Flashcards

With absolute liability, also called strict liability, there is no requirement to establish negligence, lack of care or recklessness. If a failure to act or specific actions lead to losses, injury or damages, the defendant can be held liable for an absolute liability tort.

One of the four elements required to have a legal contract. Acceptance is often made by the underwriter after reviewing the applicant’s application. The underwriter may make a counter-offer, in which case acceptance is made by the applicant.

Actual cash value is replacement cost minus depreciation.

Insurance policies are contracts of adhesion. This means that if there is a lawsuit related to ambiguity in the contract it will always be decided in the interest of the insured, the insurer must stick to that interpretation. If they had wanted it interpreted otherwise, they should have been more clear.

An admitted insurer can legally do business in a state. The insurance company must meet the state’s legal and financial requirements to be an authorized insurer.

Adverse selection is when higher-risk individuals, knowing they’re more likely to have a claim, are more inclined to buy insurance than lower-risk people, creating an imbalanced pool for the insurer and potentially driving up premiums for everyone.

An insurance company representative licensed by the state who solicits and negotiates contracts of insurance and provides service to the policyholder for the insurer. An agent can be an independent agent who represents at least two insurance companies or a direct writer who represents and sells policies for one company only. Agents are also referred to as insurance producers.

Insurance contracts are aleatory, the outcome depends upon chance.

An alien insurer is one whose home office is in another country, but that is doing business in this state.

Apparent authority is the appearance of power on behalf of the insurer through the actions or use of identifying materials by the agent (producer), such as company advertising material. This type of authority occurs when a principal permits an agent to act on its behalf without either expressed or implied authority.

A formal request, typically a written or electronic form, that an individual or business submits to an insurance company to obtain coverage.

The authorization for an agent (producer) to act for or represent an insurance company. An agent must have a minimum of one appointment but may have as many as they wish.

In cases where the policyholder and the insurer cannot agree on the amount of loss, an appraisal process may be initiated. This process is designed to resolve disputes fairly and impartially, without resorting to litigation.

An authorized insurer can legally do business in this state.

Automobile insurance covers the loss exposure presented from the ownership and operation of a personal automobile. Coverage is provided for bodily injury and property damage to others and optionally, coverage for losses to a consumer’s automobile and occupants of the automobile. Coverage may be available for motorcycles, recreational vehicles, and pick-up type trucks licensed for use on public roads.

Avoidance is a risk management tactic whereby the risk of loss is prevented in its entirety by not engaging in activities that present the risk.

A binder provides temporary insurance coverage between the time of application submission and premium payment and policy issuance.

A blanket policy is a type of insurance policy that can cover more than one item at a single location (think a house and farm equipment), or multiple items at different locations (such as rental properties owned by a landlord or multiple business locations).

A boycott is a concerted refusal to deal or a group action designed to pressure another party into doing something by withholding or enlisting others to withhold patronage or services from the target. It can be a method of shutting a competitor out of a market or preventing entry of a new firm into a market. Boycott is an unfair method of competition that is prohibited under state law.

A business owners policy covers small and medium-sized businesses, basically consisting of integrated property coverage, general liability coverage, and some additional types of coverage that most businesses require. Optional coverages can also be added to meet the specific needs of the business. Auto and worker’s compensation are generally excluded.

Cancellation occurs when the insurer terminates a policy during the policy period.

A casualty line of authority is defined as insurance coverage against legal liability, include that for death, injury or disability or damage to real or personal property. There are several types of insurance products offered under this line.

Coercion is an unfair trade practice that occurs when a producer applies physical or mental force or threat of force to persuade another to buy insurance.

Coinsurance/insurance to value exists in a property policy to ensure that the insured carries adequate limits. When the coinsurance clause is met, partial losses are paid in full, up to the limit.

Commercial general liability insurance insurers against financial loss due to act or omissions of the insured which cause financial or bodily harm to others. Five forms of liability are covered: premises, operations, products, completed operations and certain limited forms of contractual liability.

Commercial multiple peril is a package insurance policy that provides both liability and property coverage for businesses and other organizations.

Commercial property coverage applies to real property (buildings, factories, and warehouses) and business personal property (furniture, fixtures, and inventory). It commonly provides time element coverage such as loss of income.

The head of the state’s Department of Insurance. The Commissioner may also be referred to as the Director or Superintendent depending upon the state. The Commissioner’s job is to supervise the insurance business in a state and administer that state’s insurance laws.

To be legally valid a contract must be entered into by competent parties. This means that the parties understand the contract that they are agreeing to.

Concealment is failure to disclose a material fact.

Conditions in a property insurance policy outline the obligations and responsibilities of both the insurer and the insured. These provisions set forth the rules and procedures that must be followed to maintain coverage and ensure the proper handling of claims.

Consideration is an exchange of value. Consideration for the insured is the premiums paid plus the answers to the questions on the application. Consideration for the insurer is the insurer’s promise to pay. Consideration does not have to be equal.

The consideration clause is the part of the insurance contract that sets forth the initial premium payment and renewal premiums as well as the frequency of the premiums due.

In most cases, an insurance policy. A policy is a contract between the insurance company and the policyholder.

Insurance contracts are contracts of adhesion, where one party (the insurer) states the provisions of the contract while the other party (the insured) is not involved in its drafting, but whose participation is in either agreeing with it or declining it.

Crop insurance is coverage for crops in the event of loss or damage by insured perils, including hail, fire, and lightning. Prior to the passage of the Federal Crop Insurance Act in 1938, it was virtually impossible to obtain insurance protection against crop damage. Today coverage is available from the Federal Crop Insurance Corporation as well as from private sources. Exclusions from coverage include the perils of war and nuclear disaster.

The declarations section provides essential information about the insurance policy, including the insured’s details, coverage limits, and policy period.

The deductible is an amount that must be paid by the insured on a property claim before the insurer will pay anything.

Defamation is being false or maliciously critical of an insurer’s financial condition.

A direct loss occurs as a result of a covered peril. Direct losses are tangible losses that can be touched and seen.

A domestic insurer is one whose home office is in this state. The domestic insurer is doing business in this state.

A dwelling property policy protects the physical structure of a home (walls, roof) and sometimes other structures on the property, like a garage, from covered perils like fire, wind, hail, and vandalism, often using DP-1, DP-2, or DP-3 forms with varying levels of named peril or open peril (DP-3) coverage.

Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most homeowners’ and dwelling fire insurance policies do not include earthquake damage. The deductible on earthquake insurance is expressed as a percentage of the policy limit.

The date on which an insurance policy becomes effective.

There are four elements required to have a legal contract: C – O – A – L. Consideration, offer, acceptance, and legal purpose and capacity.

Not all risks are insurable. Pure risk involves no chance of gain. Pure risk is insurable. Speculative risk, like gambling, involves a chance of gain or chance of loss. Speculative risk is not insurable.

Employment practices liability insurance is insurance protection for employers to cover the cost of loss caused by, or due to a liability claim from an employee for such offenses as discrimination, sexual harassment, wrongful termination or other employment related claims.

Endorsements are added to insurance contracts to modify the terms of the contract. Endorsements may add, delete, remove, or change coverage. Endorsements are also called riders.

The entire contract is admissible in court. The entire contract includes the policy and anything else attached at issue, such as the application and any riders. The entire contract clause protects both the insurer and the insured. No changes may be made to the policy after issuance unless both parties agree to the change.

Equipment breakdown insurance is commonly referred to as boiler and machinery insurance. It covers the costly physical and financial damage that can result from equipment breakdown. Equipment breakdown insurance can pay for: direct property loss (the cost to repair or replace damaged equipment), lost business income and costs for temporary replacement equipment, other expenses incurred to limit the loss or speed restoration of operations, loss value of spoiled products or materials, and business recovery expenses.