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Property & Casualty

TermDefinition
Insurance A contract that indemnifies agaisnt loss, damage, or liability from an unknown event. Transfers risk from the insured to a third party, the insurance company
Property Insurance covers real property (structures) and personal property (moveable stuff) from covered causes of loss called perils
Casualty Insurance covers insured from non-property losses. AKA as legal liability to others
Personal Lines Insurance for families and individuals:AUTO HOMEOWNERS BOATS RECREATIONAL VEHICLES
Commercial Lines Insurance for businesses: COMMERCIAL AUTO COMMERCIAL PROPERTY COMMERCIAL PROPERTY COMMERCIAL LIABILITY WORKER'S COMPENSATION
Risk Uncertainty of financial loss
Pure risk Chance of loss only. Only risks that are covered by insurance
Speculative risk Chance of loss or gain. Not covered by insurance
Law of large numbers L.L.N. As the number of homogenous (similar) loss exposures increases, the more accurate claims can be predicted from the group
Perils common causes of loss such as fire, wind, lightning, and so on.
Named peril specified peril that is listed on the policy
Opene peril all risk: except the specifically excluded by the policy
Hazard not causes of loss but things that increase the chance of a peril
Physical Hazard Visisble characteristic
Moral Hazard Dishonest tendencies
Morale Hazard Attitude of carelessness
Direct loss immediate physical damage to property
Indirect Loss Loss that happens but due to the use of the property. AKA consequential
Insurable Interest (Must be present for insurance to pay) financial risk of loss.
Proximate Cause first cause in an unbroken chain of events
CALC competent parties, Agreement, Legal purpose, consideration
Meaning of CALC competent parties (18+ sane sober), agreement (offer and acceptance), legal purpose (transfer of risk is legal), consideration (exchange of values "premium")
Representations information believed to be true, ex: answers by the insured
Misrepresentation information that is not true
Material misrepresentation info that is not true but would have caused the insurer to not issue the policy
Fraud an all-out effort by one party to deceive and cheat the other
Warranty Guarantees an insured wil do (or not do) something
Binder Temporary contract of insurance pending issue of the policy
Binder Details Usually issued by the agent, may be writeen or verbal, good for up to 30 days in Texas, can be cancelled by insurer, does not guarantee a policy will be issued, ceases automatically if a policy is issued/declined
Four parts of an insurance policy Declarations, Insuring agreement, Conditions, Exclusions (DICE: Declarations, Insuring Agreement, Conditions, Conditions, Exclusions)
Declarations (DICE) declarations page, sheet, or face of the policy. Tailors the policy to meet specific needs of an insured, contains the six P's
Six P's Policy number, Parties (insurer, insured, mortagee or lien holder), Property description and location, Policy term (effective and expiration dates), Policy limits and deductibles, premium
Limits of liability: max amount of coverage agreed to be paid per loss aggregates: max amount of total of all claims paid per policy period (usually found only on commercial policies)
Deductable aka: retention or retention limit. requires the insured to pay a specific amount or percentage of the loss. Insurer pays in excess of deductible, effect of adding deductible; reduces premium, reduces frequency of claims
Premium consideration paid by the insured. each day that passes the insurer earns more of the premium , if policy is terminated prior to expiration date the unearned premium must be returned
Insuring agreement contains the insurer's promise to pay, includes the covered perils of a policy. Named, Open, and a combinatio of named and open PERILS
CONDITIONS (DICE) Contains the duties and rights of the parties (ex: insured's duties in event of a loss, insurer's subrogation rights, mortagee rights. Also includes termination provisions, loss settlement, territory where coverage applies.
After a loss insured must provide insurer with prompt notification, cooperation with the insurer, submission of proof or sworn statement (within 91 days in TX), if required.
After a loss (property policies) Property policies require insured to protect property from further damage and provide an inventory of damaged property
INSURER Subrogation rights If insurance company pays for the damages caused by someone else, then the insurer now has the right to go after the responsible party. the deductible is returned to the insured party if the insurer is able to collect from the at-fault party
Mortgage Rights Mortgagee (Lender): pay the premium/file a proof of loss, receive claim payment up to the insurable interest
Created by: adap686