are statements that provide information

about the particular property or activity to be insured

o usually the first page of the policy

o In property insurance, it contains name of the insured, location of property , period of

protection, amount of insurance, premium and deductible information

Insurance contracts typically contain a page or section of ___________

O for example, the insured is referred to as “you”

summarizes the major promises of the insurer

where only those perils specifically named in the policy are covered

where all losses are covered except those losses specifically excluded

. may also be called an open-perils policy

. insurers have generally deleted the word “all” from policies

. “All-risks” coverage has fewer gaps, and the burden of proof is placed on the

insurer to deny a claim

e.g., flood, intentional act

e.g., a professional liability loss is excluded in the homeowners policy

e.g., pets are not covered as personal property in the homeowners policy

O some perils are not commercially insurable

. E.g., catastrophic losses due to war

O extraordinary hazards are present

. E.g., using the automobile for a taxi

O coverage is provided by other contracts

. E.g., use of auto excluded on homeowners policy

O moral hazard is present of it would be difficult to measure the amount of loss

. E.g., coverage of money limited to $200 in homeowners policy

O coverage not needed by typical insureds

. E.g., homeowners policy does not cover aircraft

are provisions in the policy that qualify or place limitations on the insurer’s promise to perform

] An insurance contract must indicate the person or persons from who the protection is provided

O some policies insure only one person, e.g., most life insurance policies

is the person or persons named in the declarations section of the policy

] A policy may cover other parties even though they are not specifically named

O e.g., the homeowners policy covers resident relatives under age 24 who are full-time students away from home

In property and liability insurance, an __________ is a written provision that adds to, deletes from, or modifies the provisions in the original contract

O e.g., an earthquake endorsement to a homeowners policy

In life and health insurance, a __________________ is a provision that amends or changes the original policy

o e.g., a waiver-of-premium rider on a life insurance policy

is a provision by which a specified amount is subtracted from the total loss payment that otherwise would be payable

• eliminate small claims that are expensive to handle and process
• reduce premiums paid by the insured

insurance should pay for high severity losses; small losses can be budgeted out of the person’s income

O reduce moral and morale hazard

the insured must pay a certain amount before the insure makes a loss payment

O e.g., an auto insurance deductible

means that all losses that occur during a specified time period are accumulated to satisfy the deductible amount

is a type of aggregate deductible that is found in basic medical expense and major medical insurance contracts

is a deductible that can be used to integrate a basic medical expense plan with a supplemental major medical expense plan

 is a stated period of time at the beginning of a loss during which no insurance benefits are paid

in a property insurance contract encourages the insured to insure the property to a stated percentage of its insurable value

O if the coinsurance requirement is not met at the time of the loss, the insured must share in the loss as a coinsurer

A property owner wishing to insure for a total loss would pay an _________ if other property owners only insure for ___________

inequitable premium_

potential losses_

If the coinsurance requirement is met, the insured receives a _______, and the policy owner who is underinsured is____________ through application of the coinsurance formula

rate discount

penalized

is to prevent profiting from insurance and violation of the principle of indemnity

provision, each insurer’s share of the loss is based on the proportion that its insurance bears to the total

amount of insurance on the property

each insurer shares equally in the loss until the share paid by each insurer equals the lowest limit of liability under any policy, or until the full amount of the loss is paid

provision, the primary insurer pays first, and the excess insurer pays only after the policy limits under the primary policy are exhausted

in group health insurance is designed to prevent over insurance and the duplication of benefits if one person is covered under more than one group health insurance plan

.e.g., two employed spouses are insured as dependents under each other’s group health insurance plan