insurance terms

insurer will not be responsible for the amount which is greater than the limit of liabilty stated on the declaration page

the sum and circumstances the insurer charges the insured to restore a policy to its initial face value after the claim

• 1. the time and cause of loss
• 2. any other insurance policy that may cover the loss
• 3. any appropriate evidence of the loss

the valuation method used to pay losses

if the insured and insurer do not agree on the amount of the loss, they demand an appraisal. the appraisal either agrees or submits the difference to the umpire.

the time frame the insurer must pay a loss to the insured after receiving the proof of loss and agree with it. For personal lines forms the time frame is 60days; commercial 30days

the insured may not abandon the ownership of the property to the insurer for repair

insurer will not grant any coverage to the bailee

writtent documents attached to the policy to broaden or restrict coverage

name appears in the first polisiton of the Declaration page of a policy; has certain rights and duties that does not apply to the other names listed on the declaration page

any person or organization added to the policy by endorsement; has the same coverage as the named insured

a specified dollar amount that an insured must bear; the higher the deductible, the lower the premium

used to encourage the insured to purchase and maintain the insurance to value and to establish the basis of payment if the insured fais to maintain a specifed percentage of value

• Formula
• amount of insurance carried X amount of loss
• amount of insurance required

the basis from which all fire policies are written; insures against losses caused by fire, lightning and by removal from premises endanger by the perils insured against

Physical hazard - physical condition that increases the probability of loss

Moral hazard - dishonesty

Morale hazard - indifference to loss

Legal hazard - an increase in probabilty that the loss will occur because of court actions

the substitution of a small certain expense for a large uncertain loss

the first party; protected by an insurance policy

the second party; indemnifies for losses

uncertainity concerning a loss

a possibility of loss or no loss; insurance is designed to protect pure risk

a cause of potential loss

determination of what types of protections are required to meet insured's meets

using techniques that prevent potential loss like burglar alarms and sprinkler systems

after the exposure is identified, some risk can be eliminated entirely

insure only to the risk that can cause financial instability

transfer the uncertainity of loss to an insurance company from an insured

investments of a large number of people

• Risks must be
• 1. homogenous units to make losses resonably predictable
• 2. accidental
• 3. definite in terms of time, place, amout and cause
• 4. cause financial hardship
• 5. exclude catastrophic perils

the larger the number of exposure considered, the more closely the lossess reported will equal the underlying probability of loss

insuring the risks which are more prone to losses than average risks

device used by insurers to transfer or share in a risk; insurer originating the risk (the ceding company); the insurer who share in a risk (reinsurance insurers)

the ceding company transfer the amount of insurance in excess of the retention level immediately and automatically upon receipt of the premium

allow the opportunity to exchange advice about the underwriting of each case; may result in higher premium

potential for financial hardship in the event of loss; property ownership is the evidence of insurable interest and must exist in every enforcable contract

the insured is restored to the same financial condition as prior to the loss

• Primary function - selection of risk
• protect the insurer against adverse selection
• charge an adequate premium for the risk
• producers engage in field underwriting

• In evaluating a risk must examines;
• the nature of the risk
• hazards are present
• outside factors that affect the risk
• past losses that had occured

accounting measurements of insurer's future obligation to its policyholders

estimate of the amount than an insurer will pay for a claim

dividing the paid losses plus loss reserves by total earned premium

divinding an insurer's total operating expenses by total earned premium

• 1. class ratings
• 2. experience ratings
• 3. individual rating
• 4. judgement rating
• 5. loss cost rating
• 6. manual rating
• 7. merit rating
• 8. retrospective rating.
• 9. schedule rating

a group of insureds who have similar exposurers and experience

based on the actual loss during a specified period of the past

used when there are not enough similar insureds to support a class rate

based on underwriter's judgement and experience

used on risks on which insurer may not have enough data to develop the rate, other than expenses and profit

rates containe in a manual published by the insurer

rewards an insured who takes measure to decrease the potential loss

insured's premiums are adjusted at the end of policy period based on formula of debits or credits for losses that have occured during the period

using charges and credits to modify the class rate based on the nature of particular risk being rated

include continuous or repeated exposure to harmful conditions

terminatio of a policy before its expiration date

when an insurer cancels the policy, the unearned premium is refunded to the insured on pro rata basis

when insured request canellation, the insurer retains a portion of the unearned premium and the unearned premium is refunded to the insured on a short rate basis

cancellation of a policy on the date the policy becomes effective

termination of an insurance policy after its expiration date

the cause that sets other causes in motion; multiple causes combine to produce loss or damage

a fire that leaves the area in which it was intended to be kept

a condition or defect that exists within the policy itself; insurance policy exclude inherent vice

a temporary document that provides the insurance coverage until a policy is issued, contains perils covered, amount of coverage, effective date and name of insurer; DOES NOT STAEE THE PREMIUM AMOUNT

a disputed claim is decided by a neutral third party

the right of insurer to take possession of damaged property after the loss has been paid

a written document attached to the policy by the insurer to broaden or restrict coverage

2 causes resulting in a loss; one cause is covered, the other is excluded, the insurance is covered unlesss the policy specifies

a situation in which at least 2 policies provide identical coverage for the same risk, each policy pays the proportion of a loss to its limit

2 policies covered for a property but since the limit of coverage, the insured may not be fully covered in the event of a loss

an individual or organization who control the property of another for servicing

an individual who owns the property that has been taken care of the bailee

property coverage above the primary insurance; does not pay until the primary insurance has been exhausted

a property that contains personal propety but has no occupants

a property that contains neither personal properties nor occupants

• Direct loss - damage to a property in which proximate cause is an insured peril
• Indirect loss - a second or financial loss occuring as a result of financial loss

1. named peril - coverage applies only to losses stated in the policy

2. Open peril - coverage applies to all losses caused by all perils

the policy pays current replacement cost less depriciation (25%)

the policy repays the full cost to repair the damaged property without depreciation

the coverage amt at the time of loss be at least equal to 80% of cost of replacement; replace with like kind and quality

replacement with less costly property with functionally equivalent

reimburstment to the insured according to the price a willing buyer would pay for the property purchased from a willing seller

insuring various classes of property whose actual value or replacement cost is difficult to determine; insured and insurer agree at the time of insuring

insuring an unusual or valuable piece of property that establishes at the time of insuring a maximun amount of isnurance to be paid in the event of loss

an insurer to pay full amout of insurance on an insured structure in the event of loss

• Open policy - value is not agreed upon
• Valued policy - value is agreed upon at the time of insuring

the rights, rules, and obligations of the insurer and insured to follow throughout the policy period

if the insurer broadens the coverage with no increase in premium, boradened coverage automatically applies to the policy without the need for an endorsement

insured may not transfer the right of ownership to another party without the insurer's written consent

the legal process the insurer seeks recovery of the amount paid to the insured from a third party resoponsible for having caused the loss; prevents insured from collecting twice for the same loss