Risk
Change of a financial loss/uncertainty of a loss to happen/uncertainty of future outcome
Assumed Risk
Amount of risk the insured is willing to absorb
Pure Risk
A situation that present the opportunity for loss, but for no gain; Insurable risk
Speculative Risk
Uncertainty about an event under consideration that could produce either a profit or loss/Business venture/Non-insurable risk
Insurance
Contract where one indemnifies or pays another a specific amount
Law of Large Numbers
Statistical theory stating the larger the number of similar exposure united the more predictable and accurate the estimate of expected loss
Policy
Written contract/agreement for or effecting insurance including clauses, riders and endorsement
Declaration Page
Includes Named Insured and Address, policy period, premium, limits and loss payee/mortgagee
Insuring Agreement
Portion of the insurance policy in which the Insurer(Insurance Company) promises to make payment for covered perils to or on behalf of the insured
Conditional Contract
Obligation of the insurer (Insurance Company) may be based on insured satisfying certain conditions
Exclusions
Section of policy which lists property, perils, losses, persons or situations which are not covered
Endorsement
Written form attached to an insurance policy that alters the policy's coverage, terms, or conditions
Binders
Temporary insurance/ Can be written or oral
Certificate of Insurance
Document providing evidence that certain types of insurance coverages and limits have been purchased by the insured
Contract of Adhesion
Contract created by insurance company - insured cannot negotiate terms
Unilateral Contract
Contract where only one party makes an enforceable promise
Personal Contract
Covers the financial loss suffered by a person - not the property or operations
Definition of Insured
Any person/organization specifically designated by name as an insured in an insurance policy, as well as others, that although unnamed, fall within policy definition
Insurable Interest
One who has an economic interest
Limits of Liability
Maximum amount of insurance the company will pay for a particular loss
Casualty Insurance
All insurance other than Life & Health
Property Insurance
Carrier pays directly to the insured/First party coverage
Liability Insurance
Carrier pays on behalf of the insured/Third party coverage
Health Insurance
Has it's own category; Only included because of licensing statutes authorize P&C agents sales.
Fraternal Insurance
Primarily life insurance providers; Church related (Typically members of a society)
Admitted Carrier
Licensed to do business in the state / They receive Certificate of Authority
Non-Admitted Carrier
Company not licensed (but approved by OIR) to do business in state (Surplus Lines Companies)
Mail Order Insurance
Insurance sold through mass marketing techniques (direct mail)
Reinsurance
Transaction in which the reinsurance company agrees to indemnify an insurance company for part or all of the liability assumed by the insurance company under a policy it has issued
Peril
Cause of a loss
Hazard
Introduces or increases the chance of a loss from a peril
Physical Hazard
Physical characteristics of an object that increases the severity of a loss by covered peril
Moral Hazard
Intentional loss; Conscious mental attitude of the insured
Morale Hazard
Accident Proneness; Unconscious mental attitude of the insured
Proximate Cause Doctrine
Unbroken connection between a covered occurrence and the damage for the occurrence
Direct Loss
Physical harm to tangible property
Indirect Loss
Economic loss as consequence of direct loss
Consquential Damage
Damage from direct loss; I.E loss of spoilage from lack of power
Lenders Interest
Insurance assures lenders that collateral property is covered / Mortgagee Clause
Benefits to having Lenders Interest
(1) Make lender a payee in any covered loss
(2) Gives mortgagee advance notice of cancellation/non-renewal/reduction of coverage
(3) Mortgagee is covered if insured is engaged in act/omission preventing payment
(4) Mortgagee can continue policy if premium
Principle of Indemnity
One should not make a profit
Departures for Principle of Indemnity
Actual Cash Value / Florida Value Policy Law / Agreed Valued Policy
Actual Cash Value
Replacement Cost (R/C) less Depreciation
Replacement Cost
New for Old; Required to replace
Florida Value Policy Law
If a total loss by a covered peril to bldg., structure or mobile home, the company must pay the policy limit regardless of property value
Agreed Value Law
Insurance company agrees in advance to a Stated Amount
Market Value
Price that would be paid to purchase an asset in that market
Coinsurance
Did (Limit of insurance) / Should (Property Value)
Coinsurance %
Loss = Recovery (Loss Settlement)
Coinsurance applies if
Insured has coverage under 80%, 90%, or 100%. If at least 80%, we will pay the loss without penalty
Coinsurance contract
Rate charged is based upon use of coinsurance clause attached to this policy, with the consent of the insured.
Specific Insurance
Separate limit for each building and contents or items
Blanket Insurance
Single limit of two or more covered items - full limit applies to any one item
Straight Deductible
Deduct flat amount form loss payment
Franchise Deductible
Pay the loss form dollar one if the loss equals or exceeds the stated deductible
Percentage Deductible
% amount is deducted from the loss
Hurricane Deductible
Insurance company must offer 2%, 5%, or 10% (higher if insured signs a handwritten note); Changes can be made only at renewal & deductible on calendar year losses
Commercial Residential Policies
Annual basis; Applies to each hurricane; Residents can apply either on annual basis or per hurricane (Insured would need to choose)
Vacancy
Absence of people and personal property form a building; Coverage may be restricted after a period of vacancy
Unoccupied
Without occupants, with personal property in building
Theft
Any unlawful taking of property
Robbery
Taking property by causing or threating body harm
Burglary
Taking of property by breaking & entering, leaving visible signs of forcible entry or exit
Mysterious Disappearance
The vanishing of insured property in an unexplained manner
Premium
Amount of money an insurance company charges to provide the coverage described in the policy
Deposit Premium
Required by insurance company on forms of insurance subject to periodic premium adjustments / Down payment
Earned Premium
Portion of policy premium that applied to the expired portion of the policy
Premium Financing
Involves the lending of funds to a person/company to cover the cost of the insurance premium / Escrow account
Audit
Review of the financial records of a person/organization conducted annually to determine exposures, premiums, etc.
Negligence
Failure to a prudent person would have acted in the same circumstance (cause to be liable)
Liability
Any legally enforceable obligation. In insurance, the obligation to pay a monetary award for injury or damage caused by one's negligent/statutorily prohibited action. (When judge said insured is legally liable)
Legal Liability
Would fall into two type of negligence: Comparative & Contributory
Comparative Negligence
Where both parties are contributed to the cause of the injures (Currently being used in FL)
Contributory Negligence
If plaintiff is responsible for 1% at fault - not entitled to recover from others
Absolute Liability
Imposed on the wrongdoer without proof of carelessness or fault
Strict Liability
Liability where the manufacture is liable to a third party regardless degree of care (Defective products)
Vicarious Liability
Negligence is not directly attributable to the person claimed against, but is negligence of another whom the person claimed against is in someway responsible/ Parent responsible for child graffiti / Contingent Liability
Compensatory Damages
Monetary amount necessary to replace what was lost / Money is only remedy
Punitive Damages
Damages to punish the wrongdoer for anti social actions, rather than the compensating for loss
Exemplary Damages
Damages awarded to make an example of the wrongdoer
Accident
Sudden fortuitous event/happening/produced by chance
Occurrence
An accident, including continuous and repeated exposure to substantially the same harmful condition
Liability Policy Insuring Agreement
To pay on behalf of the insured all sums the insured becomes legally liable to pay as damages - commonly referred to as 3rd party claims
Liability Under the Liability Policy
Specifically defined in each policy / The one who is legally liable
Liability Policy Limits
Can be expressed as single limit, split limit, and/or aggregate limit
Condition
Provisions inserted in the policy that qualify/place limitations on the insurance company's promise to pay or perform / If conditions aren't met, insurance company can deny claim
Subrogation
When insurance company pays claim to insured, rights to collect from at party transfer to insurance company
Assignment
Transfer of legal rights under/interest in, an insurance policy to another party / One cannot transfer policy to another without company's written permission
Changes
Must be made by the insured and in writing
Policy Period
Coverage only applies to losses that begin during this period
Policy Territory
Stated geographical region / Worldwide/ United States, it's possessions and Canada
Other Insurance
How policies interact with other policies for the same occurrence. Can be broken into four types: Primary, Excess, Pro Rata, and Equal Share
Primary
Policy pays first
Excess
Other insurance must be exhausted then this policy will apply
Pro Rata
Will pay a proportion of a loss as it limits bear to overall limits of coverage in force
Equal Share
Contribution bases on the number of policies, without regard of their limits
Cancellation
Provides advance notice for valid reasons. Florida law governs specific requirements.
Nonrenewal
Required of insurance company to provide advance notice ranging in days depending on jurisdiction and circumstances surrounding
Liberalization
In revised policy form, broadened coverage within 60 days of policy creation, without addition premium, insured receives broadened coverage
Appraisal
Survey that determines value of property without legal action
Arbitration
Procedure in which an insurance company and the insured agree to settle a dispute by accepting a decision made by a third party