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Risk and Insurance Test 2
Terms in this set (46)
Size of Insurance markets
Life and health(1061)- sell life insurance and health products, annuities and mutual funds
Property and Casualty insurers (2689)- sell property and casualty insurance.
Insurers can be classified by organizations form:
Stock insurer- corporation owned by stockholders, pay dividends and insurer can't issue an assessable policy.
Mutual insurer- corporation owned by policy owners, policy holders may receive dividend or rate reductions.
Lloyds of London- not an insurer, but society of members who underwrite insurance, members must meet strict financial requirements
Blue Cross and Blue Shield- Generally nonprofit, Provide services for hospitals, many sponsor HMOs and PPOs.
Health Maintenance Organization(HMO)- provides comprehensive healthcare to it members
Agents vs Brokers
Agents are someone who legally represents the principal and has the authority to act on the principles behalf. Principle is legally responsible for all acts of an agent when the agent is acting within scope of authority. Property snd casualty agent has power to bind insurer.Binder provides temporary insurance until policy is actually written.
Broker is someone who legally represents the insured, doesn't have binding authority, receives a commission.
Agent represents insurance companies while broker represents insurance buyer.
a violation of a person's legal rights, or a failure to perform a legal duty owed to a certain person or to society as a whole. Which include:
-Breach of Contract
legal wrong for which the court allows a remedy in a form of money damages. Fall into three categories:
-Intentional i.e fraud/assault
-Strict liability- liability is imposed regardless of negligence.
person who commits a tort, While a plaintiff is the person who is injured.
failure to exercise standard of care required by law to protect others from an unreasonable risk of harm. Not the same for each act
- compensate victim for losses actually incurred.
Special damages- medical expenses
General damages- pain and suffering
designed to punish people and organizations so that others are deterred from committing same wrongful acts.
Contributory negligence Law
the injured person cannot collect damages if his or her care falls below the standard of care required for his or her protection. If the persons conduct contributed in anyway to the injury.
comparative negligence law
the financial burden of the injury is shared by both parties according to their respective degrees of fault
Pure rule (comparative negligence)
you can collect damages even if you are negligent but reward is reduced in proportion to your fault.
50 percent comparative negligence rule
A comparative negligence rule that permits a plaintiff to recover reduced damages so long as the plaintiff's negligence is not greater than 50 percent of the total negligence leading to harm.
last clear chance rule
states that a plaintiff who is endangered by his or her own negligence can still recover damages from the defendant if the defendant has a last clear chance to avoid the accident but fails to do so
assumption of risk doctrine
a person who understands and recognizes the danger inherent in a particular activity cannot recover damages in the event of an injury
under certain conditions, the negligence of one person can be attributed to another
-Vicarious liability law- motorist's negligence is imputed to vehicles owner
-Dram Shop Law- a business that sells liquor can be held liable for damages that may have resulted from the sale of liquor.
res ipsa loquitur (the thing speaks for itself)
court may be willing to infer that the defendant caused the harm, under this doctrine .
-Dentist pulling wrong tooth
-applies only when
( 1) the defendant had exclusive control of the thing that caused the harm
( 2) the harm normally would not have occurred without negli-gence, and
( 3) the plaintiff had no role in causing the harm.
Application of negligence law
Invitee- Person who is invited onto premises.(Occupant has obligation to owe them protection)
Licensee- Person who enters the premises with occupants expressed or implied permission.(Property owner must warn licensee of unsafe conditions which are apparent)
Trespasser- person who enters or remains on the owner's property without owners consent.
Attractive Nuisance- hazardous condition that can attract and injure children (Keys left in tractor)
Respondents Superior- Employer can be held liable for the negligence of an employee.
Tort Liability Problems
rising tort liability costs
inefficiency in compensating injured victims
uncertainty of legal outcomes
high jury awards
long delays in settling lawsuits
joint and several liability rule
under this rule, several people may be responsible for the injury, but a defendant who is only slightly responsible may be required to pay the full amount of damages
current homeowners policies
HO-2- cover dwelling, other structures and personal property on named perils basis
HO-3- covers dwelling and other direct physical structures. All covered except those specifically excluded. Personal property is covered on a named perils basis.
HO-4- covers a tenants personal property on a named perils basis
HO-5- provides open perils coverage on the dwelling, other structures and personal property. All direct physical losses covered except the ones specifically excluded.
HO-6- covers personal property on named perils basis.
HO-8- designed for older homes. Dwelling and other structures are based on the amount required to repair or replace using common construction.
HO-3 policy Coverages Section 1
Coverage A- covers dwelling on the residence premises and any attached structure, including construction materials.
Coverage B- insures other structures on the residence premises, Garages, tool shed, Structures that are rented out
Coverage C- insures personal property owned or insured, covered anywhere in world, automatic 10% coverage, certain types have max dollar limits. Excludes Animals, Motor vehicles, Aircraft, property in regular rented apt.
Coverage D- provides protection when the residence premises can't be used due to covered loss. 30% coverage A. Additional Living expense ex is cost of renting a furnished apartment.
Removal of debris, trees, shrubs, fire department service charge, reasonable repairs to protect property from further damage.
Section 1 Perils Insured Against- dwelling, personal property, named perils.
Section 1 Exclusions- Losses due to earth movement, war or govt, neglected property, intentional losses, certain water losses
HO-3 policy Coverages Section 2
Coverage E- protects the insured when a claim or suit for damages is brought because of bodily injury or property damage allegedly caused by an insured's negligence. Occurrence limit- defined as an accident which results in bodily injury or property damage during the policy period.
Coverage F- mini accident policy, Medical payments to other pays reasonable medical expenses. Avoiding a lawsuit. Insured is not required to be legally liable.
Exclusions for E and F- Liability arising from use of motor vehicle ex- aircraft hovercraft, certain water craft. Professional services, war, controlled substances, sexual trafficking and molestation.
Exclusions for E- property owned by insure, workers comp, bodily injury to an insured
Exclusion for F- worker comp, injury to resident employee
Claims Expense- are covered in addition to the policy limits for liability damages
First Aid Expenses- incurred for bodily injury covered under policy.
Damage to property of other- pays up to 1000 per occurrence.
Duties after a loss
1. Give prompt notice
2. Protect the property
3. Prepare an inventory of damaged personal property
4. Exhibit the damaged property
5. File a proof of loss within 60 days after the insurer's request
Losses to personal property are paid on the basis of actual cash value.
Replacement cost- amount necessary to repair/replace anything that was lost of same value.
insurance protects the named insured and family members against legal liability arising out of their personal acts
Inflation Guard Endorsement
provides for an annual pro rata increase in the limits of insurance in the Section I coverages(policy rises with inflation)
earthquake coverage endorsement
covers earthquakes, landslides, volcanic eruption, and earth movement
Personal Property Replacement Cost
claims are paid on the basis of replacement cost with no deduction for depreciation
Scheduled Personal Property Endorsement
provides additional coverage for nine classes of property (jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, postage stamps, and rare and current coins) and the insurer agrees to pay the stated amount for a scheduled item if a total loss occurs
home business insurance coverage endorsement
covers both business property and legal liability arising out of a home-based business
Identify theft Endorsement
reimburse crime victims for the cost of restoring their identity and cleaning up their credit report
Cost of Homeowners Insurance
(3) Fire Protection class-depends on quality of fire department.
(4) Construction costs
(5) Age of the home
(6) Type of policy
(7) Deductible amount
(8) Insurance score- credit based score highly predictive of future claim costs
(9) Loss history report
Comprehensive Loss Underwriting Exchange (CLUE)
report shows up to five years of information on property claims, including the date of loss, type of loss, and amounts paid
Personal Auto Policy (PAP) Basics
- 4 wheeled motor vehicle owned or lease for at least 6 moths
-Pick up van weighing 10,000lbs or less
-Covers, automobiles, trailer, temporary vehicle
PAP Part A: Liability Coverage
-Protects the insured against loss arising from legal liability when his or her automobile injures someone or damages another person's property. Usually has a single limit but can be split limit 10000/20000/5000
10000- bodily coverage for each person
20000- bodily injury coverage per accident
5000- property damage liability
covers name insured and any resident family member or person responsible
Supplementary Payments- cost of bail bond, premiums on appeals bond, loss of earnings, other erasable expenses
Exclusions- intentions injury or damage, property owned or transported, property rented, vehicles with less than four wheels, vehicles used in auto business.
PAP automatically provides higher limits.
If more than one liability policy covers loss the insurer pays pro rata. You give a friend your car you pay first and they pay excess.
PAP Part B: Medical Expenses Coverage
-covers all reasonable medical costs and funeral expenses incurred, by the insured or the insured's family members within 3 years of an accident
Exclusions- operating a vehicle with less than four wheels, vehicle is used as residence, vehicle is used in racing
PAP Part C: Uninsured Motorist Coverage
pays for the bodily injury cause by an uninsured motorist, by a hit and run driver, by negligent driver whose insurance company is solvent, the uninsured motorist must be legally liable. Coverage applies to name insured/family members. Does not apply when primary coverage under another policy, an insured is injured in a vehicle owned by the named insured but not insured under the policy
PAP Part D: Coverage for Damage to Your Auto
the insurer agrees to pay for any direct and accidental loss to a covered auto or any non owned auto. Like hail, falling objects, theft, glass breakage. Nonowned auto is an auto not owned for regular use of the named insured or family member. Also pays for temporary transportation expenses.
Exclusions- Damage from wear and tear, freezing and mechanical or electrical breakdown, radio active contamination or war, govt destruction, trailer, camper body.
PAP Part E: Duties after an accident or loss
- notify insurance company or agent
-Cooperate with insurer
-Send insurer copies of any legal notices received I concentration with an accident
-take a physical exam if need be
PAP Part F: General Provisions
-Provides coverage in US, Canada, Puerto Rico, US Territories.
-Cancellation Provision- The named insured can cancel at any time by returning the policy to the insurer or providing written notice. Can Cancel if: Premium has not been paid, Drivers license is suspended, policy obtained through misrepresentation.
-Non-renewal- if an insurer decides to discontinue coverage the insured must be given notice at least 20 days before policy is up.
-Automatic termination- policy is automatically terminated if insured declines insurers offer to renew.
miscellaneous-type vehicle endorsement
can be added to the PAP to insure motorcycles, mopeds, motor scooters, golf carts, motor homes, dune buggies, etc.
Doesn't cover snowmobiles, doesn't cover a non owned vehicle.
Law that requires drivers to prove that they can pay for damage or injury caused by an automobile accident.
-Posting a bond
-Depositing the amount required by law
-Showing person is a qualified self insurer
No guarantee you will get everything back
compulsory insurance law
requires motorists to carry at least a minimum amount of liability insurance before the vehicle can be licensed or registered. Split limit show the minimum requirements25/50/25
per person body injury/per accident body injury/ per property damage
no-fault auto insurance
another method for compensating injured accident victims. After accident each party collects from their insurance company
modified no-fault plan
victims have a limited right to sue
-an injured driver may sue if the bodily injury claim exceeds a certain monetary threshold
-Verbal threshold, if the injury involves death, dismemberment, disfigurement.
Benefits are restricted to persons economic loss:
-loss of earnings
-essential services expenses
Arguments in support of no-fault laws:
difficult to determine the fault of an accident, some people can afford better attorneys, Fraudulent and inflated claims, Delay in payments
Defects of negligence system, savings from no-fault are exaggerated, court delays only in large cities, safe drivers may be penalized by this, no payment for pain and suffering.
cost of auto insurance depends on:
-age, gender, marital
-use of auto
-number and types of car
-insurance score(based on credit record. Good- lower premium)
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