Property Insurance
Is tangible items that you can possess, your stuff(house, car, dog, furniture) It can also be business stuff(building, inventory etc...)
Casualty Insurance
Refers to your legal responsibility to pay for the damage that you do to the others guy body or property. Will pay for damage you do to the other guy.
Insurance
A contract that allows for the transfer of your individual risk to a company, that will identify losses suffered by the insured to a predetermined limit, unless excluded??? by the?? policy language.
Pure Risk
You can only lose, you cannot win.
Ex. If you own a car, it can be stolen. If you drive a car, you could hit a pedestrian..... YOU CANNOT WIN.
Speculative Risk
Is a risk that is created(Gambling)
Ex. In gambling, there is not a risk until you place a bet, like $10 on Auburn to beat Alabama and you can win or lose on that bet.
Direct Loss?
Is a loss incurred due to direct damage to the property.
Ex.If your house burns down, you have a direct loss.
Indirect Loss?
A loss resulting from direct damage to the property
Ex. The money you have spent on a hotel for 3 months while your house? is being built.
Why do Insurance companies want large numbers of insureds?
Companies want large numbers of insureds to create the risk sharing apparatus. The losses incurred by a large number of similar risks are highly predictable.
Insurable Interset
Is the extend of your financial interest at the time of the loss.
What is an Endorsement?
-It covers the gaps and holes in your policy
-If the homeowner's policy limits for jewelry is $1,500 in the event of theft and if you have $10,000 worth of jewelry, you may be a bit concerned.
-You can purchase an endorsement to your homeowner's coverage
Risk Retention Group
-It is a form of group self-insurance for business liability risks.
Ex. If a daycare center costs for insurance is too much, they can pay money into a common pool and if any claims were to happen they can take money out of the pool.
Surplus?
A type of insurance transaction in which a specially licensed producer is able to procure insurance from a non-admitted company. You have to be denied three times by an admitted insurance company before you can enter the Surplus Lines market.
Reinsurance
The practice of transferring a portion of an insurance company risk to another company.
Contract
Defined as an agreement between two or more parties.
Indemnify
-To make whole, to compensate for a loss
- An insurance contract, whereby one party(the insurer or the indemintor) agrees to compensate the other (the insured or the indemnitee) for any damages or losses, in return for premiums paid by the insured to the
Contract of adhesion
The insurer must stick to the contract. They wrote it, they are stuck with it.
Unilateral Contract
-Although there are two parties to the insurance contract, only one party(the insurer) makes a legally enforceable promise.
-Unilateral=One promiser
Vicarious Liability
The liability concept that states those responsible for the actions of another are potentially liable for losses caused by that person.
Strict Liability
A measure of liability that considers neither duty nor negligence.
Absolute Liability
A tort law concept in which an individual can be found legally responsible without being negligent.
Why is the law of large numbers important?
2 reasons
Key risk elements & Underwriting information sources
Short Rate Refund
A small penalty if you cancel mid-term
Limits of Liability
The maximum that the company will pay on your behalf for damage to your property or the maximum the company will pay on your behalf for bodily injury or property damage for which you are legally responsible.
What is the difference between a stock and a mutual insurance company?
-Stock Company- is in business to earn money for its stockholders.
-Mutual Company- have no stockholders. The policy owners elect the board of directors of the company. The earning are considered a surplus and this is distributed to the policy owners as a
What is the difference between an alien, foreign, and domestic insurer?
-A company that sells policies in Alabama is...
>Headquarted in Alabama is a DOMESTIC company in Alabama
>Headquarted in Texas is a FOREIGN company in Alabama
>Headquarted in Canada is an ALIEN company in Alabama
What is surplus lines of insurance?
They can write policies that are too high for a regular insurance company to take on. You have to be denied three times by an admitted insurance company before you can enter the surplus lines market. Surplus lines is a non-admitted insurance company.
Contract of utmost good faith
Insurance is a good faith contract because each party relies heavily on the truthfulness of each other. The insurer relies that the applicant completed the application truthfully and the applicant trusts that the insurer will fulfill the obligation if the
Aleatory Contract
Is one in which the dollar value exchanged by the two parties is NOT necessary equal due to the ?uncertain timing of the event which is the subject of the contract.
Difference between Rate and Premium?
-Rate- Is the price buyers pay to acquire a certain amount of insurance protection.
-Premium- Is the amount of the money that the insured has to pay for an insurance policy.
Difference between class rate and manual rate?
-Class Rate- applies to all members of a large group of similar risks
-Manual Rate- is when class rates are printed in a manual
What is the first page of an Insurance policy?
Declaration Page
Why is the replacement cost typically better?
Because its the replacement cost today without subtracting deprecation
What is underwriting and its purpose?
-An underwriter evaluates the risk and exposures of potential clients. They decide how much coverage the client should receive, how much they should pay for it, or even accept the risk and insure them.
-Rates come from 3 sources; the application, physical
Difference between a Peril and a Hazard?
-A peril is the damage that can cause a loss of an? insured property.
Ex. Torando
-Hazard is any dynamic which increases the likelihood that a peril will occur or one that magnifies the damage done by a peril.
Know the different claims payment choice which are basically different vaulation methods for propery
>Actual Cash Value- Today's replacement cost minus the depreciation
>Replacement Cost- is the replacement cost without subtracting the depreciation
>Functional Replacement Cost- The amount it would cost to repair or replace
>Agreed Value- Agree to the val
Purpose of Coinsurance?
Is a mechanism for rewarding policy owners who buy adequate amounts of coverage and punishing those who do not
Difference between basic, broad and special cause of loss coverage?
>Some basic coverages are fire, lightning, explosion, windstorm, riot, vandalism, volcanic action, smoke, sparkles leakage, and sinkhole collapse.
>Some examples of broad coverages are plumbing, falling objects, weights of snow, ice, or sleet, and you can
If an insured does not meet the coinsurance requirement, what will happen in the event of a
claim?
They have to pay a percentage of it, 60%
What is the difference between misrepresentation and concealment?
>Misrepresentation- The action of giving false or misleading account of the nature of something
>Concealment- The action of hiding something or preventing it from being known
(If you lie, you lose out on the claim and you lose the coverage?)
What is the difference between the broad and special cause of loss form?
>Broad cause of loss form- it includes the 11 basic perils plus 3 additional perils with the first letters P, F, and W.
(Plumbing, Falling Objects, and WEighs of snow, Ice, and Sleet)
>Speical cause of loss form- simply covers everything that is not exclu
Who is paid by liability insurance?
Never you, always the other guy. These contracts pay on your behalf when you harm the other guy
What are some ways you can do damage?
Bodily Injury, Property Damage, Personal Injury and Advertising Injury
What are the four requirements to prove negligence?
Breach of duty, duty, causation, damages
What is the difference between a judgement and a settlement?
>Settlement- is when the other guy (and probably his attorney) sit down with Calvin and his insurance company and work out an agreement to compensate? the other guy for his doctor bills, lost wages, pain and suffering
>Judgement- if a settlement is not po
What is the difference between compensatory and punitive damages?
>Compensatory- is the damages agreed to or ordered in liability cases
=Speical/Economic Damages- Medical bills, lost income, repair estimates, and replacement goods.
=General/Noneconomic Damages- humiliation, embarrassment, pain & suffering and mental ang
What is a liability umbrella?
Umbrellas are designed to pay an excess, can be primary if no primary exists
Subrogation
It allows an insurer to recover the amount it has paid for a loss by suing the party that caused the loss.
What is the difference between occurrence and an aggregate limit?
>Occurence- Includes accidents + events which happen over time
=There is no limit for the number of occurrences
>Aggregate Limit- is used to limit the amount that can be paid during a policy
What are idel Characteristics? of an ?insurable risk?
Wishlist:
1) Large number of similar objects
2) Losses are accidental/unintentional
3) Losses can be determined/measured
4) Losses should not be catastrophic
5) Large Loss Principle
6) Insurable Interest
What is the difference between contributory and comparative negligence?
>Contributory negligence-failure of an injured plaintiff to act prudently,
considered to be a contributory factor in the injury suffered, and sometimes reducing the amount recovered from the defendant
>Comparative negligence-a partial legal defense that r
Basic vs Broad vs special
>Basic- policies only cover the specifically named perils in the policy.
Ex. Fire, Smoke
>Broad-Offers more coverage than basic, includes coverage for all the same hazards and even some additional ones. Just like Basic broad only covers named perils.
Ex.F
Property Insurance
Is tangible items that you can possess, your stuff(house, car, dog, furniture) It can also be business stuff(building, inventory etc...)
Casualty Insurance
Refers to your legal responsibility to pay for the damage that you do to the others guy body or property. Will pay for damage you do to the other guy.
Insurance
A contract that allows for the transfer of your individual risk to a company, that will identify losses suffered by the insured to a predetermined limit, unless excluded??? by the?? policy language.
Pure Risk
You can only lose, you cannot win.
Ex. If you own a car, it can be stolen. If you drive a car, you could hit a pedestrian..... YOU CANNOT WIN.
Speculative Risk
Is a risk that is created(Gambling)
Ex. In gambling, there is not a risk until you place a bet, like $10 on Auburn to beat Alabama and you can win or lose on that bet.
Direct Loss?
Is a loss incurred due to direct damage to the property.
Ex.If your house burns down, you have a direct loss.
Indirect Loss?
A loss resulting from direct damage to the property
Ex. The money you have spent on a hotel for 3 months while your house? is being built.
Why do Insurance companies want large numbers of insureds?
Companies want large numbers of insureds to create the risk sharing apparatus. The losses incurred by a large number of similar risks are highly predictable.
Insurable Interset
Is the extend of your financial interest at the time of the loss.
What is an Endorsement?
-It covers the gaps and holes in your policy
-If the homeowner's policy limits for jewelry is $1,500 in the event of theft and if you have $10,000 worth of jewelry, you may be a bit concerned.
-You can purchase an endorsement to your homeowner's coverage
Risk Retention Group
-It is a form of group self-insurance for business liability risks.
Ex. If a daycare center costs for insurance is too much, they can pay money into a common pool and if any claims were to happen they can take money out of the pool.
Surplus?
A type of insurance transaction in which a specially licensed producer is able to procure insurance from a non-admitted company. You have to be denied three times by an admitted insurance company before you can enter the Surplus Lines market.
Reinsurance
The practice of transferring a portion of an insurance company risk to another company.
Contract
Defined as an agreement between two or more parties.
Indemnify
-To make whole, to compensate for a loss
- An insurance contract, whereby one party(the insurer or the indemintor) agrees to compensate the other (the insured or the indemnitee) for any damages or losses, in return for premiums paid by the insured to the
Contract of adhesion
The insurer must stick to the contract. They wrote it, they are stuck with it.
Unilateral Contract
-Although there are two parties to the insurance contract, only one party(the insurer) makes a legally enforceable promise.
-Unilateral=One promiser
Vicarious Liability
The liability concept that states those responsible for the actions of another are potentially liable for losses caused by that person.
Strict Liability
A measure of liability that considers neither duty nor negligence.
Absolute Liability
A tort law concept in which an individual can be found legally responsible without being negligent.
Why is the law of large numbers important?
2 reasons
Key risk elements & Underwriting information sources
Short Rate Refund
A small penalty if you cancel mid-term
Limits of Liability
The maximum that the company will pay on your behalf for damage to your property or the maximum the company will pay on your behalf for bodily injury or property damage for which you are legally responsible.
What is the difference between a stock and a mutual insurance company?
-Stock Company- is in business to earn money for its stockholders.
-Mutual Company- have no stockholders. The policy owners elect the board of directors of the company. The earning are considered a surplus and this is distributed to the policy owners as a
What is the difference between an alien, foreign, and domestic insurer?
-A company that sells policies in Alabama is...
>Headquarted in Alabama is a DOMESTIC company in Alabama
>Headquarted in Texas is a FOREIGN company in Alabama
>Headquarted in Canada is an ALIEN company in Alabama
What is surplus lines of insurance?
They can write policies that are too high for a regular insurance company to take on. You have to be denied three times by an admitted insurance company before you can enter the surplus lines market. Surplus lines is a non-admitted insurance company.
Contract of utmost good faith
Insurance is a good faith contract because each party relies heavily on the truthfulness of each other. The insurer relies that the applicant completed the application truthfully and the applicant trusts that the insurer will fulfill the obligation if the
Aleatory Contract
Is one in which the dollar value exchanged by the two parties is NOT necessary equal due to the ?uncertain timing of the event which is the subject of the contract.
Difference between Rate and Premium?
-Rate- Is the price buyers pay to acquire a certain amount of insurance protection.
-Premium- Is the amount of the money that the insured has to pay for an insurance policy.
Difference between class rate and manual rate?
-Class Rate- applies to all members of a large group of similar risks
-Manual Rate- is when class rates are printed in a manual
What is the first page of an Insurance policy?
Declaration Page
Why is the replacement cost typically better?
Because its the replacement cost today without subtracting deprecation
What is underwriting and its purpose?
-An underwriter evaluates the risk and exposures of potential clients. They decide how much coverage the client should receive, how much they should pay for it, or even accept the risk and insure them.
-Rates come from 3 sources; the application, physical
Difference between a Peril and a Hazard?
-A peril is the damage that can cause a loss of an? insured property.
Ex. Torando
-Hazard is any dynamic which increases the likelihood that a peril will occur or one that magnifies the damage done by a peril.
Know the different claims payment choice which are basically different vaulation methods for propery
>Actual Cash Value- Today's replacement cost minus the depreciation
>Replacement Cost- is the replacement cost without subtracting the depreciation
>Functional Replacement Cost- The amount it would cost to repair or replace
>Agreed Value- Agree to the val
Purpose of Coinsurance?
Is a mechanism for rewarding policy owners who buy adequate amounts of coverage and punishing those who do not
Difference between basic, broad and special cause of loss coverage?
>Some basic coverages are fire, lightning, explosion, windstorm, riot, vandalism, volcanic action, smoke, sparkles leakage, and sinkhole collapse.
>Some examples of broad coverages are plumbing, falling objects, weights of snow, ice, or sleet, and you can
If an insured does not meet the coinsurance requirement, what will happen in the event of a
claim?
They have to pay a percentage of it, 60%
What is the difference between misrepresentation and concealment?
>Misrepresentation- The action of giving false or misleading account of the nature of something
>Concealment- The action of hiding something or preventing it from being known
(If you lie, you lose out on the claim and you lose the coverage?)
What is the difference between the broad and special cause of loss form?
>Broad cause of loss form- it includes the 11 basic perils plus 3 additional perils with the first letters P, F, and W.
(Plumbing, Falling Objects, and WEighs of snow, Ice, and Sleet)
>Speical cause of loss form- simply covers everything that is not exclu
Who is paid by liability insurance?
Never you, always the other guy. These contracts pay on your behalf when you harm the other guy
What are some ways you can do damage?
Bodily Injury, Property Damage, Personal Injury and Advertising Injury
What are the four requirements to prove negligence?
Breach of duty, duty, causation, damages
What is the difference between a judgement and a settlement?
>Settlement- is when the other guy (and probably his attorney) sit down with Calvin and his insurance company and work out an agreement to compensate? the other guy for his doctor bills, lost wages, pain and suffering
>Judgement- if a settlement is not po
What is the difference between compensatory and punitive damages?
>Compensatory- is the damages agreed to or ordered in liability cases
=Speical/Economic Damages- Medical bills, lost income, repair estimates, and replacement goods.
=General/Noneconomic Damages- humiliation, embarrassment, pain & suffering and mental ang
What is a liability umbrella?
Umbrellas are designed to pay an excess, can be primary if no primary exists
Subrogation
It allows an insurer to recover the amount it has paid for a loss by suing the party that caused the loss.
What is the difference between occurrence and an aggregate limit?
>Occurence- Includes accidents + events which happen over time
=There is no limit for the number of occurrences
>Aggregate Limit- is used to limit the amount that can be paid during a policy
What are idel Characteristics? of an ?insurable risk?
Wishlist:
1) Large number of similar objects
2) Losses are accidental/unintentional
3) Losses can be determined/measured
4) Losses should not be catastrophic
5) Large Loss Principle
6) Insurable Interest
What is the difference between contributory and comparative negligence?
>Contributory negligence-failure of an injured plaintiff to act prudently,
considered to be a contributory factor in the injury suffered, and sometimes reducing the amount recovered from the defendant
>Comparative negligence-a partial legal defense that r
Basic vs Broad vs special
>Basic- policies only cover the specifically named perils in the policy.
Ex. Fire, Smoke
>Broad-Offers more coverage than basic, includes coverage for all the same hazards and even some additional ones. Just like Basic broad only covers named perils.
Ex.F