02.03. Policy Provisions

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02.03. Policy Provisions
2013-03-12 20:46:05
Policy Provisions

Policy Provisions
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  1. Policy Provisions - 6 Categories
    • declarations: unique information on the insured; list of forms
    • definitions: words with special meaning in policy
    • insuring agreements: promise to make payment
    • conditions: qualifications on promise to make payment
    • exclusions: limitations on promise to make payment
    • miscellaneous provisions: wide variety of provisions that may alter policy
  2. Policy Provisions - Declarations
    • provides specific details about the insured and the subject of the insurance
    • important facts include policy number, dates, name of insurer, agent, insured, ...
    • endorsements may contain info similar to declarations
  3. Policy Provisions - Definitions
    • usually mark those words in boldface or quotations marks on the policy body
    • definitions aim to remove ambiguity
    • undefined words rules: (1) everyday words are given ordinary meaning (2) technical words = technical meaning (3) legal meaning = legal (4) consideration given to local, cultural, trade-usage meaning
  4. Policy Provisions - Insuring Agreements
    • one per coverage provided
    • eg: personal auto includes 4 agreements (liability, medical payments, uninsured motorist, damage to your auto)
    • comprehensive insuring agreement: provide broad grant of unrestricted coverage clarified and narrowed by exclusions, definitions, provisions. Called special-form coverage in commercial property insurance. Covers against all cause of loss not excluded
    • limited insuring agreement: restrict coverage to certain causes of loss or certain situations. Called named peril in commercial property insurance
  5. Policy Provisions - Exclusions
    • state what the insurer does not intend to cover
    • can be limiting or clarifying coverage
  6. 6 purposes of exclusions
    • eliminate coverage for uninsurable loss exposures (war, criminal acts by insured, wear and tear)
    • assist in managing moral and morale hazards
    • reduce likelihood of coverage duplications
    • eliminate coverages not needed by the typical insured
    • eliminate coverages requiring special treatment
    • assist in keeping premiums reasonable (mechanical breakdown, tire damage)
  7. Policy Provisions - Conditions
    • paying premium
    • reporting losses promptly
    • provide appropriate documentation for losses
    • cooperate in any legal proceedings
    • refrain from jeopardizing an insurer's rights to recover from third party