTATION
false pretense with intent to defraud; failure to disclose material facts about risk, gives insurance company right to cancel policy
BREACH OF WARRANTY
violation of an agreement between a seller and buyer in reference to the condition, content, quality or title of and item sold. WARRANTY-a provision that pledges a condition does or will exist at some point in the future
CONCEALMENT
the intention to withhold relative information about the risk from the n insurance company. grounds to cancel a contract of not pay a claim
NEGLIGENCE
failure to act with the legally required degree of care fro others resulting in bodily harm or property loss; BASIS FOR PAYMENT OF LIABILITY CLAIMS. North Carolina uses "contributory negligence" if an injured party even slightly contributed to the loss, t
LIABILITY
condition enforced by the courts to something bound under law or in a contract. if one party causes harm they may be liable
SUPPLEMENTARY PAYMENT
additional payments from the insurance company for costs such as court cost and attorney's fees. These are payments made in addition to coverage limits
BODILY INJURY
temporary or permanent physical harm to a person. Injury, disease, or death caused by an insured to a third-party
PROPERTY DAMAGES (PD)
damage or destruction to real and/or personal property.
PERSONAL INJURY (PI)
damage through libel, slander, false arrest, defamation of character and invasion of privacy that could lead to a judgment against a person. Homeowners policy will not cover PI but a Personal Umbrella policy will
ACCIDENT
an unexpected, unforeseen and unintended event (not under control of the insured) resulting in bodily injury and property damage
OCCURENCE
an event that results in an insured loss but not necessarily from and accident. Example: Damages from wind
CERTIFICATE OF INSURANCE
document for property and liability insurance that provides evidence of existence and terms of a particular policy for the insured
BINDER
temporary insurance contract providing coverage until a permanent policy is issued. P&C issue binders as evidence of coverage. NC binders are good for a max of sixty (60) days from date of issue
ENDORSEMENT
a written agreement attached to a policy to add or subtract coverage
LIBERALIZATION CLAUSE
in property insurance...if the legislative acts or acts of the insurance regulatory office expand the coverage of an insurance policy or endorsement forms without requiring add'l premium, then all similar policies & endorsements will automatically have su
FIRST NAME INSURED
the person, business, or organization specified first on the Declaration Page in a Prop & Liab policy
MONOLINE POLICY
cover only one risk such as property. standard in the insurance industry until 20th century
PACKAGE POLICY
combines two or more forms such a commercial property and commercial liability coverage
PARTS OF AN INSURANCE POLICY
declaration page, insuring agreement, conditions, exclusions, and definitions. D.I.C.E.D.
DECLARATION PAGE
description of who or what is insured, amount of insurance, name of insured, policy terms, and premium amount
INSURING AGREEMENT
obligations and responsibilities of the insurer to insured in case of a covered loss. also list covered perils
CONDITIONS
duties and obligations of the insured and insurer in the contract. if insured fails to meet conditions could delay payment for a loss
EXCLUSIONS
List the perils or conditions NOT COVERED by policy
DEFINITIONS
explains some of the terms used in the policy.
INSURANCE
method of transferring financial risk through the pooling of similar pure risks by insurance company. hedge against potential financial loss
APPLICATION
written statement on an approval (by the state regulatory authority) prescribed form by the applicant in reference to insuring a risk
SUBROGATION
right granted in an insurance contract allowing an insurance company to take action against a third party that owes monetary damages to the company's insured; right to recover damages owed
ADHESION
insurer writes the insurance contract and policyowner has no input in the wording, any potential ambiguity in the wording of the contract will be held against the party writing the contract, the insurance company