Montgomery Insurance School: Intro: risk and loss – Flashcards
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Two Party Contract
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(referring to Property insurance) A contract between holder/policy owner and the insurance company
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Property
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tangible items: policy owner's stuff building, inventory, etc.
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Causality
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(aka liability) the 'other's' body and/or property
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Third party contracts
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contracts between policy owner, insurance company and unkown third party (victim/other)
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Personal Lines insurance
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Home and Auto Insurance
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Personal Lines insurance
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P & C policies to cover the risk exposures of an individual and family: auto, home, boat etc.
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Commercial Lines Insurance
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A contract designed to protect business: P & C of office and clients' liability
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Indemnify
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Compensation of loss
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Insurance
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A contract that allows for the transfer of the policy owner's risk to a company that will indemnify losses suffered by the insured.
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Insured
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Covered by the insurance policy/plan
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First Named Insured
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The one who owns the insurance policy
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Insurance Company
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Insurer selling to the policy owners so they are insured
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Cancellation
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Non-renewal= end of contract. Only allowed by the policy owner.
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Prorata Refund
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Partial (50%) refund on the policy owner's cancellation of the contract if owner prepays and insurer cancels part of the way through the contract
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Short- Rate Refund
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If the policy owner or insured cancels at mid-term the owner pays a penalty
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RISK
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chance of loss; uncertainty of loss; the probability that loss will occur.
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Insurance companies will only insure
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pure risk (not created risk)
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LOSS
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insurance only address financial loss not sentimental value
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Direct Loss
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Initial loss (house burnt down)
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Indirect Loss
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Loss sequencing from direct loss ($$ for hotel when you lose your house)
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Mitigating Risk of Loss
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ways of dealing with the risks/opportunities for loss
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Retain risk
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Deductible: controls overutilization
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Transfer Risk
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Allow someone or something else to take on one's risks (what the insurer does for the insured: takes on their risks)
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Predetermined Limit
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Lower of the loss or the limit coverage to the level of your insurable interest
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Exclusion: Catastrophic Losses
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Losses happen to a lot of people simultaneously
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Exclusion: Inherent Vice
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You don't insure something that will happen naturally: things rust, fall apart etc.
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Exclusion
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CPC catastrophic Predictable (inherent vice) Covered Elsewhere
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Endorsements
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Extra coverage
