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Peril
Potential cause of loss i.e. acident, fire, theft
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Hazard
Anything that increases seriousness or liklihood that a loss will occur
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Direct loss
Loss that is directly related to a particular peril i.e. fire damage to an apartment building
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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
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Salvage
Insurer can reduce the claim if they pay a loss for the insured
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Abandonment
Insured cannot abandon the property to the insurance company for the full-insured value
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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
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Standardized Policies
Forms filed by the Insurance Services Office Inc to the individual insurance departments for approval
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Deductible
Part of the loss that the insured is responsible for paying
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Vacancy
Building is void of contents and people. Coverage is limited but additional Vacancy Permit coverage can be purchased.
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Unoccupancy
Building is void of people. Usually will not affect coverage
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Assignment
Policies cannot be assigned to another party without the insurance company's consent.
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Liberalization
Broadened coverage that requires no additional premium is extended to similar policies or endorsements
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Binder
Temporary evidence that coverage is in effect until the policy is issued. Either oral or written
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Primary Insurance
Policy that pays first if more than one policy is in effect
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Excess Insurance
Last resort coverage. Pays only when other coverage has been exhausted
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Accident
Sudden an unforseen event resulting in a financial loss.
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Occurence
Sudden and unforseen event resulting in financial loss, or continuous/repeated exposure to an event that results in financial loss
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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
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Arbitration Clause
Usually used in auto policies to resolve arguments for uninsured/underinsured motorist claims for bodily injury
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Subrogation clause
Insurer pays a covered claim on behalf of the insured that is caused by a third party
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Other Insurance Clause
Specifies obligations of insurer when other coverage is used. Each insurer pays for its percentage of the claim
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Certificates of Insurance
Evidence that coverage is in effect with general summary of coverage
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Transacting Insurance
In most states, any person who has contact with an insured about insurance matters must be licensed.
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Indemnity
No profit from loss. Claimant should only be restored to the approximate financial condition that existed before the loss
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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
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Proof of Loss
Form filed by the claimant stating the property has been either lost or damaged by a covered loss
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Ambiguity
Language that is vague and creates doubt. If an ambiguous policy is disputed in court, the courts usually favor the insured
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Contribution By Equal Shares
"Other Insurance" condition where all insurers contribute equally to a loss
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Nonconcurrency
Properties that are covered by multiple policies that aren't idendical as to coverage
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Cause of Loss Forms
States perils that are covered
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Named Peril
Lists specific perils that are covered under the policy
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Open Peril
All perils are covered except those listed in the exceptions section
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Actual Cash Value
Cost of replacement minus the decrease in value over time
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Replacement Cost
Current cost to purchase a new replacement for what was lost
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Funcional replacement cost
As reasonably close to the replacement of the lost or damaged item as possible
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Market Value
Price that the market will support
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Agreed value
Valued agreed upon by the insurance company and the insured
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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.
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Valued Policy
The limit of the policy is set as a specific amount to be paid if a total loss occurs
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Lein Holder
Holds on to assets when money is owed. If those assets are sold, owed parties must be paid first
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Specific Basis for Insuring Property
Separate limit for each insured item i.e. one limit on the building and one for its contents
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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
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Reporting Form
Used by insured to report values of the insured contents to the insurance company to determine coverage and premiums
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Coinsurance Clause
A certain percentage of property must be covered in order to receive full reimbursement for a loss
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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
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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
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No Benefit to Bailee
Policy protects the insured and not someone who is in possession of their property
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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
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Constructive total Loss
Cost to repair is more than the value of the vehicle. i.e. "totaled"
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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
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Gross Negligence
Willful and wanton negligence or misconduct without the slightest degree of care
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Tort
Civil wrong that violates the rights of others.A person becomes legally liable by committing a tort
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Punitive Damages
Often awarded by the court and intended to punish the defendant to discourage others from behaving in a similar manner.
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Contributory Negligence
If an individual contributes to their own loss in any way, then another cannot be held liable for the loss
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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
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Assumption of Risk
Applies when a person knowingly exposes themself to danger or injury
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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
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Statute of Limitations
Laws as to when certain types of lawsuits must be filed
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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
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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
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Single Limit
Policy limit that pays a single amount as the max liability of the insurer for any one accident occurance
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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
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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
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Physical Hazard
Any hazard arising from the material, structural or operational features of the risk itself, aside from the people owning or manging it
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Moral Hazard
Morals or habits that increase the probability of a loss from a peril
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Morale Hazard
Insured's indifference to loss because of the existence of insurance
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Pure risk (insurable)
Only the possiblity of loss
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Speculative Risk (not insurable)
Profit or loss is possible i.e. betting on a horse race
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Static Risk (insurable)
Losses caused by irregular action of nature, by the mistakes or misdeeds of a person
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Dynamic Risk (not insurable)
Associated with a changing economy
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Fundamental Risk (not insurable)
Affects the entire economy or a large number of persons or groups within the economy
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Particular Risk (insurable)
Risk that affects only the individual and not the entire community or country i.e. theft of a stereo
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