Term
| Basic aspects of an insurance contract |
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Definition
1. Declarations
2. Definitions
3. Insuring Agreement
4. Exclusions
5. Conditions
6. Miscellaneous Provisions |
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Term
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Definition
statements that provide information about the particular property or activity to be insured
information provided:
-identification of the insured
-location of property
-amount of insurance
-size of deductible |
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Term
| Purpose of definitions sections |
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Definition
to clearly define the meaning of key words or phrases so that coverage under the policy can be determined more easily
"we" refers to the insurance company and "you" refers to the insured |
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Term
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Definition
summarizes the major promises of the insurer
2 types of insuring agreements:
1. named perils coverage
2. "all-risks" coverage (open perils) |
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Term
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Definition
all losses are covered except those which are specifically excluded
for an insurer to deny payment under an all risk policy, the insurer must prove that the loss is excluded
preferred |
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Term
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Definition
only those perils specifically named in the policy will be covered
the burden of proof is on the insured to show that the loss was caused by a named peril
cheaper, but not preferred |
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Term
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Definition
a provision in an insurance contract in which the insurer states situations when coverage will not apply
3 major types of exclusions
1. excluded perils
2. excluded losses
3. excluded property |
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Term
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Definition
1. some perils considered uninsurable
2. presence of extraordinary hazards
3. coverage provided by other contracts
4. moral hazard problems
5. coverage not needed by typical insureds |
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Term
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Definition
exclude them because they can't handle that loss
e.g. flood or nuclear radiation -- law of large #s |
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Term
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Definition
professional liability in HO
different risk |
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Term
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Definition
airplanes in HO
insurance companies want all airplanes in the same risk pool |
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Term
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Definition
provisions in the policy that qualify or place limitations on the insurer's promise to perform
common conditions:
1. notifying the insurer if a loss occurs
2. protecting the property after a loss
3. preparing an inventory of damaged personal property
4. cooperating with the insurer in the event of a liability suit |
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Term
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Definition
cancellation of policy -- states when an insurer can cancel a policy (i.e. 30, 60, or 90 days after missed premium payment)
subrogation -- the insurer states it has the right to subrogate
other insurance provisions
reinstatement of lapsed policy -- states the conditions of how an insured can reinstate coverage that has lapsed due to missed premiums |
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Term
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Definition
a provision by which a specified amount is subtracted from the total loss payment that would otherwise be payable
deductible and premium have an inverse relationship
purposes of deductibles:
1. eliminate small claims
2. reduce premiums
3. reduce moral and morale hazard |
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Term
| Straight deductible (property insurance) |
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Definition
| the insured must pay a certain number of dollars of loss before the insurer is required to make a payment |
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Term
| Aggregate deductible (property insurance) |
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Definition
| all losses that occur during a specified time period are accumulated to satisfy the deductible amount |
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Term
| calendar-year deductible (health insurance) |
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Definition
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Term
| elimination (waiting) period (health insurance) |
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Definition
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Term
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Definition
| a written provision that adds to, deletes from, or modifies the provisions in the original contracts |
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Term
| When are endorsements used? |
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Definition
| endorsements are used in property insurance to modify, extend, or delete provisions |
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Term
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Definition
| riders are used in life/health insurance to add or increased benefits, waive conditions, or amend the basic policy |
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Term
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Definition
encourages the insured to insure the property to a stated percentage of its insurable value
typically uses an 80% coinsurance clause |
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Term
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Definition
| Equity in Rating -- the notion that if everyone insured for partial losses instead of full losses, insurance rates would be higher |
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Term
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Definition
inflation -- the insured may be in compliance when the policy went into effect at first but price inflation could increase the replacement cost of the property
insured may incur a coinsurance penalty if property values fluctuate |
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Term
| What is the percentage participation clause? |
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Definition
requires the insured to pay a certain percentage of covered medical expenses in excess of the deductible
typically 80/20 coinsurance clause |
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Term
| What are the purposes of coinsurance of health insurance? |
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Definition
reduce premiums
prevent over-utilization of policy benefits -- people won't go to doctor all the time |
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Term
| Who does Coverage F cover? |
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Definition
pays reasonable medical expenses of another person who is accidentally injured either:
-on an insured location with insured's permission
-or by the activities of an insured
-resident employee
-or animal owned by or in the care of an insured |
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Term
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Definition
-intentional damage by insured age 13 or older
-property covered under Section I
-property owned by an insured
-property owned or rented to a tenant
-business liability
-act or omission |
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Term
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Definition
-Part A: Liability Coverage
-Part B: Medical Payments Coverage
-Part C: Uninsured Motorists Coverage
-Part D: Coverage for Damage to your Auto
-Part E: Duties after an Accident or Loss
-Part F: General Provisions |
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Term
| What is covered under Coverage A? |
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Definition
| the insurer agrees to pay any damages for bodily injury or property damage for which the insured is legally responsible because of an auto accident |
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Term
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Definition
-named insured and resident family members
-anyone using the covered auto with reasonable belief of permission
-any person or organization legally responsible for any insured's use of a covered auto on behalf of that person or organization
-any person or organization legally responsible for the named insured's or family members' use of any auto or trailer |
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Term
| Uninsured motorists coverage |
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Definition
Part C pays for the bodily injury caused by an uninsured motorist, a hit-and-run driver, or by a negligent driver whose insurance company is insolvent
damages include medical bills, lost wages, and compensations for permanent disfigurement resulting from the accident
Does legal liability matter? |
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Term
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Definition
the insurer agrees to pay for any direct and accidental loss to a covered auto or any nonowned auto as defined in the insuring agreement, including their equipment, less any deductible
2 coverages:
-collision
-other than collision |
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Term
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Definition
the upset of your covered auto or nonowned auto or its impact with another vehicle or object
hit another car
hit a tree, building, pole
return from shopping, car has dent |
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Term
| Other than collision (comprehensive) coverage |
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Definition
-hit by missiles or falling objects
-fire, windstorm, hail, flood
-contact with bird or animal
-glass breakage
-theft
-vandalism |
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Term
| Financial responsibility laws |
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Definition
| does not require proof of financial responsibility until AFTER the driver has his or her first accident or conviction for certain offenses |
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Term
| Defects with financial responsibility laws |
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Definition
no guarantee accident victims will get paid
victims may not be fully indemnified |
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Term
| Compulsory insurance laws |
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Definition
requires motorists to carry at least a minimum amount of liability insurance before the vehicle can be licensed or registered
used by most states |
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Term
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Definition
after an auto accident involving a bodily injury, each party collects from his or her own insurer regardless of fault
restricted rights to sue -- monetary and verbal thresholds
exclusion of property damage -- generally, no fault only covers bodily injury |
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Term
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Definition
| accidental victims cannot sue, regardless of the amount of the claim, and no payments would be made for pain and suffering |
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Term
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Definition
| an injured person has the right to sue a negligent driver only if the bodily injury claim exceeds the dollar or verbal threshols |
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Term
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Definition
| pays benefits to an accident victim without regard to fault, and the injured person still has the right to sue the negligent driver who caused the accident |
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Term
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Definition
| plans in which auto insurers participate to make insurance available to drivers who are unable to obtain coverage in the standard markets |
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Term
| Auto insurance plan -- residual market |
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Definition
| all auto insurers in the state are assigned their proportionate share of high-risk drivers based on the total volume of auto insurance written in the state |
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Term
| Joint Underwriting Association (JUA) |
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Definition
| organization of auto insurers operating in the state in which high-risk business is placed in a common pool, and each company pays its pro rate share of pool losses and expenses |
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Term
| Specialty automobile insurers |
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Definition
| insurers that specialize in insuring motorists with poor driving records |
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Term
| Factors affecting automobile insurance rates |
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Definition
territory (city vs. rural)
age, gender and marital status
use of the auto
driver education
good student discount
number and types of cars (year, make, model)
individual driving record
insurance score (credit based score) |
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Term
| Homeowner's insurance coverage territory |
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Definition
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Term
| Homeowners insurance loss settlement |
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Definition
replacement cost vs. actual cash value
Cov. A & B -- apply coinsurance -- replacement cost
Cov. C -- don't consider coinsurance -- actual cost value |
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Term
| Car insurance loss settlement |
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Definition
| insurance company will pay the lesser of the actual cash value or total it |
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Term
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Definition
some states don't make you purchase auto insurance until after you've had a loss
"no pay, no play" |
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Term
| Auto insurance PAP coverage territory |
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Definition
U.S., Canada, Puerto Rico, and the U.S.'s territories and possessions (Virgin Islands, etc.)
NOT Mexico |
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Term
| Residual markets auto insurance |
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Definition
amount company's insure based on their market share
don't have to be offered at market rates |
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