Card Set Information

2011-06-08 03:41:09
insurance basics

Insurance terms
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  1. Peril
    Potential cause of loss i.e. acident, fire, theft
  2. Hazard
    Anything that increases seriousness or liklihood that a loss will occur
  3. Direct loss
    Loss that is directly related to a particular peril i.e. fire damage to an apartment building
  4. Indirect Loss
    Loss caused by a covered peril but not immediately and directly caused by it i.e. loss of rental income after a fire
  5. Salvage
    Insurer can reduce the claim if they pay a loss for the insured
  6. Abandonment
    Insured cannot abandon the property to the insurance company for the full-insured value
  7. Pair or Set Clause
    If part of a pair or set is lost or damage, the insurer will pai a fair proportion of the pair's full value
  8. Standardized Policies
    Forms filed by the Insurance Services Office Inc to the individual insurance departments for approval
  9. Deductible
    Part of the loss that the insured is responsible for paying
  10. Vacancy
    Building is void of contents and people. Coverage is limited but additional Vacancy Permit coverage can be purchased.
  11. Unoccupancy
    Building is void of people. Usually will not affect coverage
  12. Assignment
    Policies cannot be assigned to another party without the insurance company's consent.
  13. Liberalization
    Broadened coverage that requires no additional premium is extended to similar policies or endorsements
  14. Binder
    Temporary evidence that coverage is in effect until the policy is issued. Either oral or written
  15. Primary Insurance
    Policy that pays first if more than one policy is in effect
  16. Excess Insurance
    Last resort coverage. Pays only when other coverage has been exhausted
  17. Accident
    Sudden an unforseen event resulting in a financial loss.
  18. Occurence
    Sudden and unforseen event resulting in financial loss, or continuous/repeated exposure to an event that results in financial loss
  19. Appraisal Clause
    • When both parties cannot agree on the value of a claim:
    • a) both parties select an appraiser to determine value
    • b) umpire is selected if appraisers cannot agree
    • c) both parties share in expense
  20. Arbitration Clause
    Usually used in auto policies to resolve arguments for uninsured/underinsured motorist claims for bodily injury
  21. Subrogation clause
    Insurer pays a covered claim on behalf of the insured that is caused by a third party
  22. Other Insurance Clause
    Specifies obligations of insurer when other coverage is used. Each insurer pays for its percentage of the claim
  23. Certificates of Insurance
    Evidence that coverage is in effect with general summary of coverage
  24. Transacting Insurance
    In most states, any person who has contact with an insured about insurance matters must be licensed.
  25. Indemnity
    No profit from loss. Claimant should only be restored to the approximate financial condition that existed before the loss
  26. Proximate Cause of Loss
    Unbroken chain of events that, in a natural and continuous sequence, produce a loss i.e. a fire causing smoke and water damage
  27. Proof of Loss
    Form filed by the claimant stating the property has been either lost or damaged by a covered loss
  28. Ambiguity
    Language that is vague and creates doubt. If an ambiguous policy is disputed in court, the courts usually favor the insured
  29. Contribution By Equal Shares
    "Other Insurance" condition where all insurers contribute equally to a loss
  30. Nonconcurrency
    Properties that are covered by multiple policies that aren't idendical as to coverage
  31. Cause of Loss Forms
    States perils that are covered
  32. Named Peril
    Lists specific perils that are covered under the policy
  33. Open Peril
    All perils are covered except those listed in the exceptions section
  34. Actual Cash Value
    Cost of replacement minus the decrease in value over time
  35. Replacement Cost
    Current cost to purchase a new replacement for what was lost
  36. Funcional replacement cost
    As reasonably close to the replacement of the lost or damaged item as possible
  37. Market Value
    Price that the market will support
  38. Agreed value
    Valued agreed upon by the insurance company and the insured
  39. Stated amount
    Agreed amount of insurance stated in the policy that will be paid in the event of a total loss regardless of actual value.
  40. Valued Policy
    The limit of the policy is set as a specific amount to be paid if a total loss occurs
  41. Lein Holder
    Holds on to assets when money is owed. If those assets are sold, owed parties must be paid first
  42. Specific Basis for Insuring Property
    Separate limit for each insured item i.e. one limit on the building and one for its contents
  43. Blanket Basis for Insuring property
    One limit that applies to both the building and its contents. Usually more than one location is covered under a single limit
  44. Reporting Form
    Used by insured to report values of the insured contents to the insurance company to determine coverage and premiums
  45. Coinsurance Clause
    A certain percentage of property must be covered in order to receive full reimbursement for a loss
  46. Standard Morgage Clause
    Protects the interest of the financial institution against loss to real property caused by insured perils, even if the loss was intentional
  47. Loss payable clause
    Protects the interest of the financial institution against loss to real property caused by insured perils, even if the loss was intentional. Applies to chattel property
  48. No Benefit to Bailee
    Policy protects the insured and not someone who is in possession of their property
  49. Liability Losses
    When a person is responsible for injury or loss to another person or another's property and the law requires them to make financial restitution
  50. Constructive total Loss
    Cost to repair is more than the value of the vehicle. i.e. "totaled"
  51. Negligence
    Lack of reasonable care that is required to protect others and/or their property from the unreasonable chance of harm. Insured must be guilty of negligence for a liability policy to respond
  52. Gross Negligence
    Willful and wanton negligence or misconduct without the slightest degree of care
  53. Tort
    Civil wrong that violates the rights of others.A person becomes legally liable by committing a tort
  54. Punitive Damages
    Often awarded by the court and intended to punish the defendant to discourage others from behaving in a similar manner.
  55. Contributory Negligence
    If an individual contributes to their own loss in any way, then another cannot be held liable for the loss
  56. Comparative Negligence
    Most common. Allows an injured party to collect from another party on a loss, even if the injured contributed to their own loss. Damages are reduced to the extent of the injured party's negligence
  57. Assumption of Risk
    Applies when a person knowingly exposes themself to danger or injury
  58. Intervening Clause
    Independant action that breaks the chain of causation and starts a new chain of events. This action becomes the proximate cause of loss
  59. Statute of Limitations
    Laws as to when certain types of lawsuits must be filed
  60. Absolute Liability
    Individuals participating in certain activities that are considered to be hazardous may be held liable for the damages of another, even if they weren't negligent AKA strict liability
  61. Vicarious Liability
    Times when a person may be held responsible for the negligent acts of another. i.e. the employer is responsible for a pedestrian injured by a negligent employee
  62. Single Limit
    Policy limit that pays a single amount as the max liability of the insurer for any one accident occurance
  63. Split Limit
    Policy limit expressed by 2 figures. i.e. one limit for bodily injury of each person and one limit for all claims of injured people in the accident
  64. Aggregate Limit
    Represents the total amount for all claims paid during the policy period. Once this has been met, the insured is without coverage until the policy is renewed
  65. Physical Hazard
    Any hazard arising from the material, structural or operational features of the risk itself, aside from the people owning or manging it
  66. Moral Hazard
    Morals or habits that increase the probability of a loss from a peril
  67. Morale Hazard
    Insured's indifference to loss because of the existence of insurance
  68. Pure risk (insurable)
    Only the possiblity of loss
  69. Speculative Risk (not insurable)
    Profit or loss is possible i.e. betting on a horse race
  70. Static Risk (insurable)
    Losses caused by irregular action of nature, by the mistakes or misdeeds of a person
  71. Dynamic Risk (not insurable)
    Associated with a changing economy
  72. Fundamental Risk (not insurable)
    Affects the entire economy or a large number of persons or groups within the economy
  73. Particular Risk (insurable)
    Risk that affects only the individual and not the entire community or country i.e. theft of a stereo