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vocab
terms
| Term | Definition |
|---|---|
| Insurable Interest | You must have interest into the item/person you are insuring, meaning you get insurance on cars you own, house your own, etc. For a person, you need to be related/married. The memory trick is BB$. You need BLOOD, BUSINESS or MONEY to get insurance. Friend |
| Underwriting- | is known as the Risk Selection Process. Insurance is the transfer of risk so it’s important to fully assess how much risk a person has to transfer. A person with multiple accidents is more likely to have more claims, so they would be transferring more ri |
| Perils- | Perils are the Causes of Loss, the reason you file a claim. A peril is the fire, lightning, wind, hail. Insurance does not cover all possible perils. |
| Named Peril- | A policy that will only cover perils that are named/listed on the policy. If a peril is not named, it’s not covered. |
| Open Peril- | A policy that will cover any perils except what’s excluded. This is a policy that will list out what is NOT covered. |
| Vacancy- | a house is vacant when there are NO people and NO stuff. At 61 days of being vacant, a house will begin to lose coverage |
| Unoccupancy- | a house that has stuff, but NO people, however the people do intend to come back like going on a vacation |
| Direct Loss- | the direct physical damage to property, which includes Proximate Cause of Loss too. |
| Indirect Loss- | the losses that happened because of the direct loss/consequences of the direct loss. A house burning down is the direct loss, and the cost of having to stay at a hotel because of it is the indirect loss. |
| Blanket Insurance- | A single policy that covers multiple classes. |
| Specific Insurance- | A policy that covers a certain thing or its own amount of coverage. |
| Fire Restive- | a house that is built with material that can resist burning down for up to 2 hours. Fire resistive is the best rating. |
| Frame | -A building that is made of wood which is flammable. Frame is the worst rating. |
| Loss Valuation- | a factor in determining the premium |
| Replacement- | the brand-new price to replace with similar/same kind or quality at today’s prices. The original price paid is not considered. |
| Actual Cash Value- | the used value to replace things and is calculated by knowing the Replacement value and then subtracting wear and tear (depreciation). |
| Market Value: | What a willing buyer would pay a willing seller |
| Functional Replacement- | The modern less expensive price to make repairs like using Drywall instead of plaster |
| Agreed- | A policy that sets the replacement price of an item based on a fair Valuation of the item. Agreed is used for an item that doesn’t fluctuate much in value. |
| Stated- | A policy that sets a Maximum limit that the insurer will pay up to if the item suffers a covered peril. |
| Declarations- | the first page of the policy and is a policy summary of who and what is covered, by what company and for what amount |
| Definitions- | explains certain meanings of words used in the policy. |
| Insuring Agreement/Clause | -Lists the perils insured against as well as contains the promise to pay and the parties of the contract (Parties, perils, promise, period) |
| Additional/Supplementary Coverage- | is built in extra coverage to all the policies at no additional cost |
| Conditions- | a part of the policy that lists the rules, duties, obligations, ways of behaving for both the insured and insurer |
| Exclusions- | a part of the policy that lists what is NOT covered |
| Endorsements | -written changes made to amend the policy, if added coverage via an endorsement, it will raise the premium |
| Certificate of Insurance- | A document that states the insured has coverage |
| Insured- | an insured is anyone covered by the policy |
| First Named Insured | In a Commercial (business) policy, the first named insured is the designated person who manages the policy for the business |
| Named Insured- | the person who bought the policy and is listed on the Declaration Page |
| Additional Insured | -Mortgage/lien holder added via an endorsement in regard to a specific interest (mortgage/car loan) |
| Policy Period- | states how long a policy covers an insured |
| Policy Territory- | states where the coverage is active (US, Canada, US territories) |
| Policy Limits | -the most amount of money the insured can collect under the policy |
| Limits of Liability: | The max amount of money the insurer is liable to pay |
| Cancellation- | terminating an in force policy |
| Nonrenewal- | termination of a policy at expiration |
| Deductibles- | the amount of money the insured pays first before the insurer pays |
| Coinsurance- | a rule that says an insured needs to carry at least 80% of the replacement cost of the home in order to have the full claim covered. If an insured carries less than 80%, the insurer will use the coinsurance equation to reduce the amount they pay for a cla |
| Other Insurance- | a provisions in the policy that explains if there is more than one policy covering a loss, they will all need to pay a fair share of the loss to protect indemnity |
| Aggregate Limit: | The max available money on the policy for all claims |
| Per Occurrence: | the sublimit of liability that sets a maximum for all claims arising from one accident/occurrence |
| Per Person: | the max available limit in an accident for one person |
| Split Limit: | separately stated limits of liability-Per person/per accident |
| Combined Single Limit: | a single dollar limit available for all claims from one accident without breaking it up by person, bodily or property |
| Theft: | the act of stealing |
| Burglary: | breaking and entering, forced entry causing damage |
| Robbery: | stealing while a person is a witness/victim |
| Insurance | is the transfer of risk of loss |
| Risk | is the uncertainty or chance of loss occurring |
| Pure Risk | is loss or nothing, no chance of gain, Only Pure Risks are insurable |
| Speculative | loss or gain/win or lose: for example, gambling |
| Handling Risk: | Sharing, Transfer, Avoidance, Reduction, Retention( I am a STARR @ Handling Risk) |
| Exposure | is the unit of measurement to determine rates for an insured based on how risky they are |
| Hazards | increase the chance of the risk occurring |
| Physical Hazards | are material and structural things you can see and touch |
| Moral Hazards | is lying on purpose, example: lying on the insurance application |
| Morale Hazards | is a sense of carelessness |
| Peril | is the cause of loss like a fire or accident. |
| Loss | is the reduction or disappearance of value. |
| Indemnity: | restore the insured to their previous financial condition after the loss |
| The Law of Large #’s says | the more stats you have to look at, the more predictable losses will be. |
| Certificates of Authority | allow insurer to sell in that state making them admitted and authorized |
| Stock Companies | are owned by shareholders, issue non-participating policies and dividends are taxed |
| Mutual Companies | are owned by policyholders, issue participating policies, dividends are not taxed |
| Reinsurance | is when a company indemnifies another. Indemnify is to make whole again after a loss. |
| Domestic | Insurer is a state they are incorporated (headquartered and selling) Hint: One State |
| Foreign | Insurer is a state where they are not head quartered, but they are selling Hint: Two States |
| Alien | is completely outside of the United States Hint: Country |
| Law of Agency | agent represents the insurer and the knowledge of the agent is knowledge of the insurer |
| Agent Authority/Express | is written/contract. |
| Agent Authority/Implied | is assumed by insurer. |
| Agent Authority/Apparent (perceived) | is assumed by customer (business cards/letterhead/stationary) |
| Fiduciary Responsibility | agent submits premium collected to the insurance company |
| Elements of a legal Contract: Agreement: | Known as Offer and Acceptance |
| Elements of a legal Contract: Offer | Customer submits and application |
| Elements of a legal Contract: Acceptance | insurer issues policy |
| Elements of a legal Contract: Consideration | Both parties bring something of value |
| Elements of a legal Contract: Consideration on the side of the insured | Application + Premium |
| Elements of a legal Contract: Consideration on the side of the insurer | promise to pay a claim |
| Elements of a legal Contract: Competent Parties | Not under the influence of drugs or alcohol, sound mind, legal age (felons are ok) |
| Elements of a legal Contract/Legal Purpose: | Cannot be against public policy/break the law |
| Adhesion: | Insurer write the policy, customer either takes it or leaves it |
| Aleatory: | Unequal Exchange (customer pays small monthly premium, insurer pays very large claim) |
| Personal: | Between the customer and the insurer |
| Unilateral: | One sided promise, only the insurer is legally bound to do anything |
| Conditional: | Both parties have rules/duties they must follow/do |
| Reasonable Expectations: | A customer can expect the coverage if an agent implied it though during the sale |
| Representation: | statements that are believed to be true but are not guaranteed to be true |
| Misrepresentation: | an untrue statement |
| Warranty: | absolutely true statements |
| Concealment: | with holding or hiding on the application |
| Fraud: | deceive or lying to cheat the insurance company |
| Part A-Liability | Pays to others that you injure in an accident. Limits are usually either split limits, or combined single limit. |
| Part B- Medical Payments- | Pays to you and your passengers in your car for injuries that you have from an accident. This is usually a small limit, $3,000 to $10,000 per person. |
| Part C-Uninsured/Underinsured Motorist- | Pays to you, when you are injured by somebody else, who either does not have any or enough insurance. |
| Part D- Damage to Your Auto- | pays to you, to get your car fixed or replaced. |
| Part E- Duties after a loss- | specifies the rules that you need to follow after an accident. |
| Part F-Policy Provisions | explains the rules that the insurance company follows. |
Created by:
kita1506
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