Term
| Risk - define and types(3) and characteristics of last(A-E) |
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Definition
Define:the uncertainty that a financial risk will occur (as it pertains to insurance)
Types:
1) Speculative: chance of gain and loss
2) Pure: chance of loss only
3) Insurable: one that an insurance company is willing to accept
A. Low probability of loss occurring
B. Less than catastrophic results
C. The loss must be measurable
D. The loss must be significant (more than a minimum -- why we have deductibles)
E. The loss must be accidental and unintended |
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Term
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Definition
| Probability-chance of an event occurring. It is the measure of uncertainty. Uncertainty is highest when probability is 50% |
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Term
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Definition
| Done by consumers - the tendency of people with a higher than normal probability of having a loss to buy and maintain insurance coverage. This removes the randomness from probability and changes it against the company. Insurers attempt to prevent adverse selection. (Underwriters) |
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Term
| Methods of handling risk (3) |
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Definition
Retention - individual maintains loss (or Ex: deductible)
Transfer: shift responsibility to insurance company
Control or reduce: attempt to prevent or reduce loss. Ex:seatbelt |
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Term
| Perils and Hazards (define) |
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Definition
Peril: What actually caused the loss
Hazard: increases chance of loss occurring |
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Term
Purpose of Property and Casualty Insurance and the fundamental idea
Principle of Indemnity (define) |
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Definition
restore the insured to the point it was before the loss (without gain).
F.I. - Principle of Indemnity - attempts to pay only what is lost
Property: indemnifies a person or business with an interest in the physcial integrity of tangible propery for its loss or the loss of income produced by that property.
Casualty: provides protection to meet the unexpected costs imposed by law due to acts that have caused bodily injury or property damage to another individual. Included:Auto, Crime, Surety Bonds, Workers Comp |
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Term
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Definition
Private or Voluntary- Individuals seek coverage
Social Insurance - Govnmt requires or provides (Ex: NC Auto reinsurance facility)
Reinsurance - Insurance companies sell off portions of a policy |
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Term
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Definition
Capital Stock Companies - make profit - owned by shareholders - Board of Directors -(taxable dividend)
Mutual Companies - non-profit - owned by policyholders(non-taxible dividend)
Reciprocal (Assessment) - non-incorporated associations. each policy holder is insured by all other policy holders
- managed by: Attorney-in-Fact
- AIF can: access policyholders for more premium |
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Term
| Classification of Insurance companies by location |
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Definition
Domestic - in NC
Foreign - state outside NC
Alien - outside country |
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Term
OE:
Admitted or Authorized Companies by.. |
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Definition
| company recieving a "Certificate of Authority" (Agents cannot place coverage with non-admitted companies) |
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Term
| Types of Producers and their authority |
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Definition
1. Agents- are reps of insurer. (The compnay) Must be licensed. Operate on behalf by agency contract and appointment
1. Having Binding authority
2. An agent may also be "captive" or "exclusive" in that the agency contract may require that the agent represent only that company.
2. Brokers - representatives of the insured (consumer). "Shop the market"
1. Must have a valid agents license
2. Must post a bond of not less than $15,000
2. Brokers |
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Term
OE:
Fiduciary (define and duties) |
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Definition
relationship that is developed when an individual places trust in someone to perform certain duties or actions. Agents duties to company:
A. Loyalty
B. Obedience
C. Use of reasonable care
D. Accurate accounting
E. Communication of information held by the agent to the company
Errors and Omission Insurance helps protect the agent of negligence |
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Term
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Definition
quality control department. selects those applications that the company wishes to insure using standards established by THE COMPANY but always guarding against adverse selection.
Loss Ration = claims/premiums
Loss Ration + Expense Ratios determine whether company has had underwriting loss or profit |
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Term
| Principles of Contracts (4) |
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Definition
1. Offer and Acceptance(Agreement)
2. Consideration - exchange of something of value
3. Legal Object - can't be illegal
4. Competent parties (Can't be minors: 18+, the mentally infirm, under the influence) |
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Term
| Parts of Insurance Contract |
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Definition
DICE+
1)Dec Page - parties, term, amount of insurance purchased, amount of premium, object or person insured
2)Insuring Agreements (Insuring Clause) - heart of the contract. Perils and insurers responsibilities to pay claims
3) Conditions: provisions & stipulations. Rules of contract (Ex: payment of premium, providing proof of loss, etc)
4) Exclusions: perils not covered
5) Endorsements (Optional)- can add or take away |
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Term
| Legal Characteristics of a contract: Unilateral |
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Definition
| contract can only be enforced by consumer, not by the company |
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Term
| Legal Characteristics of a contract: Adhesion |
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Definition
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Term
| Legal Characteristics of a contract: Waiver |
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Definition
| written voluntary abandonment right or advantage |
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Term
| Legal Characteristics of a contract: Representations |
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Definition
| statements made with utmost good faith but NOT GUARANTEED |
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Term
| Legal Characteristics of a contract: Warranties |
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Definition
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Term
| Legal Characteristics of a contract: Misrepresentation |
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Definition
| Simply a lie of material info. Defraud |
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Term
| Legal Characteristics of a contract: Concealment |
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Definition
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Term
| Legal Characteristics of a contract: Named Insured |
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Definition
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Term
OE:
Commissioner of Insurance /what he can do (8) |
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Definition
Voters of the State elect on a 4-year term of office as a member of the Council of State(Governor fills between terms)
1. Issue subpoenas/administer oaths (Commissioner or Deputy)
Institute Civil actions/criminal prosecutions through Attorney General. Issue regulations that are necessary to carry out the insurance laws of this State.
2. Monitor financial stability of companies through annual review
3. Provide assurances that companies and agents are competent to coduct business.
4. Regulate unfair trade and claims practices(Adjusters)
5. Approve rates and forms(types) for insurance. DOI - make available for public inspection the rates and deviations for residential and non-fleet(personal) automobile coverage.
6. 10 days prior written notice for examination/hearing. Arrest by warrant if evidence of criminal violation.
7. Suspend agent/adjuster license. (Revocation after hearing)
8. Class H felony - any person who intends to deceive or defraud insurer |
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Term
| Insurance Companies must keep records for.. |
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Definition
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Term
| When a proof of loss form is required the insuring company must provide the form within.. |
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Definition
| 15 days (if not provided, the insured may submit the proof of loss with any written document) -- T.P. example |
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Term
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Definition
| misrepresentation of a policy's terms and values to induce a lapse or replacement of an existing contract. (Consumer doesn't have the information they need to make a good decision). |
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Term
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Definition
| any VALUABLE consideration, not specified in the contract, which is offered as an inducement to purchase insurance. (Can say I'll take you to lunch to talk about policy but can't say I'll only buy if you pay)This is ILLEGAL |
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Term
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Definition
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Term
| Adverse Underwriting Decision is when: |
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Definition
1) an application has been rejected
2) an existing policy has been terminated or coverage has been placed with a residual market mechanism
3) Failure to place coverage with a company requested
4) Charging higher rates based on information that differs from that supplied by the insured
(Charging higher premium based on increased hazard is not a AUD) |
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Term
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Definition
| Individual doesn't reveal their identity or pose as someone else to obtain information |
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Term
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Definition
1. Notice of Information Practices {what and from whom info is collected. dispute). Public- with policy. Not public - prior
2. Disclosure Authorization Form - obtain/release info. Max effective time:12 months |
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Term
| Direct Loss vs Indirect Loss |
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Definition
Direct Loss: actual monetary loss caused by physical damage to or destruction of property
Indirect loss: results as a consequence of a direct loss. Involves a loss of revenues or extra expenses that result from physical damage or destruction of property. Ex: loss of profit due to merchandise being destroyed in a fire. |
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Term
| Named Peril vs Open Peril |
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Definition
Named: provides coverage for those identified in policy
Open: provides coverage for everything unless specifically excluded from the coverage |
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Term
| Insurable Interest(5) 5?? |
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Definition
1. Face personal financial loss
2. Have a legitimate interst(Owner, mortgagee, leaseholder, etc)
**3**. Must exist at time of loss
4. Not gain economically from loss. Ex: Business partners earn 75%/25% 25% owner can only get 25% of insurance
5. Trasfer of the right ro receive policy benefits to another individual is not binding until the insurer becomes a party to the change. |
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Term
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Definition
Standard Fire Policy-
Named Peril insuring against direct losses:
1. Fire - visible light
2. Lightening
3. Removal - to protect from further damage (up to 5 days under open peril)
AND Proximate Cause |
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Term
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Definition
| Fire - no coverage if friendly fire |
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Term
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Definition
| extends to direct damage covered by an unnamed peril when the proximate cause of the damage was a covered peril. Ex: an explosion caused by a fire |
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Term
| SFP Provision - Cancellation |
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Definition
Cancellation -
Insured canceled - unearned premium returned on a short-rate basis
Insurer canceled -
named insured - 5days,
mortagee - 10days
- unearned premium returned on a pro-rate bases |
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Term
| SFP Provision - Mortgagee (Loss Payee) |
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Definition
| 3. Mortgagee (Loss Payee) Rights - (banks can submit a proof of loss if insured failed to do so) 60days from time company requests(unless extended) |
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Term
| SFP Provisions - Pro-rata Liability (and Define Concurrency) |
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Definition
more than one policy covering same property - Divides up proportionatly regardless whether the other insurance was collectible or concurrent.
Concurrency - covering the same property against the same perils |
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Term
| SFP Provisions - Concealment and Fraud |
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Definition
| Protects insurer from willful misrepresentations by the insured. Policy can become null and void. But Mortgagee still covered until required 10 day advanced cancellation notice |
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Term
| SFP Provision - Legal Action |
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Definition
| against the company could not be initiated after 3 years from date of loss |
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Term
| SFP Provisions - Subrogation |
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Definition
| Allows insurance company to collect $ from a negligent third party. (third party started the fire but the insured got money from the insurer -- so the insurer has rights to collect that money from the third party) |
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Term
| SFP Provisions - Abandonment |
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Definition
| Says insured can't abandon their PARTIALLY damaged property to the insurance company in order to claim TOTAL loss |
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Term
| Inception and Expiration dates |
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Definition
| 12:01 AM where the property is located. So if policy is in East coast, and car is in west coast, at 11:50pm Western time(2:30am Eastern time), it is still covered. |
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Term
| Settlement of a claim (4 ways) |
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Definition
Actual Cash Value (ACV):todays replacement cost - depreciation.
Ie 20 years roofing shingles, 10 yrs later damage, ACV is 50% of new shingles
2. Insurer could repair, rebuild, or replace damaged property - If this is done, Insured has to be notified within 30days of the proof of loss being submitted (This usually cost less for Insurance Companies b/c contrators etc will cut a deal for more business)
3. Insurer takes possession of the property at an agreed value (Salvage Value).- If this is done, Insured has to be notified within 30days of the proof of loss being submitted
4. Total loss - settlement cannot exceed the face value of the policy regardless of the actual amount of loss. |
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Term
| SFP Modification to Claims Settlement -Appraisal Method |
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Definition
Each party hires appraiser,
3rd party "Umpire" 50%/50%
2 must agree. (Umpire with either one) |
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Term
| Extended Covereage Endorsement (EC) |
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Definition
WHARVES
wind - exterior damage
hail - exterior damage
aircraft
riots/civil commotion
vehicles
explosions - Interior Source
smoke- Interior Source |
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Term
| When an adverse underwriting decision has taken place, the Privacy act establishes responsiblities.. |
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Definition
| Provide reasons if written request submitted within 90days, the company has 21 days to respond, the person has 30 days to dispute |
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Term
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Definition
| any broadening of coverage requiring no additional premium that takes place during or 60 days before coverage period. If new policy owners are given benefits at no additional cost, the current policy owner will be liberalized to get these benefits. |
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Term
| Are indirect losses subject to deductible |
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Definition
| NOOO b/c it's already taken out of the direct loss |
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Term
OE:
H.O. coverage C limits for loss by theft |
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Definition
25% of loss by theft for pewterware, plated goldware, and silverware
10% of loss by theft for guns and related equipment
increased limits by "mandatory Special Provisions Endorsements" |
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Term
OE:
All liability insurance provides |
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Definition
| supplementary payments - Cost to defend. Paid in addition to the limit. |
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Term
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Definition
| Liability is never subject to a deductile |
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Term
| Flood insurance policies become effective __ days after receipt of coverage |
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Definition
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Term
OE:
Postassesment insurance guaranty association |
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Definition
| all admitted companies that write DIRECT loss property coverage. Meant to provide public confedence in insurance company. (Pays if a company goes bankrupt) |
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Term
| OE:Max limits reinsured by the Facility |
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Definition
Max limits reinsured by the Facility are 100/300/50 (reduced max liability)
UM/UIM not reduced |
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Term
| OE:Business Income Coverage Form: Co-Insurance |
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Definition
Consequentail (indirect) loss: Co-Insurance
Total Net income(of the CURRENT year) x co-insurance percentage (may be as low as 50%) |
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Term
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Definition
1-30 days - 40%
31-60days - 80%
61+ - 100% |
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Term
| OE: Extra Expense Coverage Form |
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Definition
| pays for extra expenses to continue at another location (incrementally). Not subject to co-insurance. |
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Term
| OE: Monthly Limit of Indemnity |
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Definition
| 1/3, 1/4, 1/6 - If 1/4 limit of $100,000, max is 25,000 per month |
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Term
| Geographic dispersion(Define) |
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Definition
| "spread of risk" - spreading exposed units over a large area in order to avoid high losses |
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Term
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Definition
| Insurance is a plan of spreading risk of possible loss over a large number of people. It is based on a mathematical principle called the Law of Large Numbers. Insurance protects against the uncertainty(risk) of when a financial loss might occur |
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Term
| Law of Large Numbers (define) |
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Definition
Law of Large Numbers - the mathematical principal that makes it possible to predict future losses based on prior experiences. The law states that as a large number of events are included, the difference between actual and expected results become smaller. Insurance relies upon the past results of a large population of similar people to predict future loss experience.
Insurance uses both Probability and LOLN to determine rates |
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Term
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Definition
Binder: A premium receipt that acts as temporary evidence that insurance is in effect without condition. Provides coverage until the policy arrives
Agents are given "Binding" authority |
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Term
| Errors & Omissions Insurance (E&O) |
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Definition
| Insurance AGENTS can purchase to protect themselves in cases of negligence |
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Term
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Definition
| Cost sharing clauses can be included in insurance contracts only if the policy prominetly displays this notice |
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Term
Communication to the Commissioner
1. Of Name change
2. Of Address change
3. Of Appointment cancellations |
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Definition
1. Of Name change - 30days
2. Of Address change - 10 days
3. Of Appointment cancellations - 30 days |
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Term
| Unfair Trade Practices Act (7) and Commissioners actions against |
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Definition
1. Misrepresentation or False Advertising Policies
2. Defamation - false or derogatory statement intended to injure another party
3. Boycotting, Coercion, and Intimidation (Constraining consumer to make certain actions)
4. Filing False financial statements or false entries in record books
5. Unfair Discrimination btw individuals with similar exposures and hazards.
6. Rebating
7. Misuse of Confidential Information.
Commissioner can investigate. 10 days prior notice to hearings. Commissioner can issue in writing a Cease and Desist |
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Term
| Insurace Information and Privacy Protection Act (define, definitions and requirements) |
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Definition
NAIC proposed a model privacy law that has been adopted by all states.
Definitions:
1. Adverse Underwriting Decision
2. Pretext Interviews
Requirements: Execution and/or delivery of 2 documents prior to collection and use of confidential information:
1. The Notice of Information Practices: summarizes the applicant's right to know what information was gathered, from whom and rights to dispute. Not public = before the policy
2. the Disclosure Authorization Form: grants permission for the insurance company to obtain and/or release specified information from specified "persons". The maximum effective time period for this authorization in property and casualty insurance is 12 months
1. |
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Term
| OE: Insurance and Information and Privacy Protection Act: Responsibilities when an Adverse Underwriting decision has take place.. |
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Definition
| 1.Provide reasons for decision OR availability of reasons upon written request. (90 days for person, 21 days for company to respond with reasons, 30 days to dispute information) Dolly Parton 90-21-30. |
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Term
| Insurance Information and Privacy Protection Act - Power of the Commissioner |
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Definition
| may investigate alleged violations. may hold a hearing after 10 days prior written notice to all policies. may subpoena companies, agetns, and insurance support organizations. The law also allows the applicant to be heard at this hearing and may be with a lawyer. |
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Term
| SFP Duties of the Insured (5) |
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Definition
1. Protect the property from further damage
2. Give the insurer prompt notice of the loss
3. Submit a signed statement of loss within 60 days
4. Allow the insurance company to inspect the property
5. Cooperate in the investigation including questioning under oath |
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Term
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Definition
1. accounts, bills, currency,deeds, evidence of debt, money or securities
2. Acts of war
3. Losses due to failure to protect from further damage(Tarp example)
4. Civil Authority losses - condemnation of property by a gvmnt body
5. Increase in hazard. Ex - installation of a luncheon grill in a gift shop.
6. When a building became vacant or unoccupied coverage was suspended 60 days later. Vacant - neither contents or tenants (empty) Unoccupied - contents but no tenants. |
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Term
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Definition
Vandalism and Malicious Mischief - Only if EC is included. VMM coverage suspended if the property was vacant for 30 consecutive days.
DOES NOT COVER GLASS, THEFT OF PROPERTY, BURGLARY, OR LARCENY |
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Term
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Definition
| Endorsement added to the STP that covered accidental leakage or discharge of a sprinkler system. Misoperation or malfunction of a system. |
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Term
| Pro-rata liability vs Pro-rata distribution |
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Definition
Pro-rata Liability - when more than one policy insures the same property
Pro-rata Distribution - when more than one property is insured by the same policy |
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Term
| STP rate for property insurance |
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Definition
| is based upon cost per $100.00 of insurnace coverage (/$100) |
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Term
| Purpose of ISO and the Rate Bureau as it protains to the STP |
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Definition
| is to develop and standardize insurance coverage forms. |
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Term
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Definition
Basic Form - DP-1
1. no minimum size policy.
2. Name Peril
- SFP
- EC
- VMM
- Volcanic Eruption (airborne only) |
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Term
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Definition
Broad Form - DP-2
1. minimum policy:
$12,000 on dwelling
$4,000 when written for personal property (contents) only
2. Name Peril
- SFP
- EC (includes vehicles owned or operated by the named insured or a resident of the household)
- VMM
- Volcanic Eruption (airborne only)
- DAMAGE done by burglars,
- falling objects
- weight of ice, sleet or snow
- sudden and accidental Water Damage
- power surge
- collapse
- VMM |
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Term
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Definition
Special Form - DP-3
1. minimum policy:
$15,000 on dwelling
2. Open Peril on dwelling
Broad-Formed Named Peril on contents |
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Term
| Burn in the brain statements (4) |
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Definition
1. "Special" form is always OPEN peril
2. An indirect loss is never subject to a deductible (b/c the deductible is already taken out of the direct loss)
3. All liability insurance provides Supplementary payments (pay the cost to defend)
4. Liability insurance is never subject to a deductible |
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Term
| Coverage Parts of Dwelling Policies |
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Definition
A. Dwelling
B. Other Structures (10% of A)
C. Personal Property/Contents. Limit purchased separately.
D. Fair Rental Value (10% of A)
E. Additional Living Expenses (ALE) Available on DP-2 and DP-3. And can be added by endorsement on DP-1 |
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Term
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Definition
--detached building or only connected by a non-combustible material
--In DP-1 Coverage B reduces the Coverage A limit by the amount paid for the same loss. DP-2 and DP-3
--Not included: structures used for commercial, manufacturing or farm purposes. |
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Term
| Dwelling Policy - Coverage C |
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Definition
-includes household and personal property
- also covers property in the care of an insured (borrowed lawn mower)
- Guests/servants can be added (if asked for)
- Purchases on a need be basis
- Excluded:
-pets,
-aircraft,
-motor vehicles other than for maintenance of the premises (lawn mower)
-boats (other than rowboats and canoes)
*Unrelated person living together will not cover property |
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Term
| Dwelling policy - Coverage D |
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Definition
Fair Rental Value
-indirect loss coverage for loss of rental income and payment for ongoing expenses (Ex: Energy)
- Single Limit DP-1
- DP-1 may not exceed 1/12 of the 10% Coverage A EACH MONTH.
- Rental value is payable even if the dwelling is not rented at the time of loss. |
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Term
| Dwelling Policy - Coverage E |
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Definition
Additional Living Expenses (ALE)
- in DP-2 & DP-3 (added by endorsement in DP-1)
- When a dwelling is occupied by the insured instead of when it is rental property. |
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Term
| Dwelling Policy - Civil Authority prohibits use of the insured policy |
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Definition
| b/c a peril insured against has damaged a neighboring location, dwelling forms limit payments under Coverage D and E to a maximum period of TWO WEEKs |
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Term
| Personal Liability and Theft Coverage(2) |
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Definition
Each must add by endorsement
Theft:
1) Broad Theft Coverage - used for owner-occupied dwellings and covers both on premises and off premises theft
2) Limited Theft Coverage - non-owner-occupied dwellings and only covers on premises theft
Personal Liability:
- Can get if owner-occupied property only
- Minimum limit of liability $100,000 per occurrence and $1000 per person medical payments coverage to others.
(renter has to get through commercial program) |
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Term
| Dwelling Program Eligibility |
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Definition
1)
--All dwelling (except farm dwelling) containing no more than four apartments or families and
-- dwellings containing five or fewer roomers or boarders
2)Certain business occupancies are permitted if they provide a SERVICE rather than sales (Beauty parlor, in-home office, studio or a private school for piano lessons) |
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Term
| Dwelling Policy - Persons Insured |
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Definition
| are the named insured as well as all members of the insured's family living at the named location. If the named insured dies, coverage will continue for the name insured's representative. |
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Term
| Dwelling policy deductibles |
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Definition
will apply on a per occurrence basis for each incident causing a loss.
- Do not apply to D and/or E (indirect loss)
- The standard deductible is $250 but changes are allowed |
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Term
Dwelling Policy - Coverage Extensions(Additional Coverage) (8)
1 - Removal
2 - Debris
3 - Personal property
4 - Repairs
5 - Trees
6 - Collapse
7 - Glass
8 - Fire Department Services |
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Definition
1. Coverage for removed property
DP-1: 5 days
DP-2 & DP-3: 30 days
2. Debris removal is provided but NOT as an ADDITIONAL amount of insurance.
3. Personal property of an insured is covered worldwide up to 10% of the amount payable under Coverage C (@Epcot, will still cover 10% of shoes damaged)
4. Cost of reasonable temporary repairs to protect the property is covered but NOT as an additional amount of insurance.
5. Coverage for trees, shrubs and plants is provided for DP-2 & DP-3 ONLY. The limit is $500 per tree, shrub or plant up to 5% of the Coverage A limit. Only covered by: fire, lightning, explosion, riot or civil commotion, aircraft, vehicles not owned or operated by an insured or VMM. NOT COVERED: wind, hail or weight of ice, sleet and snow.
6. Collapse of a building:
Provided in DP-2 and DP-3 - termites, weight of contents/water on roof, decay, defective building material
7. Breakage of glass or safety glazing material IS provided in the DP-2 and DP-3
8. $500 max is provided for the Fire Department Services charges |
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Term
Dwelling Policy exclusions (10)
1. Damage by a vehicle |
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Definition
1. Damage caused by a vehicle operated by an insured person in DP-1 ONLY
2. Structures used for manufacturing or farming purposes
3. Accounts, money, deeds, bullion(metal) or securities.
4. Losses caused by power failure or law ordinance (such as condemnation of property)
5. Losses caused by failure to protect property from further damage (blue tarp ex)
6. Loss caused by the cancellation of a lease (deals with Coverage D)
7. Losses caused by vandalism, by burglary and water overflow when the property has been vacant for 60 days. Also suspended is all coverage for glass, theft and attempted theft. This is longer than the SFP)
8. Smoke from the dwelling fireplace (friendly fire), agricultural smudging or industrial operations (outside source).
9. Explosion of a boiler or steam pipe
10. Earthquake, earth movement or volcanic eruption (landborne damage) |
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Term
| Dwelling Policy - Claims Settlement |
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Definition
see notes
Motivates people to insure adequately (Co-insurance is the same way)
DP-1 - ACV
DP-2 & DP-3
- Structure:
--Partial loss:
---<80%: ACV
--->=80%: replacement cost
-- Total loss: limit of Insurance
- Content: ACV (or add "Personal Property Replacement Cost Coverage" by endorsement to get replacement cost for personal property other than fine art, memorabilia, collector items, antiques) |
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Term
Dwelling Policies Other Items (3)
1 Cancellation |
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Definition
1. Cancellation -
- First 60 days of coverage: 10 days notice
- After 60 days of coverage:
- 10 days for nonpayment of premium
- 30 days for any other reason
2. Can contain standard provisions regarding abandonment, subrogation, assignment, appraisal, increase in hazard, fraud, etc.
3. Liberalization applies to the any broadening of coverage requiring no additional premium that takes place during or 60 days before the coverage period |
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Term
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Definition
| If a new policy owner is given benefits, at no additional cost, the current policy owner will be "liberalized" to get these benefits. |
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Term
| Homeowners policies may be issued to... |
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Definition
| Homeowners policies may be issued to the OWNER-OCCUPANT(s) of a 1, 2, 3, or 4 family dwelling that is used for private residential purposes. |
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Term
| Homeowners is a single or multi-line policy? |
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Definition
Multi-line policy in that both personal property and liability coverage are provided in the same policy. (2 sections)
Section I - Property Coverage
Section II - liability Coverage (same in all HO forms) |
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Term
| Homeowners forms available under the HO-2000 Program are (and minimums & perils): |
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Definition
see notes!!
HO-2 "Broad Form" $25,000 min
--same as Broad Form DP-2 & adds theft
HO-3 "Special Form" $25,000 min dwelling
-- same as DP-3 (open on A&B. C is broad formed named)
HO-4 "Contents Form" $6,000 on personal property and provides only contents coverage (Renters insurance) Primary Coverage in C
HO-5 "Comprehensive Form" $25,000 min
-- Open Peril on A, B & C
HO-6 "Unit-Owners" (Condo's) $10,000 min on personal property (Coverage C) and is similar to HO-4 in that the primary purpose is to provide contents coverage for condo owners whose major exposure is contents and not the building. Covers $1,000 flat amount of structure coverage (Coverage A) to cover improvements and betterments or additions and alterations made to the unit. |
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Term
| Homeowners Insurance: Section I Coverage Parts |
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Definition
Coverage A: Dwelling. Not available in HO-4. $1,000 flat amount in HO-6. Primary for HO-2, HO-3 and HO-5
Coverage B: Other Structures: (10% of A) Not available on HO-4 & HO-6
Coverage C: Contents/Personal Property: (50% of A on HO-2, HO-3 and HO-5). "C" is the primary in HO-4 & HO-6.
Coverage D: Loss of Use (A.L.E):
20% of A on HO-2, HO-3 and HO-5
20% of C on HO-4
40% of C on HO-6 |
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Term
| Homeowners - Features of the Coverage Parts - Coverage A |
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Definition
| Dwelling structure - must be on HO-2, HO-3, and HO-5. Insures the structure and equipment/fixtures PERMANENTLY affixed pertaining to the service of the structure such as heat pumps, cabinets, central air conditioning, etc. In addition, materials and supplies to be used for the repair, construction or alteration of the dwelling are covered except for theft losses. |
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Term
| Homeowners - Features of the Coverage Parts - Coverage B |
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Definition
| Other structures: garages, detached buildings. or attached only by non-combustible material. Amounts payable will be in addition to the Coverage A limits. If 10% of Coverage A is not enough, more can be purchased. |
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Term
Homeowners - Features of the Coverage Parts - Coverage C ON EXAM!
A: Money, bank notes, bullion, gold other than goldware, silver other than silverware, platinum other than platinumware and medals
B. Securities, accounts, deeds, evidence of debt, letters of credit, notes other than bank notes, personal records, tickets, stamps, and manuscripts
C watercraft, including trailers, furnishings, equipment and outboard motors. (Wind or hail losses are not covered unless the watercraft is inside a fully enclosed building and theft coverage is restricted to on-premises only) (doesn't restrict kind of boat)
D. trailers not used with watercraft.
E. 1)--Property on premises used primarily for business purposes
2)--property away from the premises used primarily for business purposes
F. Loss by theft of jewelry, watches, furs, precious and semi-precious stones
***G.***
1)Loss by theft of pewterware, plated goldware and silverware
2) Loss by theft of guns and related equipment
H. loss to electronic apparatus used personally while it is in or on a motor vehicle |
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Definition
Personal property/contents
A - $200
B - $1,500
C - $1,500
D - $1,500. Theft - on-premises only
E 1) $2,500
2) $500
F $1,500
G 1) 25% Coverage C limits to a max of $10,000
2) 10% Coverage C limits to a max of $10,000
"mandatory Special Provisions Endorsement"
Scheduled Personal Property Endorsement can be added to cover personal property in excess of these limits.
H. $1,500 |
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Term
| Homeowners - Features of the Coverage Parts - Content/Personal property - loss of a pair, set or parts: |
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Definition
| insurer may repair any part to restore the pair or set to its value before the loss or pay the difference btwn the value of the pair or set before and after the loss. |
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Term
| Homeowners - Features of the Coverage Parts - Coverage D |
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Definition
A.L.E
Includes temp living arrangements, laundry services, restaurant charges, etc.
Also includes coverage for rental value and prohibited use (up to two weeks). Payments will be made until the premises is repaired or replaced and payments are not limited by policy's expiration. This coverage is also additional insurance in all HO forms. |
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Term
Homeowners Policy - Coverage Extensions(Additional Coverage) (8)
1 - Debris Removal
2 - Removal of Trees (if damage to covered structure)
3 - Moved property coverage
4 - Trees, shrubs and plants
5 - Fire department service charge
6 - Theft or unauthorized use of credit cards or electronic fund transfer cards, loss caused by forgery of any check or the acceptance in good faith of counterfeit paper currency
7 - HO-4, additions and alterations
8 - reasonable, temporary repairs to protect the premises
9 - Commonly owned property
10 Collapse
11 - Breakage
12 - Landlord Furnishings
13 - Ordinance or Law
14 - Grave markers |
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Definition
1 - Up to a maximum of an additional 5% of the Coverage A limits.
2 - UP TO $500 to remove any/all fallen trees that damage a covered structure. Covered: wind, hail, weight of ice, sleet or snow, or a neighbor's tree felled by a peril that is covered under Coverage C.
3 - for a max of 30 days if moved to protect from further damage
4 - $500 per item up to 5% the Coverage A limit. Perils: fire, lightening, explosion, riot or civil commotion, aircraft, vehicles not owned or operated by an insured, VMM or theft. WIND NOT COVERED UNLESS DAMAGE TO STRUCTURE.
5 - Max $500
6 - Up to $500
7 - are covered for an additional 10% of the Coverage C limits (max $1000)
8 - Cost of reimbursement (blue tarp)
9 - max $1000
11 - of glass or safety material
12 - HO-2, HO-3, HO-5 provide up to $2,500 for appliances, carpeting and other household furnishings in a apt or a residence premises that is regularly rented or held for rental, however theft losses are excluded.
13 - 10% of Coverage A limit may be used to pay for certain increased costs of construction incurred due to the enforcement of an ordinance or law
14. $5,000 for grave markers whether they are on or away from the residence premises |
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Term
| Homeowners Policy Exclusions found in Section I include (9) |
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Definition
1. Structures used for business
2. Pets and aircraft
3. Losses caused by the failure of the insured to protect the property.
4. Losses to motorized vehicles (except those used for maintenance of the premises) including their accessories. Sound or video equipment, tapes or discs operating within a vehicle unless using a portable electronic apparatus ($1500 max)
5. Losses caused by power failure away from the insured premises.
6. Water that backs up through sewers or drains (outside)
7. Property of roomers and boarders who are unrelated to the insured
8. Flood
9. Loss by earth movement |
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Term
| Homeowners Claims Settlement |
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Definition
Same as Dwelling for Structure:(<80%:ACV. >=80%:Replacement Cost)
Personal property: ACV unless Personal Property Replacement Cost endorsement is purchased (available for all HO policies) Insurer will only pay up to $500 until actual repair or replacement.
Functional Replacement cost - ornate woodwork replaced with something of like kind and quality. 8track tape player replaced with CD player. etc |
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Term
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Definition
| apply per occurrence basis for Section I losses only. Section II is NOT subject to deductibles. The standard is $250 although changes are allowed. |
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Term
| Homeowner Policy Section II |
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Definition
Coverage E - Personal Liability
Coverage F - Medical Payments to Others |
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Term
| Homeowner Policy Coverage E |
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Definition
Personal Liability
- pays bc bodily injury or property damage arising out of an insured's premises or their personal activities (park playing ball, break someone's nose).
Also includes vicarious liability (ex: dog)
Also pays the cost to defend the insured against law suits (Supplementary Payments) and are not subject to limits. $100,000 min limit per occurrence for B.I. or P.D.
Paid in addition to the limit. |
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Term
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Definition
| because of certain relationships, an insured becomes legally responsible for actions of others (ex.. kids, dogs) |
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Term
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Definition
| The cost to defend. (includes things like parking deck fees) |
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Term
| Homeowners Features of Coverage Parts - Coverage F |
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Definition
Medical Payments - "Med Pay".
- covers B.I. ("First aid expense")
- expenses must be incurred within 3 years of the accident
- Base, min limit $1,000
- "No-fault" coverage
- helps minimize the insured being sued |
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Term
Homeowners Section II Coverage Extensions (Additional Coverages) (3)
1. Loss assessment for BI or PD that arise out of commonly owned property limit is?
2. Liability using a golf cart and Boats
3. Property damage to others |
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Definition
1. $1000
2. Golf cart on golf course ONLY
Boats:
-Rented inboard <50HP (Jet ski)
-Owned/Rented Outboard Motorboat <25 HP
-Owned/Rented sail boats <26 ft
3. Property Damage to others property up to $1000. Intentionally by 13+ person EXCLUDED. |
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Term
| Homeowners Section II Coverage Exclusions (5) |
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Definition
1. business engaged -
(Home day care is not covered but part time babysitting job would be covered)
2. transmission of disease
3. sexual molestation, punishment, abuse
4. Sale of controlled substance (Ex Garden)
5. Acts of someone 13+ yrs old |
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Term
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Definition
-restricted to private residential dwellings with no more than two families or two boarders in a 1-family dwelling.
- If an insured has a service business - must be insured by "Permitted Incidental Occupancies Endorsement"
Secondary dwellings eligible under same policy if in same state
Ineligible: farms, business structures, unrelated tenant |
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Term
| HO policy Persons Insured |
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Definition
named insured
spouse (if living together)
Personal Property:
-resident relatives
- students that are relatives and under 24 that lived with prior to school
-Relatives under 21 and in the care of the insured
-Employees at insured location |
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Term
| Homeowners Section II optional Endorsements (5) |
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Definition
1. Personal Injury Liability-loss out of false arrest, detention, slander, invasion of privacy, etc
2. Watercraft Endorsement - those exceeding limits
3. Refrigerated Property Coverage - up to $500 for power failure or unit failure
4. Water Back up and Sump Discharge or Overflow - Up to $5000 for direct loss
5. Business Pursuits - teachers (eliminates the exclusion for insured's business activities) |
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Term
Homeowners Policy: Other Items (3)
1. Standard Provisions
2. Cancellation |
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Definition
same as dwelling policy
1. Subrogation, appraisal, assignment, abandonment, fraud, etc. apply
2. Require:
-1st 60 days of policy:
10 days prior notice
-after 60 days,
30 days notice. |
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Term
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Definition
Two multi-line policy forms:
- MH(C)
- MH(F)
1. Not a H.O. policy
2. Every M.H.O. policy covers flood and earthquake
3. Liability is exactly the same as H.O. insurance. Difference is in property coverage. |
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Term
| National Flood Insurance Program (NFIP) |
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Definition
provides direct loss flood insurance at subsidized rates.
-standards set by FEMA
-rates set by FIA
-limits set by FIA
-eligibility requirements set by FIA
-encourages communities to practice flood control.
Write-Your-Own: allows Insurance companies to write their own (having NRIP as backup-- can't suffer loss but can't keep profit)
Plans: Regular & Emergency
Emergency has must lower limits. Once a community is recognized to have a flood problem, it is eligible for the emergency plan. Once control requirements are met, it is eligible for regular plan.
Deductible (based on zones) applies separately to building loss and contents loss |
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Term
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Definition
1) Dwelling Form - insure residential property w/ no more than four units and the contents of such property. A 10% extension is allowed for appurtenant structures.
2) General Property Form: larger residential structures and all non-residential buildings. |
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Term
| Flood Insurance Coverage- ACV/Replacement cost |
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Definition
Primary Single-family dwellings - Replacement Cost (if insured >80% of value)
All others - ACV |
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Term
ON EXAM
Flood insurance policies become effective |
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Definition
| 30 days after receipt of coverage application and the premium payment |
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Term
| Flood Insurance - Elevation Certificates |
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Definition
| measures lowest floor of home against base elevation for the community - If lowest floor is higher, more favorable flood rates will be used |
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Term
| Flood Insurance - Removal |
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Definition
| 45 days of removal coverage is provided |
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Term
| Watercraft or Yacht coverage |
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Definition
Coverage for private use(not charter, transportation for a fee, etc)
-Hull Insurance: to boat itself (open peril)
-Protection and Indemnity: liability coverage for BI or PD (to others) |
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Term
| Comprehensive Personal Liability |
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Definition
/Family Liability
Identical to Section II of HO |
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Term
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Definition
liability coverage
Divided into Personal(PAP) and Business(BAP) categories |
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Term
PAP developed by?
Definitions:
1) Named Insured
2) Insured
3) A Covered Auto |
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Definition
Developed by NC Rate Bureau
1) Named Insured - individual(s) listed on Dec Page (includes spouse living in same house)
2)Insured - blood relative, relative by marriage, adoption, foster children living in same household, a child away at college. Any person other person using vehicle with named insured's permission
3) Covered Auto: cars, trailer w/ tags, van/truck <10,000lbs, farm utility vehicles, vehicles used as a temporary substitution (other people's vehicles b/c urs in shop) |
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Term
ON EXAM!
PAP Auto Coverage Newly Required Vehicle |
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Definition
Additional - highest limits & broadest coverage within 30 days. After, no coverage provided
Replacement - same as replace vehicle up to 30 days. If not reported within 30 days, looses Comp and Collision (only have liability) |
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Term
PAP Definitions:
4. Non-owned automobile
Temporary substitute automobile |
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Definition
non-owned automobile: borrowing someones car with permission
Temporary Substitute: borrowed car (neighbor, dealership, etc) b/c your car is in the shop |
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Term
PAP Definition
5. Territorial limits |
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Definition
| the geographic areas where coverage applies. U.S. (including Puerto Rico), Canada (b/c Alaska). No coverage in Mexico! And ports in between |
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Term
PAP Definition
6. Negligence
and common defenses (A-C) |
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Definition
type of tort or civil wrong. Failure to do what a prudent person would do.
Common Defenses:
A. Contributory negligence - injured party contributes to their own injury due to own negligence, there is no right to recover damages from the other party.
B. Comparative negligence - will measure the amount of negligence of each party and injured party has no rights to damages = percentage they were negligent
C. Assumption of Risk - individual was aware of risk and chose to expose themselves - no right to recovery (Baseball game) |
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Term
PAP definitions
7. Accident
8. Occurrence |
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Definition
7. Accident - sudden, unforeseen, unintended on-time event at a known place and time
8. continuous or repeated exposure |
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Term
PAP definitons
9. Certificate of Insurance |
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Definition
| document that evidences the existence of insurance coverage. |
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Term
| PAP Coverage Parts (Insuring Agreements) are |
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Definition
A - Liability
B - Medical Payments
C - Uninsured Motorist/Underinsured Motorist
D - Physical Damage
E - Insured Duties
F - General Provisions
A-D is where coverage is |
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Term
PAP Features of the Coverage Parts A
ON EXAM! |
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Definition
see notes - calculation!
Liability Insurance -
pays for BI/PD
Supplementary Payments paid in addition to limits of liability are:
-up to $250 cost of bail bonds
- up to $200 per day lost earnings due to attendance at hearings
3 reasonable expenses at insurers request
Liability - 3rd party coverage:
A min limits: 30/60/25
$30,000 per person B.I.
$60,000 per accident B.I
$25,000 per accident P.D.
"Split limit liability"
or $85,000 single limit |
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Term
| PAP Features of the Coverage Parts. Part B |
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Definition
| Medical Payments - covers named insured, family members or any other person while occupying an insured vehicle. Named insured as pedestrians. Med Pay for HO is 3rd party coverage (for others) Med Pay for Automobile is for YOU & family (1st party). Have to have 4 wheels. |
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Term
| PAP Features of Coverage Parts - Part C |
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Definition
Uninsured Motorist Coverage (UM) - pays the insured's BI and PD (PD is subject to $100 deductible) claim if they are injured by a motorist who has no liability coverage or by a driver whose company is declared insolvent.
Hit and run - BI only and must have physical contact with another vehicle.
Underinsured Motorist (UIM) - pays difference btwn driver's BI liability limit and the insured's UIM limits. |
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Term
PAP Features of Coverage parts Part D
on exam |
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Definition
Physical Damage - Not required
Collision vs OTC (other than collision) (Comprehensive)
PAP pays for collision - colliding with another object or b/c an upset on the roadway.
Hitting an animal is Comprehensive
Claims settle is on ACV
Personal effects limited to $100 (fire and lightening losses only)
Non-owned trailer has $1,500 coverage limit.
Unlimited coverage applies to devices permanently installed by the manufacturer.
Other than the manufacturer: $1000.
(higher limits can be purchased by endorsement) |
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Term
| PAP - Featured parts of the coverage Parts -Part D - Transportation Expenses for theft |
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Definition
Theft - Borrowed or rented car covered if OTC was purchased on policy.
Payment: up to $15 per day or max of $450
2 day waiting period!!
If you rent a car 9 days starting the day your car was stolen, you will only get paid $15 a day for 7 days. |
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Term
| PAP Features of Coverage Parts - Part E |
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Definition
| Insured Duties - prompt notice, cooperating with investigations, defense efforts, submitting proof of loss, promptly notifying police if the vehicle is stolen, hit-and-run and protecting the vehicle from further damage. |
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Term
| PAP - Features of Coverage Parts - Part F |
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Definition
| General Provisions - addresses bankruptcy of insured, legal action, change of premiums for misrepresentations, subrogation, and assignment. Minimum liability still has to be covered for even if there are misrepresentations found (although the insurance company has the right to recover such payments from the insured) |
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Term
| PAP - Features of Coverage Parts - Part F (termination of coverage) |
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Definition
Min Written notification periods for termination:
A. 10 days notice for cancellation of non-liability coverage for any reason
B. 15 days notice for cancellation of liability, med pay, and UM or UM/UIM coverage for non-payment of premium
C. 60 days notification for cancellation of liability, med pay, and UM or UM/UIM coverage bc
- becomes non NC resident
- agent wrote policy terminated for bad reasons
- named insured materially misrepresents the years of driving experience or the driving record of any driver who is a member of the household and customarily uses an insured vehicle. |
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Term
| PAP Features of Coverage Parts - Exclusions A-I |
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Definition
A. Intentionally -still have to cover damage mins
B. Vehicle used to carry people/things for a fee (limo)
C. You stealing a car
D. CD players, Ipads, phones, etc not permanently installed (HO covers these)
E. CDs, Tapes, etc (might be covered under HO if u have a portable player)
F. Normal wear and tear & road damage done to tires
G. War
H Radar detectors
I. Customization that exceeds $1000 |
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Term
| PAP Other Available Coverages - Towing & Labor |
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Definition
| up to $25.00 for towing and labor (no parts) Labor costs must be incurred at the place of disablement |
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Term
| PAP Other Available Coverages - Extended Transportation Expenses |
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Definition
pays benefits when a covered or non-owned auto is out of service for 24 hours (one day waiting period) b/c of Physical damage.NOT THEFT)
Limits $15/day up to $450 max
Can be raised to $30/day up to $900 max |
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Term
| PAP Other Available Coverages - Coverage for damage to your automobile (Customizing Equipment Coverage) |
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Definition
| provides increased coverage limits for customized furnishings or equipment and/or audio, visual and data electronic equipment above that provided in the policy. Cassette/CDs not covered. (These are itemized) |
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Term
| PAP Other Available Coverages - Extended Non-Owned Coverage |
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Definition
broader liability coverage.
1) Company Car
2) Limo (carry for a fee) |
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Term
| Umbrella Liability Policies |
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Definition
businesses or individuals.
1. Pays on an excess basis of primary
2. Doesn't have to have underlying if Self-Insured Retention (SIR)
3. Pay benefit after underlying amount
4. May have broader coverage
Difference:
1. Exposure that are insured
2. can be much higher (millions) |
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Term
| Professional Liability Policies |
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Definition
Service Sector -
- laywers
- accountants
- insurance agents
- etc
Error and Omissions
Doctors - Malpractice Insurance |
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Term
| Property Exam - General Regulations of Business (5) |
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Definition
1. Direct property loss coverage can not be greater than fair market value (need to ask if person has insurance with anyone else)
2. Replacement cost coverage is permitted
3. Max time between renewal periods for property coverage is 7 years (most companies don't do this b/c they want to evaluate)
4. Contracts in excess is binding of the insurer. (Penalties may be imposed by law / and refund of premiums plus interest may be required)
5. Lender may shall accept as proof required property insurance a binder or other temp contract of insurance as long as it has
A. Name/address
B. amount
C. description of collateral and cancelation notice
D. A receipt for payment of 1 year of premium |
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Term
Property Exam - Regulations regarding property insurance policies
(prob not that important) |
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Definition
establish standards for direct loss property coverage marketed in this state
1. Policies must state all conditions of the coverage in the contract. Company rules do not apply unless expressed in the contract.
2. If requested, contracts must show the rate of insurance (Cost per $100), etc. |
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Term
ON EXAM!
Postassessment insurance guaranty association - purpose |
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Definition
avoid losses and delay in the payment of "Covered claims" due to financial impairment of insurers. Maintain public Confidence in the insurance industry.
Cost assessed against the member insurance companies in proportion to the premiums collected. |
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Term
| Postassessment Insurance Guaranty Association applies to all direct loss coverages except |
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Definition
A. Life, Accident and Health insurance
B. Title, Credit, and Mortgage Guaranty insurance
C. Surety
D. Ocean Marine insurance |
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Term
| Postassessment Insurance Guaranty Association maintains three accounts: |
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Definition
A. Automobile insurance
B. Workers Compensation
C. All other coverages subject to the Association |
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Term
ON EXAM
Postassessment Insurance Guaranty Association responsible for "Covered claims". Covered claims are: |
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Definition
A portion of a claim in excess of $50, but less than $300,000. EXCEPT WORKERS COMPENSATION - Workers comp paid in full!
B. Not in excess of the face amount of the policy
C. only claim settlement where insurer insolvency in jeopardy
D. The insured OR the property must reside within NC. |
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Term
| Postassessment Insurance Guaranty Association has the power to |
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Definition
inform Commissioner of insurer that may be suffering financial impairment.
also request Commissioner to exam an insurer
Association pays for the examination |
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Term
| Postassessment Insurance Guaranty Association itself is subject to |
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Definition
examination by the Commissioner
must submit annual financial reports to Commissioner |
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Term
| Essential Property Insurance for Beach Area AKA "Coastal Property Insurance Pool" - purpose |
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Definition
adopted to promote the orderly growth and development of the coastal area.
"NCIUA" NC Insurance Underwriting Association created. |
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Term
| Essential Property Insurance for Beach Area AKA "Coastal Property Insurance Pool" - applies to..? |
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Definition
| All real property east and/or south of the intercoastal waterway and adjoining coastal counties. |
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Term
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Definition
| all ADMITTED companies writing direct loss property insurance. |
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Term
NCIUA is not required to provide coverage too..?
Max amount of insurance |
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Definition
Not required to provide to any property deemed UNINSURABLE
Max: $750,000 residential property
$3,000,000 on commercial property |
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Term
| NCIUA vs Insurance agents |
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Definition
| agents CAN NOT bind coverage but CAN apply |
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Term
| NCIUA - Catastrophe Recovery Charge |
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Definition
NCIUA can assess member insurance companies up to $1 Billion.
If more money is needed, all residential and commercial policy holders can be assessed not exceeding 10% of their policy premium. |
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Term
| Essential Property Insurance for Beach Area AKA "Coastal Property Insurance Pool" -- applying |
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Definition
any individiual with insurable interest in insurable property can apply.
if denied, applicant can appeal to the commissioner and Commissioner may order that property insurance be provided by the association |
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Term
On exam
NCIUA and exclusions |
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Definition
Insurers may exclude windstorm and/or hail damage by attaching the Absolute Windstorm or Hail Exclusion Endorsement written on HO policy in the beach area.
Applicant to apply to the NCIUA for wind and/or hail coverage only
These |
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Term
| FAIR Access to Insurance Requirements - reason for |
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Definition
For the same reason for the NCIUA --to cover all areas(except in the area covered by the NCIUA) that is unable to obtain coverage on insurable property through the "voluntary market".
NC Joint Underwriting Association (NCJUA) |
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Term
| FAIR Access to Insurance Requirements - members |
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Definition
| all admitted companies writing direct loss property insurance coverage |
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Term
| FAIR Access to Insurance Requirements - coverage |
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Definition
| covers all as NCIUA except Extra Expense coverage and business income |
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Term
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Definition
| a required organization composed of representatives of all admitted companies writing coverage under the jurisdiction of this act. |
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Term
| The purpose(s) of the NC Rate Bureau is (2) |
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Definition
1) to prepare and recommend proposed policy forms and rates through filings to the Commissioner. Forms and Rates are subject to approval/disapproval of Commissioner before effect
2)propose, file and promulgate(put into law) a method of classifying drivers for motor vehicle coverage under the Safe Driver Incentive Plan |
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Term
| Coverage forms falling under the jurisdiction of the Rate Bureau are: (3) |
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Definition
A. Residential property with no more than 4 units (except farm risks)
B. Motor Vehicle coverage for private passenger vehicles
C. Worker's Comp and Employer liability insurance |
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Term
| Rate Bureau: voting and representatives |
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Definition
Each company: one voting representative
These reps elect governing body + 2 unaffiliated, non-voting members appointed by the Governor.
Expenses are shared proportionately |
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Term
Rates proposed by the Rate bureau are proposed to be ___?
Factors of rates: (A-E) |
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Definition
adequate, not excessive and not unfairly discriminatory. Factors:
A: Past loss and expense experience (3 years) EXCEPT property - 5 years
B: Possible future losses and expenses
C: Reasonable profit margin
D: Investment income
E: Potential for catastrophe |
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Term
| Proposed rates (by the Rate bureau) and rating systems must be filed with the ____ & _____ |
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Definition
| with the Commissioner & made available to public |
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Term
Rate bureau and time period (Rate filing)
ON EXAM! |
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Definition
see notes
210 day waiting period to become effective
50 days(60 days W.C.) Commissioner must give notice of non-compliance.
If not, Rate Bureau has 30 days to schedule hearing.
If Commissioner disapproves, Rate Bureau can appeal.
After the appeal, the Rate Bureau can charge the rate, keeping extra premium in an Escrow account |
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Term
| An insurer is prohibited from issuing any policy that does not conform with the Rate Bureau standards unless |
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Definition
| such deviations are filed with the Commissioner and the NC Rate Bureau, approved by the Commissioner and applied uniformly to all similar risks within the state. |
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Term
| Whenever an insurer changes either the coverage provided or the rates charged for the current coverage, all insureds must be given at least __ notice. |
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Definition
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Term
Casualty Exam
Motor Vehicle Classification and the Safe Driver Incentive Plan are the responsibility of ____ |
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Definition
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Term
Casualty Exam
Motor Vehicle Classification and the Safe Driver Incentive Plan is designed to ___ |
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Definition
| provide a system to distinguishing between operators of motor vehicles for rating purposes and to encourage safe driving practices by motorists in this state through lower premiums for identified safe drivers. |
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Term
Casualty Exam
Motor Vehicle Classification and the Safe Driver Incentive Plan:
The rating system and a list of violations that may result in premium surcharges must be filed with the: |
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Definition
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Term
Casualty Exam
Motor Vehicle Classification and the Safe Driver Incentive Plan.
Factors Considered in the rating of an automobile policy include: (A-F) |
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Definition
A: Vehicle use - pleasure, business, driven to work, farm, etc
B: Operator Principle or Occasional operator
C: Amount of driving experience
D: Characteristics of the vehicle
E: Garaging address
F: NOT INCLUDED: Age and sex of operator |
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Term
Casualty Exam
Motor Vehicle Classification and the Safe Driver Incentive Plan |
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Definition
Safe driver - discount below standard rate
At-fault accidents and/or moving traffic violations: surcharges above standard rates.
All(almost) moving traffic violations results in premium surcharges(points) |
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Term
| In an insured is involved in at-fault accident and also is convicted for a moving traffic violation in conjunction with that accident, a surcharge will apply ____ |
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Definition
only to the one with higher premium increase.
Major accident = 3 + Speeding = 2, only get 3 |
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Term
| Surcharges(points) may be applied for up to: |
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Definition
3 years of conviction.
Drivers with less than 3 years prior licensed driving may already have surcharge |
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Term
| Any policy that loses a safe driver discount or is surcharged due to points will |
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Definition
| receive a notice of such action with or before the billing of additional premium. Will identify basis. |
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Term
Casualty Exam
Motor Vehicle Classification and the Safe Driver Incentive Plan
Conviction records for moving violations must be obtained: |
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Definition
| at least annually. Allowed every 6 months |
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Term
| The NC Motor Vehicle Reinsurance Facility is |
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Definition
| a nonprofit association "Facility" of all admitted insurers writing motor vehicle coverage. Created to provide required automobile liability, med pay and UM/UIM (NOT PHYSICAL DAMAGE) to "eligible risks" who are "difficult to place" in the normal market. |
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Term
| What makes an Eligible Risk: |
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Definition
1. Live in NC
2. Has NC DL
3. Have NC license tag (car registered in NC) |
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Term
| Operations of the Reinsurance Facility |
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Definition
1. All members must accept required liability, med pay and UM/UIM coverage on any eligible risk. But can then "cede" it to the facility
2. Any losses incurred by the Facility is assess to member companies, then this companies can recoup through policyholders
4. Ceded business can not discriminate in coverage
6. Agents can not refuse to accept an application. And cannot be required to meet quotas.
8. B.O.G. can exempt companies from the facility
9.Ceded business may not be terminated (unless normal reasons apply)
10. Physical damage may not be rated b/c liability coverage is ceded. |
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Term
| Operations of the Reinsurance Facility |
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Definition
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Term
| Operations of the Reinsurance Facility. Maximum limits |
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Definition
Reinsured Liability: $100,000/$300,000/$50,000 with $2,000 Med pay
**Reduced liability
UM/UIM not reduced
UI max:$1M/$1M/$50,000
UIM max: $1M/$1M |
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Term
*
Operations of the Reinsurance Facility
Ceded applicants |
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Definition
must be given reasons and informed that they can seek coverage with another insurer.
If applicant receives coverage from non-ceding company, the ceding company provide PRO-RATE refund on unearned premium (all that has not been spent) if canceled within ***45 days**** |
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Term
| The Facility Governed by: |
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Definition
a Board of Governors (12)
- 5: appointed by insurance co's
- 7: appointed by the Commissioner
(above must be licensed and active)
- plus 2 non-voting members appointed by Governor (not licensed)
14 people total! |
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Term
| Financial Responsibility Laws require (motor vehicle operators) |
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Definition
ability to respond to BI or PD claims.
1. Min 30/60/25 liability
2. Self-insured
3. Deposit $85,000 or liquid assets
4. Posting bond (10% = $8,500/year) |
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Term
| Commercial Property Insurance. The Building and Personal Property Coverage Form provides |
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Definition
coverage for most commercial, industrial, manufacturing risks.
DIRECT LOSS ONLY of building, contents or both. |
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Term
| Commercial Property Insurance. The Building and Personal Property Coverage Form. Coverage Parts |
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Definition
NO PRIMARY
A. Building(s)
B. Business personal property (furniture, fixtures and stock, improvements and betterments in, on or within 100 FEET of the premises.
C. Personal Property of others (100ft). Including property in vehicles. (Dry Cleaners would want this) |
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Term
| Commercial Property Insurance. The Building and Personal Property Coverage Form Features of Coverage Parts: A |
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Definition
Structure:
building + permanent fixtures and maintenance/service items.
Materials used for additions.
Not required (some businesses don't own their structure) |
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Term
| Commercial Property Insurance. The Building and Personal Property Coverage Form Features of Coverage Parts: B |
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Definition
stock,
machinery,
furniture,
any other property owned by the insured
WITHIN 100 feet!!! |
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Term
| Commercial Property Insurance. The Building and Personal Property Coverage Form Features of Coverage Parts: C |
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Definition
| Property of others in the care, custody, control of the insured. Baliees coverage. 100 feet |
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Term
Commercial Property Insurance. The Building and Personal Property Coverage Form. Additional Coverages
1. Debris removal
2. Preservation of Property
3. Cost of extracting pollutants |
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Definition
1. if due to covered peril
max 25% total payment for the direct loss plus the deductible. Pay an additional $10,000 if loss+debris removal is > limit of insurance.
2. Removal coverage when property is removed to keep it from further damage. Open peril coverage for 30 days
3. Cost of extracting pollutants (Ex: BP oil in water -caused by employee not covered. Fire, covered). Reported 180 days of date of loss. Max: $10,000 in any 12-mnth period. |
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Term
Commercial Property Insurance. The Building and Personal Property Coverage Form Other Extensions:
1. Newly acquired property
2. Valuable records
3. Business property temporarily located off premises |
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Definition
1. up to 30 days (same as auto)
2. Reconstruction coverage: up to $2500
3. Other than stock - max of $10,000 |
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Term
Commercial Property Insurance. The Building and Personal Property Coverage Form
Common Policy Condition |
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Definition
| common form is: inspections and surveys provision for insurability and premiums purpose. Not safety inspection. |
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Term
Commercial Property Insurance. The Building and Personal Property Coverage Form.
Exclusions (3) |
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Definition
1. Money
2. Property covered on other policies (vehicles, glass)
3. Outdoor property - fences, antennas, signs not attached. |
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Term
Commercial Property Insurance. The Building and Personal Property Coverage Form.
Cause of Loss forms (3) + (1) |
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Definition
1. Basic Form - Named peril
DP-1 (SFP,EC,VMM) + Sprinkler leakage, Sink hole collapse, Volcanic eruption (airborne), Glass (but not caused by vandalism)
2. Broad Form - Basic + Glass by vandalism($100 per plate/$500 per occurrnece), Falling objects, weight of snow, ice or sleet, water damage (sudden and accidental).
3. Special Form: open peril except specifically excluded or limited (ie -glass by vandalism still limited)
4. With/ one of the first 3
Earthquake form:
A. 168 hours = single occurrence. (7 days)
B. Volcanic eruption - landborne damage |
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Term
Commercial Property Insurance. The Building and Personal Property Coverage Form. Loss Valuation Clauses state...
Exceptions (4) |
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Definition
how the amount of certain losses will be determined. Usually ACV.
Except:
1. Stock sold not yet delivered - settled at selling price
2. Covered glass loss - Replacement cost
3. Valuable papers - cost to duplicate
4. Optional Coverages:
A. Agreed Value (suspends co-insurance)
B. Inflation Guard: if building value goes up..coverage limit goes up
C. Replacement Cost (higher premium) |
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Term
Co-Insurance Clauses
ON EXAM! |
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Definition
encourage the insured to carry insurance to value (adequate insurance based on property value).
Calculation: SEE NOTES!
DID
--------- * LOSS
SHOULD |
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Term
| Consequential (Indirect) Loss Coverage Forms: |
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Definition
1) Business Income Coverage Form (Including Extra Expense Coverage)
2) Extra Expense Coverage Form |
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Term
Consequential Loss Coverage Forms:
Business Income Coverage Form (Including Extra Expense Coverage) Plus coverages (4) |
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Definition
loss of business income or
extra expenses that incurred to continue operations
Coverages:
1. Business Income (Interruption)
(net income & continued operating expenses -lease payment)
2. Extra Expense - continue business at temp location
3. Extended Business Income - up to 30 days for loss of market caused by the suspension of business operations
4. Civil Authority - premises prohibited due to loss at another place - 3 weeks |
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Term
| Co-Insurance in Business Income Coverage |
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Definition
-only applies to Business Income Coverage
-Requirements much lower -- as low as 50%
EXAM: - Co-insurance percentage is multiplied by total net income during the CURRENT POLICY YEAR - forecasting! |
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Term
Business Income Optional Coverages
1. Maximum Period of Indemnity |
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Definition
limits the loss period to 120 days.
Suspends co-insurance. |
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Term
Business Income Optional Coverages
1. Monthly Limit of Indemnity
chance to be on exam |
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Definition
| Max the insurer will pay for loss of income during each period of 30 consecutive days during the loss period. 1/3; 1/4; OR 1/6 |
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Term
Business Income Optional Coverages
1. Agreed Value |
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Definition
| insured submit financial data to substantiate an agreed settlement amount. If limit of insurance is at least as much as the agreed value, all loses paid in full. |
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Term
Consequential Loss Coverage Forms:
Extra Expense Coverage Form |
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Definition
| pays for extra expenses incurred to CONTINUE OPERATIONS at a temporary location. This is used for businesses that CAN NOT cease operations. (do not need business interruption coverage) |
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Term
Consequential Loss Coverage Forms:
Extra Expense Coverage Form. Coverages (2) |
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Definition
1. Extra Expenses - to continue operations at another location (not for higher lease)
2. Civil Authority - max 3 weeks (can't continue your business b/c someone else) |
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Term
Consequential Loss Coverage Forms:
Consequential Loss Coverage Forms:
Extra Expense Coverage Form. Loss Conditions:
ON EXAM |
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Definition
Extra Expense Coverage are similar to other property coverages except loss payment for extra expenses is written with three applicable percentages:
1-30 days: 40%
31-60 days: 80%
61+: 100%
Since this makes policy limit available to insured incrementally, Loss Conditions in the Extra Expense Coverage Form is NOT SUBJECT TO Co-INSURANCE |
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Term
Casualty Exam
Commercial Liability Insurance (2 types of wrongdoing and 2 things paid) |
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Definition
Criminal acts - prosecuted by state/federal authorities. Monetary cost/fines. Liability DOES not protect against criminal acts
Civil wrongs(torts) - negligence, slander, libel, breach of contract, etc. that cause injury to another party. Monetary costs/judgements. This is what Liability Insurance covers.
1. Paid directly to the injured 3rd party.
2. Pays cost to defend the insured against claims. Supplementary Payments - in addition. |
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Term
| Commercial General Liability (CGL): Sublines |
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Definition
Two sublines:
1) Premises/Operations
A. Owners & Contractors
B. Contractual Liability (ex Easement)
2) Products/Completed Operations |
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Term
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Definition
Premises - customer slipping on wet floor
Operations - on or off premises - tree trimming service that damages a customers property while removing a damaged limb from tree.
A. Owners and Contractors (Vicarious liability - responsible for)
B. Contractual Liability - lease, easement, elevator maintenance agreement, etc. (5) |
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Term
| CGL: Products/Completed Operations |
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Definition
| Only after completed and relinquished by the insured and the product/work has been taken off premises. Ex: Swing breaks when sat on. |
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Term
CGL Features of the Coverage Sections:
Section I |
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Definition
Section I:
A: Bodily Injury and Property Damage
B: Personal and Advertising Injury
Personal Injury - false arrest, etc
Advertising Injury- stealing logo, etc
C: Med Pay: reported within 1 year (HO is 3 years)(to customers)
D: Supplementary Payments (A & B) Up to $250 a day for earnings lost by the insured. And bond costs up to stated max. |
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Term
CGL Features of the Coverage Sections:
Section II |
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Definition
who is insured by CGL.
A. Sole Proprietorship:
Owner and Owner Spouse
B. Partnership:
Partners and their spouses
C. Corporation:
Officers, directors and shareholders
D. Employees while in the scope of their employment (ie - while in insurance class) |
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Term
CGL Features of the Coverage Sections:
Section III |
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Definition
limits of coverage (6 areas)
A. A General Aggregate Limit (other than Products/Completed Operations)
B. An Aggregate Limit for Products/Completed Operations
C. Per Occurrence
D. A Personal and Advertising Injury Limit
E. A Fire Damage Limit (including Fire done to a building occupied as a tent "Fire Legal Liability")
F. per person Medical Expense Limit |
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Term
CGL Features of the Coverage Sections:
Section IV |
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Definition
specific conditions of liability coverage. Rules of conduct of the contract.
A. prompt notice on occurrence
B. Premiums paid are deposit only. Actual Premiums (earned premium) paid at end of policy based on actual exposure. Based on sale of products
C. CGL - primary coverage. Can be excess only policy. But if more than one policy applies to claim on primary basis, CGL will share EQUALLY with the other insurer. "Contribution by equal shares"
D. Bankruptcy of insured does not release insurer |
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Term
| CGL Claims Made Vs Occurrence Coverage forms |
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Definition
Occurrence Form - pays if occurrence during policy
Claims Form - pays if claim made during policy.
see notes. |
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Term
| CGL Claims Made Vs Occurrence Coverage forms. Claims Made - Retroactive Date |
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Definition
| Retroactive Date is set saying that any the Claims Made policy will not insure any occurrence that took place before this date. |
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Term
| Extended Reporting Period(ERP) |
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Definition
Offered in Claims Made to extend coverage to help eliminate gaps when changing to Occurrence Coverage.
A. Basic ERP: reported within 60 days after policy termination will be provided 5-year extension for the filing of the claim. (automatically included in Claims Made policys)
B. Supplemental ERPs (Maxi or Full Tails) - extra premium -provide unlimited duration on an excess basis only. |
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Term
|
Definition
Doesn't look at negligence
(Other than
- intoxication
- self inflicted
- preexisting health conditions)
Required if:
**3 or more workers
Except Farm with fewer than 10 are exempt |
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Term
| Workers Comp: Coverage Parts I-IV |
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Definition
Part I: benefits required by law
Premium is a deposit only (like CGL) Final premium at end of year based on payrole
Part II: employer liability coverage in case employee sues (most cases employees can't sue). Or family of the worker sues
III. Other states policy (insurer must be notified prior to or 30 days within work commencing). (Comply to that state Workers Comp requirements.
IV: duties of the insured: prompt notification, compliance w/ state law for medical treatment and cooperation with the insurer by providing defense assistance and meeting legal demands.
Part II: |
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Term
| Workers Comp Risk vs Payrole |
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Definition
higher Rate - rate determined by risk (each Job classification code has a manual rate)- Rate: ($/100 payment)
Clerical .50/$100 payment
Steel worker $7/$100 payment
Premium determined by Payrole. |
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Term
Workers Comp: Part I Benefits
1. Medical Expenses |
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Definition
100% coverage (all med bills)
Employer or Insurer may select physician or hospital.
However Employee can appeal to the Industrial Commission
"Remuneration" |
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Term
Workers Comp: Part I Benefits
2. Disability Benefits |
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Definition
7 day waiting period
Will not receive benefits until the employee is disabled for longer than 21 days..
2/3 of average weekly earnings paid weekly.
Min: $30/week
Max: established by the Industrial Commission.
- Temporary Total
- Temporary Partial
- Total permanent
Total - employment impossible
Partial - reduced ability or need to preform alternative work.
Temp / permanent partial compensated until employee returns or placed in "suitable employment"
2. Total permanent -
- two or more limbs,
- both eyes,
- serious brain injuries,
- 2nd or 3rd degree burns covering 1/3+ of body
Total Permanent Disabilities: Life time benefits! |
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Term
Workers Comp: Part I Benefits
3. Death Benefits |
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Definition
$10,000 lump sum burial allowance
2/3 deceased workers wages for 500 weeks (>9years)
Spouse disabled: Benefits for life or until remarried.
Child not 18 at the end of 500 weeks will continue to get benefits until 18.
Death claims filed in writing to Industrial Commission within 2 years! |
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Term
Workers Comp: Part I Benefits
4. Rehabilitation Benefits |
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Definition
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Term
Workers Compensation
Assigned Risk Plan |
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Definition
Workers Comp for businesses with "hard to place" due to increased hazards of the occupation.
Administered by NC Rate Bureau. ****Rate ureau will initially bind for 30 days while they assign the risk to a member insurer who must issue the coverage on a standard basis.
FOR NO LESS THAN 1 Year -- Spreads risk to companies. |
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Term
Workers Comp:
1. Industrial Commission |
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Definition
regulatory body for workers comp
Handles all disputes concerning workers comp |
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