question

Abandonment

answer

the abdication of insured property into the hands of another, or into the possession of no one in particular

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Absolute Liability

answer

Liability that arises from an extremely dangerous situation. Often found in cases involving explosives. Also known as "strict" liability. For example, you are absolutely liable if you keep a wild animal as a pet.

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Accident

answer

an unplanned, unforseen event which occurs suddenly and at a specific place

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Actual Cash Value

answer

the required amount to pay damages for property loss, which is calculated based on the property's current replacement value minus depreciation

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Additional Coverage

answer

a provision in an insurance policy that allows for more coverage for a specific loss expense without an increase in premium

question

Additional Insureds

answer

individuals or business that are not named as insured on the decleration page, butr are protected by the policy, usually in regard to a specific interest

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Adhesion

answer

A contract offered on a "take-it-or-leave-it" basis by an insurer, in which the insured's only option is to accept or reject the contract. Any ambiguities in the contract will be settled in favor of the insured.

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Admitted Insurer

answer

An insurer to which a state insurance department has granted a license to do business within that state.

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Adverse Selection

answer

In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.

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Agent

answer

an individual who is licensed to sell, negotiate, or effect insurance contracts on behalf of an insurer

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Aggregate Limit

answer

the maximum amount an insurer will pay for all covered losses during the covered policy period

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Agreed Value

answer

A property policy with a provision agreed upon by the insurer and insured as to the amount of insurance that represents a fair valuation for the property at the time the insurance is written.

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Aleatory

answer

A contract in which participating parties exchange unequal amounts. the amount the insured will pay in premiums is unequal to the amount the insurer will pay in the event of a loss.

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Alien Insurer

answer

an insurance company that is incorporated outside the U.S.

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Apparent Authority

answer

The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.

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Appraisal

answer

an assesment of property to determine either the correct amount of insurance to be written or the amount of loss to be paid

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Arbitration

answer

A process, agreed to by parties to a dispute in lieu of going to court, by which a neutral person or body makes a binding decision

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Assignment

answer

the transfer of legal right or interest in an insurance policy, in P&C ususally only valid with prior written consent of the insurer

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Authorized Insurer

answer

An insurance company that has qualified and received a Certificate of Authority from the Department of Insurance to transact insurance in the state.

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Auto

answer

a land motor vehicle, trailer or semi-trailer designed for use on public roads

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Avoidance

answer

A method of dealing with risk by deliberately keeping away from it (e.g. if a person wanted to avoid the risk of being killed in an airplane crash, he/she might choose never to fly in a plane).

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Bailee

answer

One who holds the personal property of another for a specific purpose.

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Beneficiary

answer

the one who recieves the proceeds from an insurance policy

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Binder

answer

A temporary insurance contract that forms an oral or wirtten agreement between the insurance company and the customer.

question

Blanket Bond

answer

a type of bond that covers losses caused by dishonest employees

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Blanket Insurance

answer

A single property insurance policy that provides coverage for multiple classes of property at one location, or provides coverage for one or more classes of property at multiple locations.

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Bodily Injury Liability

answer

Insurance that protects a driver from claims resulting from injuries or deaths for which the insured is at fault

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Boycott

answer

An unfair trade practice in which one person refuses to do business with another until he or she agrees to certain conditions.

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Builder's Risk Coverage Form

answer

This coverage form provides coverage for buildings that are under construction. Can also be used to cover a building while additions and alterations are being made to the structure.

question

Building and Personal Property Coverage Form

answer

A commercial property form that covers buildings, and/or their contents.

question

Burglary

answer

entering a building unlawfully with intent to commit a felony or to steal valuable property

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Cancellation

answer

the termination of an in-force insurance policy by either the insurer or the insured prior to the expiration date shown on the policy

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Casualty Insurance

answer

A type of insurance that is primarily concerned with the legal liability for losses caused by injury to persons or damage to the property of others.

question

Cease and Desist Order

answer

A demand of a person to stop committing an action that is in violation of a provision.

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Certificate of Authority

answer

A document that authorizes a company to start conducting business and specifies the kind(s) of insurance a company can transact. It is illegal for an insurance company to transact insurance without this certificate.

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Certificate of Insurance

answer

A legal document that indicates that an insurance policy has been issued, and that states both the amounts and types of insurance provided.

question

Claim

answer

a demand made by an insured to cover a loss protected by the insurance policy

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Class Rating

answer

The practice of computing a price per unit of insurance that applies to all applicants possessing a given set of characteristics.

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Coercion

answer

An unfair trade practice in which an insurer uses physical or mental force to persuade an applicant to buy insurance.

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Coinsurance

answer

A cost-sharing provision requires the insured to assume a portion of the cost of covered services.

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Combined Single

answer

This coverage type is a single dollar limit of liability applying to the total of damages for bodily injury and property damage combined resulting from one accident or occurrence.

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Commercial Lines

answer

insurance coverages for businesses, commercial institutions, and professional organizations.

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Commissioner

answer

The chief executive and administrative officer of a state insurance department.

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Common Law

answer

Decisions and opinions of courts that are based on local customs and habits of an area within a particular country or state

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Complaint

answer

a written statement of a liability claim given by the claimant; a reason for a law suit

question

Components

answer

factors that determine rates, including loss reserves, loss adjusting expenses, operating expenses and profits

question

Comprehensive Coverage

answer

The portion of an insurance policy that protects an individual against automobile damages or losses other than collisions. It includes damages and losses due to fire, vandalism, or theft.

question

Concealment

answer

the withholding of known facts, which if material, can void a contract

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Conditional Contract

answer

A type of an agreement in which both parties must perform certain duties and follow rules of conduct to make the contract enforceable.

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Conditions

answer

the section of the policy that indicates the general rules or procedures that the insurer and insured agree to follow under the terms of the policy

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Consideration

answer

Anything of value given to induce entering into a contract; it may be money, personal services, payment of premiums, for return of coverage

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Consultant

answer

An individual who provides professional advice or services for a fee, regarding the benefits, advantages or disadvantages promised under a policy of insurance

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Consumer Reports

answer

Written and /or oral statements regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.

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Contract

answer

A binding agreement between two or more persons that is enforceable by law

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Controlled Business

answer

An entity that obtains and possesses a license solely for the purpose of writing business on the owner, immediate family, relatives, employer and employees.

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Concurrent Causation

answer

multiple events leading to one loss

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Death Benefit

answer

The amount payable upon the death of the person whose life is insured.

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Declarations

answer

The who, what, where, when, how of the policy. Also includes premiums

question

Deductible

answer

A set amount that the holder of an insurance policy must pay for each loss before the insurance company pays out.

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Defamation

answer

An unfair trade practice in which one agent or insurer makes an injurious statement about another with the intent of harming the person's or company's reputation.

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Deposit Premium Audit

answer

A condition that allows the insurer to audit the insured's books or records at the end of the policy term to make sure adequate premium has been collected for the exposure.

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Depreciation

answer

Any decrease or loss in value caused by age, wear, or market conditions

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Direct Losses

answer

Physical damage to buildings and/or personal property as a result of direct consequence of a particular peril.

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Director

answer

the head of the state department of insurance

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Disability

answer

A mental or physical impairment that substantially limits one or more major life activities.

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Disclosure

answer

An act of identifying the name of the producer, representative or firm, limited insurance representative, or temporary insurance producer on any policy solicitation.

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Domestic Insurer

answer

An insurance company that conducts business in the state of incorporation.

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Domicile of Insurer

answer

Insurer's location of incorporation and the legal ability to write business in a state.

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Economic Loss

answer

the estimated total cost of and accident, both insured and unisured

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Endorsement

answer

A document, agreed to by both parites, that is attached to the policy and modifies or chages the original policy in some way.

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Estoppel

answer

a legal impediment to denying a fact or restoring a right that has been previously waived

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Excess Policy

answer

a policy that only pays for loss after the primary policy has paid its limit

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Exclusions

answer

Causes of loss, exposures, conditions, etc. listed in the policy for which the benefits will not be paid.

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Exclusive or Captive Agent

answer

an agent who only represents one company and is compensated by commisions

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Experience Rating

answer

method of determining the premium based on the insured's own past loss experience

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Exposure

answer

a unit of measure used to determine rates charged for insurance coverage

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Express Authority

answer

the authority granted to an agent by means of the agent's written contract

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Extensions of Coverage

answer

A provision in some property policies which allows the extension of a major coverage to apply to specific types of loss to property not specifically insured.

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FAIR Plan

answer

Fair Access to Insurance Requirements plan is a state-run program that makes insurance obtainable to those in high risk areas who have been unable to acquire insurance through other channels.

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Fiduciary

answer

an agent/broker who handles insurer's funds in a trust capacity

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First Named Insured

answer

the individual whose name appears first on the policy's declaration

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Flood

answer

An unusual accumulation of water that overflows from rivers, lakes and the ocean onto land that is not normally covered by water.

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Foreign Insurer

answer

An insurance company that is incorporated in another state.

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Fraternal Benefit Society

answer

A life or health insurance company formed to provide insurance for members of an affiliated lodge, religious, or fraternal organization with a representative form of government.

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Fraud

answer

A deception deliberately practiced in order to secure unfair or unlawful gain.

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Functional Replacement Cost

answer

The cost of replacing damaged property with similar property that performs the same function but might not be identical to the damaged property.

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Gross Negligence

answer

reckless behavior that shows disregard for the safety or lives of others

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Hazard

answer

a circumstance that increases the likelihood of a loss

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Moral Hazard

answer

the effect of a person's reputation, character, living habits etc, on his/her insurability

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Morale Hazard

answer

the effect of a person's indifference concerning loss has on the rist to be insured, lack of respect for danger

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Physical Hazard

answer

hazard that arises from the physical characteristics of an individual, such as disablilty due to current circumstance or a condition present at birth

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Implied Authority

answer

Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal.

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Indemnity

answer

compensation to the insured that restores them to the same financial position that they enjoyed prior to the loss

question

Independent Agents

answer

agents that sell insurance for multiple companies and work for themselves or other agents

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Indirect Losses

answer

losses resulting from a peril but not directly caused by it, business disruption, rent insurance, extra expenses

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Inflation Gaurd

answer

a coverage extension that automatically increases amounts of insurance on buildings by an agreed upon percentage annually

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Insurable Interest

answer

any interest an insured may have in property that is the subject of insurance so that damage or destruction of that property would cause the insured financial loss

question

Insurance

answer

the transfer of the possibility of a loss(risk) to an insurance company, which in turn spreads the cost of unexpected losses to many individuals

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Insurance Policy

answer

a written contract between the insured and an insurance company that promises to pay for all or part of a loss

question

Insured

answer

An individual who is covered by an insurer

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Insured Contract

answer

A definition on liability forms that describes the types of contracts in which liability is assumed by the insured and included for coverage in the policy. Examples of insured contracts are leases of premises, elevator maintenance agreements, easement agreements, and other agreements related to the insured's business.

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Insurer

answer

The insurance company that provides planned protection against economic losses

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Insuring Agreement

answer

A statement in an insurance policy that the insurer will, under described circumstances, make a loss payment or provide a service.

question

Intentional Tort

answer

any deliberate act that causes harm to another person

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Interline Endorsement

answer

a written amendment designed to eleminate redundancy and minimize the number of endersments in the policy

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Judgment Rating

answer

an approach used when credible statistics are lacking or when the exposure units are so varied that it is impossible to construct a class

question

Law of Large Numbers

answer

a principal stating that the larger number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of a loss

question

Legal Liability

answer

a liability under the law that occurs when a person is responsible for injuries or damages to another due to negligence

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Liability

answer

responsibility under the law

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Liberalization

answer

a property insurance clause that extends broader legislated or regulated coverage to current policies, as long as it does not result in a higher premium

question

Lien

answer

a charge, security, or encumbrance on a property

question

Limit of Liability

answer

the maximum amount for which an insured is liable

question

Lloyd's Association

answer

organizations that provide support facilities for underwriters or groups of idividuals that accept insurance risk

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Loss

answer

the reduction, decrease or disappearance of value of the person or property insured in a policy by a peril insured against

question

Loss Payable Clause

answer

An insurance provision authorizing payment in the event of loss to a person or entity other than the named insured having an insurable interest in the covered property

question

Loss Ratio

answer

a calculation used by insurance companies to relate income from loss expenses (incurred losses + loss adjusting expense) / earned premium =?

question

Loss Valuation

answer

a factor in determining the premium charged and the amount of insurance required

question

Market Value

answer

a seldom used method of valuing a loss based upon the amount a willing buyer would pay to a willing seller for the property prior to loss

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Misrepresentation

answer

a false statement or lie that can render a contract void

question

Monoline Policy

answer

a policy written separately as a single coverage

question

Mutual Assesment Insurer

answer

a mutual insurance company with thre right to assess a policy holder's additional amounts of mremium to meet operational needs

question

Mutual Companies

answer

insurance organizations that have no capital stock, but are owned by the policy holders

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Mysterious Disappearance

answer

a dissapearance of property tha cannot be explained as to the location, time or manner of the property loss

question

Named Insured

answer

the individual(s) whose name appears on the policy's decleration

question

Named Peril

answer

the cause of loss specifically covered by the insurance policy. no coverage for unlisted perils

question

Negligence

answer

the failure to use the care that a reasonable prudent person would under the same circumstances

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No benefit to bailee

answer

a provision that includes any assignment or granting of any policy provision to any person or organization holding, storing, repairing, or moving isnured property for a fee

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Nonadmitted insurer

answer

an insurance company that has not applied, or has applied and been denied a certificate of authority and may not transact insurance

question

Nonrenewal

answer

a termination of a policy by an insurer on the anniversary or renewal date

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Notice of Claim

answer

a provision that spells out an insured's duty to provide the insurer with reasonable notice in the event of a loss

question

Occurence

answer

a broader definition of loss, which differs in an accident that it includes losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected

question

Open Peril

answer

term used in property insurance to describe the breadth of coverage provided under an insurance policy for that insures against "any risk of loss' that is not specifically excluded

question

Pair and Set Clause

answer

a clause included in many property and inland marine policies which provides that the insurer is not obligated to pay for the total value of a set of items if only one item has been lost, damaged or destroyed

question

Partnership

answer

a legal entity in which 2 or more persons agree to share the profits and losses of the business

question

Passive

answer

a description of an anti-theft device or system for autos which is activated automatically when the driver turns the ignition key to the off position and the key is removed

question

Peril

answer

the cause of a possible loss

question

Personal Injury Liability

answer

legal responsibility for an injury to the character of another person caused by libel, slander, false arrest, invasion of privacy or other acts

question

Personal lines insurance

answer

type of coverage available to indiviuals and families for non-business risks

question

Policy Limits

answer

the maximum amount and insured may collect, or for which an insured is protected under the terms of the policy

question

Policy Period

answer

a period of time a policy is in effect

question

Policyholder

answer

a basic, fundamental insurance policy which pays first with respect to other outstanding policies

question

Policyowner

answer

the person who is entitled to exercise the rights and priviliges in the policy, this person may or may not be the insured

question

Premium

answer

a periodic payment to the insurance company to keep the policy in force

question

Primary Policy

answer

a basic, fundamental insurance policy which pays first with respect to other outstanding policies

question

Pro Rata

answer

proportional distribution of shares of the loss for each insurance policy written on a piece of property

question

Producer

answer

a person who acts on the behalf of the insurer to sell, negotiate or effect insurance contracts, also know as agent

question

Proof of Loss

answer

a sworn statement that must usually be furnished by the insured to an insurer before any loss under a policy can be paid

question

Property Damage Liability

answer

legal liability arising from physical damage to tangible property of others caused by the negligence of the insured

question

Proximate Cause

answer

an act or event that is the immediate or actual cause of a loss

question

Pure Risk

answer

situations that can only result in a loss or no change; a gain is never possible. only type of risk insurance companies are willing to accept

question

Rebating

answer

any inducement offered in the sale of insurance products this is not specified in the policy

question

Reciprocal

answer

insurance resulting from an interchange of reciprocal agreements of indemnity among persons known as subscribers

question

Reduction

answer

lessening the possibility or severity of a loss

question

Reinsurance

answer

a form of insurance whereby one insurance company in consideration of a premium paid to it agrees to indemnify another insurance company for part or all of its liabilities from insurance policies it has issued

question

Replacement Cost

answer

the cost to replace damaged goods with like kind and quality at current price without any deduction for depreciation

question

Representations

answer

statements made by the applicant on the insurance application that are believed to be true, but are not guaranteed to be true

question

Retention

answer

a method of dealing with risk by intentionally or unintentionally keeping a portion of it for the insured's account; the amount of responsibility assumed but not reinsured by the insurance company

question

Retrospective Rating

answer

a self-rating plan under which the actual losses during the policy period determine the final premium

question

Right of Salvage

answer

a provision in property insurance policy requiring that after a payment of total loss to insured property, the insured must transfer the title or ownership to the property of the insurer

question

Risk

answer

uncertainty as to the outcome of a n event when two or more possibilities exist

question

Risk, Pure

answer

the uncertainty or chance of a loss occurring in a situation that involves the opportunity for either loss or gain

question

Risk, Speculative

answer

the uncertainty or chance of a loss occurring in a situation that involves the opportunity for either loss or gain

question

Robbery

answer

the taking of property from another by using violence or the threat of violence

question

Salvage

answer

the amount of money realized from the sale of damaged merchandise or property.

question

Settlement

answer

the process by which an agreement is reached and a claim is resolved in liability insurance

question

Severability of Interests

answer

a provision that insurance applies separately to each insured in a policy, treating each individual as the only insured

question

Sharing

answer

a method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss who share the losses that occur within that group

question

Specific Insurance

answer

a property insurance policy that covers a specific kind or unit of property for a specific amount of insurance

question

Speculative Risk

answer

the uncertainty or chance of a loss occurring in a situation that involves the opportunity for either loss or gain

question

Split

answer

separately stated limits of liability for different coverages, which may be stated on a per person, per occurrence, per policy period basis, or can be divided between bodily injury and property damage

question

Stated Amount

answer

an amount of insurance scheduled in a property policy which is not subject to any coinsurance requirements in the event of a covered loss

question

Statute Law

answer

the written law as enacted by legislative body, which generally takes precedence in cases where both common law and statute law apply

question

Stock Companies

answer

companies owned by the stockholders whose investments provide the capital necessary to establish and operate the insurance company

question

Strict Liability

answer

a liability that refers to damages caused by defective products even though the manufacturer's fault or negligence cannot be proven

question

Subrogation

answer

the acquisition by an insurer of an insured's rights against any third party for indemnification of loss or other payment, to the extent that the insurer pays the loss

question

Superintendent

answer

the head of the state department of insurance

question

Surety Bond

answer

a guarantee that debts and obligations will be carried out, and the benefits will be paid for losses caused by nonperformance

question

Surplus Lines

answer

insurance for which there is no readily available, admitted market

question

Theft

answer

any act of stealing or removing property form its rightful owner, encompasses both burglary and robbery

question

Third-Party Provisions

answer

insurance provision that address the rights of someone other than the policy owner to have a secured financial interest in the insured property

question

Tort

answer

a wrongful act or the violation of someone's rights that leads to legal liability, intentional and unintentional

question

Transfer

answer

a basic principle of insurance under which the risk of financial loss is assigned to another party

question

Twisting

answer

a form of misrepresentation in which an agent persuades an insured/owner to cancel, lapse, or switch policies, even when it's to the insured's disadvantage

question

Umbrella Liability Policy

answer

coverage that provides extra protection against the liability, and excess amount of insurance above the primary policy

question

Unauthorized Insurer

answer

an insurance company that has not applied, or has applied and been denied a certificate of authority

question

Underwriter

answer

a person who evaluates and classifies risks to accept or reject them on behalf of the insurer

question

Underwriting

answer

the process of reviewing, accepting, or rejecting applications for insurance

question

Unilateral Contract

answer

a contract that legally binds only lone party to contractual obligations after the premium is paid

question

Underinsured Motorist Coverage

answer

auto coverage under which an insurer will pay up to limits if the liable driver's limits are exhausted and cannot pay the full amount for which they are liable

question

Uninsured Motorist Coverage

answer

coverage that allows to collect sums under which another driver would be liable to pay resulting from an accident when no coverage is carried

question

Unintentional Tort

answer

the result of acting without proper care, generally referred to as negligence

question

Unoccupied

answer

a property that has contents or furnishings in it , but not being lived in

question

Utmost Good Faith

answer

the fair and equal bargaining by both parties in forming the contract, where the applicant must make full disclosure of risk to the company, and the company must be fair in underwriting the risk

question

Vacant

answer

a property that has no contents, furnishings, or occupants

question

Valued Policy

answer

a policy used when it is difficult to establish the actual cash value of insured property after a loss because of its rarity or uniqueness, no regard to actual value or depreciation

question

Vicarious Liability

answer

a type of liability in which one person is responsible for the acts of another; employers and employees parents and children

question

Waiting Period

answer

time between the beginning of a disability and the start of disability insurance benefits

question

Waiver

answer

the voluntary abandonment of a known or legal right or advantage

question

Warranty

answer

a material stipulation in the policy that if breached may void coverage

question

Workers Compensation

answer

benefits required by state law to be paid to an employee by an employer in the case of injury, disability, or death as the result fo an on-the-job hazard

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