Académique Documents
Professionnel Documents
Culture Documents
Perils
• Perils - causes of loss
• Named perils - listed in policy
• If not listed, not covered
• Open perils - all perils not excluded by policy, all risk agreement
• Lists perils that are not covered
• If peril is not excluded, then its covered
Contract Terminology
• Insurance is a contract to indemnify loss
• Indemnity - restore what you had
• Loss - uncertain future event
• Insurable interest
• Time of sale - . when policy goes into effect
• Time of loss - cant collect after sold house
Risk
• Speculative - loss or gain
• Pure - loss only (insurable)
• Retain - loss occurs, pay for everything out of pocket
▪ Ex. Can afford worst case scenario so no need to buy insurance
▪ Higher deductible - lower premium
▪ Don’t buy insurance or increase deductible
• Reduce
• Avoid
• Transfer - paying premium for uncertain loss, claim,
▪ Sharing risk
• Reinsurance
• Coinsurance
Reinsurance
• Primary/ceding company
• Retention limit - maximum amount of risk company can assume on any one policy
• Company has to share risk with other companies
Coinsurance
• DID/SHOULD * Loss = Claim - deductible
• DID - coverage purchased
• Should - require minimum by ins co (80%)
• Loss - damage amount
• Deductible may or not be listed
Premium Determination
• Pure rate - every insurance charges same premium
• Every company invests differently
• Portion of every premium is placed in reserve account to cover current/future expected losses
• Pure rate - interest + expenses = gross premium
Solvency
• To be solvent insurance companies needs
• Minimum paid-in capital
• Surplus
• Reserves - liabilities
• Guarantee Association (CIGA) - if company goes insolvent, gets coverage for bankruptcy
• Do not use existence of any guarantee association as inducement or enticement to sell policy
• Every insurance company doing business is required to be member of CIGA
Contract
• Consideration - act for a promise
• Legal purpose - protect against the loss; to not get a gain
• Agreement -
• Competent parties - people in the right mind
Policy
• Declarations - first page, summarizes coverages
• Insuring agreement/clause - type of policy bought
• Conditions agreement/clause
• Duties/rights of each party
• Exclusions
• Definitions - defines insured contract, bodily injured etc
• Endorsement - features and benefits for additional charge
Insurers
• Location - where did company originally domicile
• Domestic - within state
• Foreign - out of state
• Alien - outside US
• Approval
• Certificate of authority - license to transact in state
• Admitted/authorized
• Non-admitted - did not get approved to transact
• Mutual
• Raises capital by selling policies
• Participating policies
• Non-taxable dividends paid to policyholders
• Demutualization - mutual transforms to stock
• Stock
• Raises capital by selling stock
• Non participating policies
• Taxable dividends paid to shareholders
• Mutualization - stocks transforms to mutual
• Fraternal - non profit, business engage in charitable activities
• Reciprocal/ inter-insurance exchange - unincorporated
• Pays premium for own account and vote for attorney in fact
• Lloyd's of London - insurer
• Provide physical location for buyers and insurers get together
• Risk Retention Group - entities insuring risk
• Government - insurer
• Workers compensation
• Medicaid/Medical
Valuation Clause
• Replacement cost - new
• Actual cash value = RC - depreciation
• Items in the house - clothes, tv, jewelry
• Replacement cost without depreciation = replacement cost
• Market value = sold
• Stated or valued policy - think of fine arts or antique cars (appraisals)
Property Casualty License
• Insurance agent
• Person - any legal entity
• Insurance broker - person
• Insurance solicitor - natural person
• Excess or surplus lines broker - allow place business with non admitted companies
• Special lines surplus lines broker
Representation
• Oral
• Writing
• Best knowledge
• Promise of future
• Agrees with assertions and stipulations
• If does not agree, said to be false
• May be altered or withdrawn before contract goes intro effect
Warranty
• Implied - assumed under the contract
• Express
• Statement of fact
• Carries most weight in insurance
Definitions
• Adhesion - insurance contract is stuck to terminology of contract and things may be unclear
• Ex. Flood is defined by accumulation of water. Damage was from water by wind. Definition
of flood unclear.
• Aleatory - unequal distribution
• May get more or less for what you paid for
• Law of large numbers - measure past to predict the future
• Personal - between insured and insurer
• Subrogation - substitution
• Unilateral - one-sided promise, client can cancel policy anytime
• Utmost good faith - rely on representation of party without attempt of conceal
Coverage
Concurrent policies
• Broad
• Broad
• Similar coverages
Nonconcurrent policies
• Broad
• Special
• Perils don't match
• Different coverages pay on primary and excess
Tort Law
• Legal wrong
• Not include crime, breach of contract
• Negligence - duty to act/not act
• Breach of that duty
• Losses suffered
• Ex. Watching house burn without doing anything
• Proximate cause - uninterrupted chain of events up to loss
• Occurrence - one time event
• Tort feasor - someone who commits tort
Loss Settlement
• Liability = arbitration
• Bother parties choose arbitrator
• Arbitrator choose third party
• Third part makes decision
• Property = appraisal
• Both parties choose appraiser
• Appraiser choose umpire
• Umpire makes decision