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Terms in this set (25)
are statements that provide information about the particular property or activiy to be insured.
-first page of policy
(name of insured, location of property, period of protection, amount of insurace, premium and deductible info)
-contain a definition page
summarizies the major promises of the insurer
-name perils coverage
-open perils or special coverage
Name perils coverage
where only those perils specifically named in the policy are covered
Open perils or special coverage
where all losses are covered except those losses specifically excluded.
three major types of exclusions
-excluded perils: flood, intentional act
-excluded losses: a professional liability loss is excluded in the homeowners policy
-excluded property: pets are not covered as personal property in the homeowners policy
Why are exclusions necessary
-Some perils are not commercially insurable:
catastrophic losses due to war
-extraordinary hazards are present: using the automobile for a taxi
-Coverage is provided by other contracts: auto excluded on homeowners policy.
also.. (Moral hazard problems, attitudinal hazard, coverage not needed)
provisions in the policy that qualify or place limitations on the insurer's promise to perform
-if policy conditions are not met, the insurer can refuse to pay claim
-insurance policies contain a variety of miscellaneous provisions:
-cancellation, subrogation, grace period, misstatement of age.
Contract must identify persons or parties insured.
-name insured: person in declarations section
-first name insured: additional rights and responsibilities that do not apply to others
-additional insureds added by endorsement
in property and liability insurance, a written provision that adds to, deletes from, or modifies the provisions in the original contract
-ex: earthquake endorsement to a homeowners policy
in life and health insurance, a rider is a provision that amends or changes the original policy.
-a waiver of premium rider on a life insurance policy
provision by which a specified amount is subtracted from the total loss payment that otherwise would be payable.
-eliminate small claims that are expensive to handle and process
-reduce premiums paid by the insured
-reduce moral hazard and attitudinal (morale hazard)
the insured must pay a certain number of dollars of loss before insurer is required to make a payment
ex: auto insurance deductible
all losses that occur during a specified time period, usually a year, are accumulated to satisfy the deductible amount
damage & deductibles
-damage limited to sense: less than deductible
-significant damage to roof- more than deductible
calendar year deductible
-health insurance deductible. Type of aggregate deductible that is found in basic medical expense and major medical insurance contracts
Elimination (waiting) period
stated period of time at the beginning of a loss during which no insurance benefits are paid.
ex: disability income
in a property insurance contract encourages the insured to insure to property to a stated percentage of its insurable value.
-If the coinsurance requirement is not met at the time of the loss, the insured must share in the loss as a censurer.
(amount of insurance carried/amount of insurance required) x loss = amount of recovery
(did/should)x loss= claims payout
purpose of coinsurance
to achieve equity in rating
-property owner wishing to insure for a total loss would pay an inequitable premium if other property owners only insure for partial losses.
-if the coinsurance requirement is met, insured receives a rate discount, the policy owner who is underinsured is penalized.
coinsurance in health insurance
-health insurance contain this. Clause requires the insured to pay a specified percentage of covered medical expenses in excess of the deductible.
-purpose of coinsurance in health insurance are to reduce premiums and prevent over utilization of policy benefits.
other insurance provisions
prevent profiting from insurance and violation of the principle of indemnity.
pro rata liability provision
each insurer's share of the loss is based on the proportion that its insurance bears to the total amount of insurance on the property
contribution by equal shares
each insurer shares equally in the loss until the share paid by each insurer equals the lowest limit of liability under any policy, or until the full amount of the loss is paid.
primary and excess insurance
primary insurer pays first, excess insurer pays only after the policy limits under the primary policy are exhausted.
coordination of benefits provision
is designed to prevent overinsurance and the duplication of benefits if one person is covered under more than one group health insurance plan
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