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| The Transfer of risk through a legal contract from insured to insurer |
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| Insurance Company - 2nd Party |
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- To restore to pre-loss condition
- no better, no worse
- makes whole |
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| Insurance for families and individuals |
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Includes both commercial and personal coverage
(a generalist) |
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| Uncertainty of financial loss |
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Chance of loss only
(Insurable) |
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chance of loss or gain
(Uninsurable) |
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| Mathematical concept that states: As the number of homogenous (similar) loss exposures increases, the more accurate claims can be predicted from the group |
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| do the pricing for insurance companies |
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| Named Peril (Specified perils) |
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| Lists the perils that are covered in the policy |
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| Cover all perils except those specifically excluded by the policy |
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| things that increase the chance of a peril happening |
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Visible Characteristic
[covered under insurance] |
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Dishonest Tendencies
[not-covered under insurance] |
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attitude of carelessness
[covered under insurance] |
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| Immediate physical damage to property |
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| Loss that happens after the direct loss but due to the loss of use of property |
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| the first cause in an unbroken chain of events |
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CLAC
Elements of Legal Contract |
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Definition
Competent parties - 18 sane and sober
Legal Purpose
Agreement - offer and acceptance
Consideration - money
*Counteroffer is NOT an element of a Legal Contract |
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| Legal Issues Affecting Insurance Contracts |
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Definition
1. Representations
2. Misrepresentation - could adjust the benefits
3. Material misrepresentation - may void the policy
- Concealment - failure to voluntarily disclose the info
- Fraud - lying about the information
4. Warranty - guarantees insured will do or not do something (commercial only)
- breach of warranty may void the policy |
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| Temporary contract of insurance issued by the agent last up to 30 days and can be cancelled by the insurer |
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Declarations
Insuring agreement
Conditions
Exclusions
Endorsements |
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face of the policy
six Ps + one D
- Policy number
- Parties
- Property description & location
- Policy Term
- Policy Limits
- Premium
- Deductibles |
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| Person, business, or other entity specifically named in the declarations |
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| maximum amount of coverage agreed to be paid per loss |
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| maximum amount of the total of all claims paid per policy period (usually only commercial policies) |
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the insured pays a specific amount or percentage of loss
adding or increasing a deductible: reduces premium & frequency of claims |
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| the consideration paid by the insured |
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insurer's promise to pay which includes the covered perils
two Ps + one D
- Promise to Pay
- Perils
- Defense Cost or Duty to Defend |
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| Only what is named is covered by the policy |
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| tells you what is excluded from the policy |
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Term
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| Contains the duties and rights of the paties |
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| Insured's Duties After a Loss |
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Definition
- Prompt notification
- Submission of a proof of loss within 91 days
- protect the property from further damage
- provide an inventory of damaged property |
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| The righter of the Insurer to collect their money from the at-fault party includes the deductible paid by the insured |
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Definition
Lender can:
- pay the premium/file a proof of loss
- received claim payment
- receive a cancellation notice
nothing the insured does can prevent the mortgagee (lender) from collecting under the policy |
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- Cancellations
- Non-renewals |
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Isurer
- 10 day notice
- full refund of unearned premium - pro rata cancellation
Insured
- no advance notice
- short-rate cancellation |
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Definition
Insurer
- 30 day advanced notice
- no adjustment in premium
Insured
- no advance notice
- no adjustment in premium |
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Term
| Dispute Resolution Process |
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Definition
Appraisal - deals with value of the loss
Insurer Insured
-Appraiser -Appraiser
-Umpire- binding resolution
No more than 3 parties involved
Arbitration - coverage issues |
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Term
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Definition
1. Pro rata laibility: policies pay proportionately
2. Contribution by equal shares
3. Primary and excess
- Umbrella Policy |
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| US and its territories, Puerto Rico, Guam and Canada NOT Mexico |
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| steps up coverage when traveling to different states with higher mandatory limits than what the insured currently has in force |
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| Insured may sue the insurer no earlier than 61 days and no later than two years and one day from the date of loss |
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Definition
Contain the property and the perils that are not covered
- flood, contraband, intentional acts by insured |
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Changes a policy
- the insured or agent can request a change to their policy |
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Dec. Page
NOT AN INSURANCE CONTRACT |
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Term
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Definition
insures damage to property owned by individuals or businesses
- 1st Party Coverage |
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Term
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Definition
- Property and location are specified
- each building listed for its own limit
-contents of each building has its own limit |
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- single limit of insurance
- all buildings, contents & personal property |
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Definition
1. Replacement Cost
2. Actual Cash Value (ACV) - replacement minus depreciation
3. Agreed value or stated amount
- value is agreed when policy issued
4. Valued policy (liquidated demand)
- when building is totally destroyed by fire, DOES NOT INCLUDE CONTENTS
5. Market Value |
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Partial Damage
- subtract the value of what remains after the loss |
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| costs more to repair or replace than normal value |
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| any loss that is not a total loss |
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Partial Damage
- subtract the value of what remains after the loss |
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| costs more to repair or replace than normal value |
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| any loss that is not a total loss |
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Term
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Definition
Minimum amount of insurance required
- if minimum is carried claims paid in full
- if minimum is not carried, partial losses are NOT paid in full |
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| (DID / SHOULD) * LOSS = Claim Payment |
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Term
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Definition
Vacant
- empty building
- insured penalized after 60 days
- may not be covered for vandalism loss
Unoccupied
- no people present but contents remain
- no loss of coverage |
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Definition
| Insured cannot abandon partially damaged property and expect to be paid for its full value |
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| If total loss is declared insured must give the insurer what is left |
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Pays a 3rd Party to whom the insured is legally liable
- liability |
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Term
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Definition
| Bodily Injury (BI) and Property Damage (PD) |
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Definition
Criminal
- prosecuted by the government
- Insurance does NOT cover
Civil
- actions brought by injured parties
- can be covered by liability insurance |
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Term
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Definition
Tort: a civil wrong
- intentional - Personal Injury
- Unintentional - Bodily Injury (negligence) |
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| Insured is responsible for actions of the wrongdoer |
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| Liability without fault for something you own |
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| The failure to do (or not do) something that ordinarily should be (or not be) done that results in a loss |
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1. Legal Duty - owe an obligation to act or not act
2. Breach of duty - failure to comply with the duty
3. Actual Loss - another suffers a loss
4. Proximate cause - the breach of duty is the direct cause of the loss |
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| Types of Injuries and Damages from Liability |
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Definition
BI - includes pain and suffering
PD - includes loss of use
Personal Injury (PI) - damage to a person's character or reputation |
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Definition
| insurer must defend the insured from a claim |
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| an even that is sudden and unexpected |
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Term
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| an event that happens over time |
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| Damages for Tort Liability |
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Definition
Compensatory - to indemnify the injured party
Punitive - to punish the wrongdoer due to gross negligence |
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