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FIL 250 Chapter 8

Common policy concepts

actual cash value (ACV) often used as a method to determine loss payments under property insurance. Most often determined by subtracting depreciation of the item from its replacement cost
pro rata liability A method for splitting loss payments among several insurance policies that cover the same loss. Each company pays based on the proportion of its limit relative to the total amount of insurance on that property
contribution by equal shares A method for splitting loss payments among several insurance policies that cover the same loss. Each company pays equally in a loss until their limit is exhausted.
primary vs. excess insurance when two policies cover a loss, it is a method for determining which policy pays first. the loss is first applied to the primary insurance policy. Any unpaid losses are applied to the excess policy
Deductible The amount of loss that must be absorbed by the policyholder before insurance provides any payment. the deductible amount is subtracted from the total loss payment that would otherwise be paid
straight deductible most common in property insurance, it is a per occurrence deductible where the insured must pay a certain number of dollars for each loss before the insurer is required to make a payment
aggregate deductible common in health insurance, all covered losses are accumulated during the policy period and the insurer pays only when the aggregate losses exceed the deductible amount
elimination period common in disability insurance, it is a deductible in days - the period during which benefits are not paid or the period of time that must elapse before benefits are payable
coinsurance requirement (property) an insurance to value requirement, meaning that the policyholder must maintain a policy limit at a stated percentage of its insurable value (80% is typical)
principle of insurable interest in order to receive any loss payment from an insurance contract, the insured must stand to lose financially if the covered loss occurs
tort a legal wrong which results in injury to another party. the remedy is typically in the form of money
negligence the failure to exercise the standard of care required by law to protect others. if you are found negligent, you may become financially responsible for another's injuries
strict liability regardless of any and all precautions taken to protect others, liability for damages are imposed because of the inherent risk of the activity
What are the four elements of negligence? (1) legal duty to protect others, (2) failure to perform that duty, (3) resulting damages to the claimant, (4) proximate cause linking negligent act and damage
compensatory damages types of damages that are related to the actual losses incurred
special damages types of damages that can be documented and measures (e.g., medical bills and lost wages)
general damages types of damages that cannot be specifically measured but are tied to damages incurred (e.g., pain and suffering)
punitive damages award of damages that are not tied to losses incurred but instead levied to deter others from repeating similar acts
contributory negligence the legal defense that says if a plaintiff contributed in any way to their own damages, they should get nothing
comparative negligence plaintiffs and defendants share in losses based on their relative percentages at fault
last clear chance rule despite the plaintiff's own negligence that contributed to damages, the defendant had the last opportunity to avoid damages and should be held responsible
assumption of risk the plaintiff should have recognized the inherent danger in a certain activity and therefore should not recover any damages sustained
imputed negligence when negligence of one person is attributed to another (e.g., employee -> employer)
dram shop laws laws that may hold businesses liable for damages if they sell liquor to someone who later injures another
licensees individuals on another's property with the express or implied permission of the property owner
trespasser individuals on another's property without the permission of the property owner
invitee individuals who were invited to another's property for the benefit of the property owner
What are the methods for determining actual cash value? replacement cost less depreciation, fair market value, broad evidence rule
What are some legal bases for demonstrating insurable interest in property insurance? ownership, secured creditors, contractual rights, factual expectancy, representation of another party
What are some legal bases for demonstrating insurance interest in life insurance? Self (unlimited), close family ties (e.g., spouse, children, parents), other pecuniary interests
bailee a party who has temporary possession of another's property
joint tenancy several parties have entire ownership, including survivorship interest
tenancy by the entirety same as joint tenancy, but between a husband and wife
tenancy in common joint partial ownership, but survivorship interest remains with heirs of owners, not surrendered to surviving owners
coinsurance in health insurance it is a percentage participation, defining the percentage of expenses paid by insurers and patients
Agreed value policy also called a valued policy, it eliminates the risk of a coinsurance penalty by negotiating a policy limit that acceptable to both the policyholder and the insurer
functional valuation the insurer may replace damaged property with functionally equivalent materials (like drywall instead of plaster walls), often used with older properties that have unique craftsmanship
coordination of benefits used in health insurance to designate primary and excess insurance when multiple insurance contracts cover the same medical expenses
Created by: isufil250
Popular Insurance sets




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