Term
| Property Loss Limitations |
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Definition
| Value of the property damaged, destroyed, or stolen; and indirect costs |
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Term
| Difficulty of Collecting Liability |
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Definition
| Difficult to determine and liability awards are difficult to gauge (pain and suffering). Liability claims are notorious for having a long tail. |
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Term
| Basis of Liability Torts. 3 Types |
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Definition
| Intentional torts (bodily damage, personal injury, and property damage). Absolute liability situations. Negligence |
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Term
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Definition
| Special (what can be itemized), general damages (what cant be itemized), Punitive damages (to punish/deter other acts). |
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Term
| Defenses against Negligence |
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Definition
| contributory negligence, comparative negligence, assumption of the risk. |
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Term
| No defense against negligence situations |
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Definition
| Absolute (strict) liability, Res ipsa loquitur (the thing speaks for itself) |
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Term
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Definition
Use of ADR (alternative dispute resolution methods-mediation, arbitration etc.
Modify the collateral sources rule
limit the use of joing and several liability
place a cap on damage awards
punish those who file frivolous claims |
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Term
| Property and liability forms |
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Definition
P&L insurance can be purchased in a monoline contract. Can be purchased that combines P&L coverages
Package policies have several advantages: more complete coverage, common expiration date, lower cost than buying the coverages seperately |
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Term
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Definition
| Insurance Services Office (ISO). Most popular is ISO HO-3. HO-4 is for renters and HO-6 is for condo owners. Section 1 of HO policies provides property coverage, section 2 provides personal liability and medical payments to others coverages. |
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Term
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Definition
Coverage A: dwelling
Coverage B: Other structures
coverage C: personal property
coverage d: loss of use
Additional coverage amounts can be purchased if needed, and the contract may be endorseed to provide broader coverage. |
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Term
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Definition
All risk (direct and physical loss not excluded) coverages.
Exclusions: collapse, damage by freezing/thawing, wear and tear, insects, inherent vice, vandalism if the home is left vancat for 60 days or more, mold dry rot, vermin |
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Term
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Definition
Named perils coverage
Exclusions: property separetely insured, pets, motor vehicles, business records, aircraft, property of roomers/ boarders
Greater fo 10% of teh coverage C limit or $1,000 is available for property usually kept off premises. |
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Term
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Definition
| Loss of use applies in 3 cases: if an insured peril damages the home and it cant be used, lost rent if a tenant cant use the rental area in the home, and prohibited use. Certain property is not covered such as money, jewlery firearms etc although can be insured with endorsements or PAF |
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Term
| Loss settlement Evaluations |
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Definition
| ACV of loss or coinsurance: (insurance carried/ 80% of Repl cost)* loss |
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Term
| Section 1 conditions for HO |
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Definition
duties after loss
appraisal clause which puts in contract how disputes over loss value will be solved. each party gets an appraisal. Common in auto insurance
No suit against the insurer until gone through all avenues listed in cotract
concealement or fraud
Pair or set clause which is matching end tables-insurer will only pay for the damaged portion but not both.
Mortgage clause permits the mortgage lender to collect up to their amount of their interest even if act is intentional |
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Term
| Section 1 & 2 conditions HO |
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Definition
Liberalization is less stringent condition. Eg. what if ISO comes out w/ new version while still covered by old-you get broader coverage
Cancellation-depends on each states regulators. reimbursement when insured cancels also depends on seasonality of claims dept. |
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Term
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Definition
ISO HO-3 specifies a $250 deductible. This deductible can be increased, and % deductibles are often used.
Not all insurers offer earthquake coverage and many that do have recently hiked rates
Flood coverage is available through a private company/federal govt program. |
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Term
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Definition
Provides 2 coverages-Coverage E which is personal liability insurance and coverage F which is medical payments to others
Coverage E provides up to $100,000 per occurrence. The insurer will pay if its insured is legally liable and the loss is not excluded. $100,000 limit applies to bodily injury and property damage liability "accidents vs. occurences" |
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Term
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Definition
Coverage provides up to $1000 per person for medical pmts to others. Intended to encourage the insured to get medical attention for someone injured by the insured negligence or at an insured location. By covering medical expenses under coverage F, insurer hopes to minimize potentially large losses under Coverage E.
Higher Coverage E and F limits can be purchased upon request. A higher E limit may be needed in order to qualify for a personal umbrella policy |
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Term
| Coverage E: Personal Liability HO |
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Definition
Liability coverage follows the insured and provides payment for bodily injury and some property damage. If the cause of the claim is not excluded, the coverage, up to 100 gs per occurrence applies. The insurer also pays legal defense costs in addition to liability limit.
Coverage requires proof/admission of legal liability for the insurer to pay on the insured behalf.
There are exclusiions that apply to E and F. E only exclusions: contractual liability, property owned by insured, CC property (care/custody/control) workers comp (liability), nuclear energy and bodily injury to an insured. |
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Term
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Definition
Medical payments to others: med pmts provides up to 1000 per person and is not based on proof of liability.
benefits are paid for injuries at insured locations or if caused by an insured, resident employee, or the insureds animal
The insured and family members are excluded but residen employees injured at location are covered
Coverage F: exclusions: residence employee off the premises, workers comp, nuclear energy, and regular residets of the home. |
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Term
| Section 2 E and F exclusions HO |
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Definition
| Motor vehicle liability, watercraft liability, aircraft liability, intentional injury |
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Term
| Section 2 additional coverages HO |
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Definition
Claim expenses (legal costs, reasonable expenses, etc.)
First aid expenses for covered BI liabilty
Limited Coverage (1000 per occurence) for damage to another persons property except for: intentional acts by children 13 or under, property covered by section 1, property owned by the insured, motor vehicles aircraft and watercraft, business liability for property damage.
Loss assessments. |
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Term
| Endorsements to HO policies |
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Definition
| Inflation guard, earthquake, personal property replacement costs (most common), scheduled personal property, personal injury, business pursiits, watercraft and PAF |
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Term
| Shopping for HO insurance |
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Definition
Consider rating factors (Location, construction, loss control, age, deductible, etc)
Carry adequate coverage at least 80% RC
andd necessary endorsements (perils, limits)
Shop around and take advantage of discounts
consider a higher deductible (5-10% vs 250)
consider purchasing umbrella policy |
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Term
| Umbrella policy Characteristics HO |
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Definition
Characteristics: excess liability insurance, broad coverage, self insured retention (SIR-Deductible), reasonable cost.
Some exclusions: intentional acts, professional services, some personal injuries, business liability, d&O liability, etc
Buying an umbrella policy: required underlying limits to buy an umbrella, wise to purchase the umbrella from the same insurer providing underlying coverages fewer disputes (who pays, legal defense costs, etc) |
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Term
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Definition
| Property losses can be paid under 3 different coverages(collision, other than collision and property liabiltiy); and medical expeneses can be paid under 3 different coverages(medical payments, uninsured motorists, and bodily injury liability) |
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Term
| Personal Auto Policy (PAP) |
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Definition
multiple line, package plicy designed for privatepassenger autos and pickups not used for business purposes. A business auto policy (BAP) is available for business autos)
States mandate minimum liability coverage and a lender may mandate physical damage insurance.
Covered autos include vehicles listed in teh declarations, newly acquired vehicles, trailers owned by insured, and temporary substitute autos |
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Term
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Definition
Part A: liabilty coverage
Part B: medical payments coverage
Part C: uninsured motorists coverage
Part D: coverage for damage to your auto
Part E: duties after an accident or loss
Part F: general provisions |
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Term
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Definition
LIability coverage is the most improtant PAP coverage, and the only state mantated
Other insurance: with regard to an owned auto liability losses are settled on a pro-rate basis. For non owned autos, insurance on the car is primary, insurance on the driver is excess
Exclusions: intentional injury/damage, property in the insureds care, bodily injury to employee, vehicle used as a public or livery conveyance (taxis but carpools are exempt), business vehicles, vehicles with fewer than 4 wheels, no reasonable belief of permision, racing vehicles. |
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Term
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Definition
Medical payments: this small medical expense benefit (usually 1000 to 10000 per person) covers the named insured and passengers and insured when they are pedestrians
Medical benefits and funeral expenses are paid without regard to fault for up to 3 years after an accident.
The other insurance rules and exclusions closely track those found in the liabilty coverage of the PAP |
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Term
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Definition
Uninsured motorists: UM coverage protects against drivers who dont ahve liability coverage.
UM only applies if the other driver is legally liable and in 3 situations: uninsured drivers, hit and run drivers, and if the other drivers insurance company is insolvent |
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Term
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Definition
Damage to your auto: 2 optional coverages are provided under part d: collision loss and other than collision loss (formerly call comprehensive)
Collision claims are paid w/o regard to fault. If another party is responsible, you can collect from him/her, or from your own insurer.
Other than collision is an all risk coverage for otherphysical damage to your vehicle. Note contact with a bird or animal is not a collision.
Part D provides loss of use in the form of transportation expenses. Up to 20 per day is available subject to a 600 aggregate limit. 48 hour waiting period for theft and 24 for other losses.
Exclusions: mechanical breakdown losses and wear and tear. Also excluded are losses to sound equipment not permanently installed. Custom furnishing and equipment arent covered.
Sometimes car purchasers are upside down on a car loan (owe more than its worth)so gap insurance can be purchased to pay the difference between amount owed and loss settlement. |
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Term
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Definition
| Duties after a loss: Determine if there are injuries requiring medical care. IF there are injuries or property damage, call the police. A police report and a camera may protect your interest at al ater date. Exchange info with other driver and call your agent. Do not admit fault. Cooperate with your insurer in teh claims process. |
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Term
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Definition
General Provisions: coverage applies in US and Canada but not mexico
termination provisions spell out the insurers and insureds rights with respect to cancellation, nonrenewal, and auto termination . |
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Term
| Auto insurance and society |
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Definition
| Compensating AUTo accident victims: financial responsibility laws, compulsory insurance laws, unsatisfied judgement funds, uninsured motorists coverage, no pay no play laws (if you dont have iability insurance you cant collect), no fault auto insurance(Insured is indemnified for losses by own insurance company. Premise is to reduce premiums by lower litigation) |
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Term
| Auto insurance for high risk drivers |
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Definition
| Residual market mechanisms: assigned risk plans (aka auto insurance plans), joint underwriting associations. |
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Term
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Definition
| rating factors: territory, age gender and marital status, type and use of vehicle, discounts such as drivers edd accident free etc, driving record, insurance score such which is several variables including credit score) |
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Term
| Shopping for auto insurance |
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Definition
Most importantly: purchase enough liability insurance to qualify for umbrella policy.
cary adequate liability coverage
carry higher deductibles
drop collision coverage on older cars
shop around for coverage
take advantage of discounts
improve your driving record
maintain good credit |
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Term
| Thoughts for purchasing insurance |
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Definition
| Insure for the large loss, dont risk a lot for a little, dont risk more than you can afford to lose, remember to use loss control, unsure against possible loss of earnings, property losses have an upper bound and liability losses dont so plan accordingly |
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Term
| Why is insurance regulated |
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Definition
maintain insurer solvency
protect consumers
ensure reasonable rates
make sure coverage is available |
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Term
| Historical development of insurance regulation |
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Definition
Paul v Virginia: a VA insurance agent who represented a NY insurer was fined for selling insurance without a license. He agrued VA could not fine him cuz insurance was interstate commerce and federally regulated. The supremes disagreed
South easter underwriters association case: a rating bureau was found guilty of price fixing and violating the sherman antitrust act
Mccarran ferguson act act of congress affirming the right of state to be primary regulatos of insurance. States should regulate until fed needs to steop in |
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Term
| Methods of regulating insurance |
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Definition
| Principal methods: legislation, courts, state insurance departments. |
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Term
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Definition
Twisting is lying to get consumer to purchase new policy
Rebating is a financial incentive to sell insurance |
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