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AZ Insurance Exam Terms
Terms in this set (69)
Liability that arises from an extremely dangerous situation. Absolute liability is often found in cases involving explosives. AKA "Strict" liability.
For example: You are absolutely liable if you keep a wild animal as a pet.
A Sudden and unexpected event, occurring at a specific time and place.
Actual Cash Value (ACV)
The cost to replace an item of property at the time of loss, less an allowance for depreciation. Often used to determine amount of reimbursement for a loss (Replacement Cost Minus Depreciation)
A person, firm, or corporation other than the Named Insured on a policy, or a lender named in a mortgage clause, who is protected against loss by the terms of the policy.
Additional Living Expenses
A coverage designed to reimburse the insured for an increase in living expenses necessitated by loss to the dwelling. This indirect loss must be the result of direct loss by a covered peril.
Represents the insurance company and acts for the company in working on agreements as to the amount of a loss and the liability of the company.
A company that meets the state insurance department's standards and is authorized by the Director to do business in the state.
Agent / Producer
An individual appointed by an insurance company to solicit, negotiate, effect, or countersign insurance contracts on its behalf.
A type of policy limit found in Liability policies that limits coverage to a specified total amount for all losses occurring within the policy period.
An insurance company incorporated in a country other than the United States.
Property coverages that are closely associated with and frequently sold with fire insurance: Dwelling Building and Contents form, Earthquake insurance, Sprinkler Leakage, etc.
All - Risk Insurance
Insurance protecting the insured from loss arising from any peril other than those specifically excluded by name. This contrasts with Named Peril Insurance, which names the Peril or Perils insured against.
A questionnaire that is filled out by an agent and the prospect seeking insurance. The form contains rating and underwriting information. The applicant is expected to make representations by answering questions to the best of his knowledge (truthfully).
If the insured and insurer cannot agree on the amount of loss, either may demand an appraisal. If demanded, each will select an appraiser, who jointly will select an umpire. The appraisers will appraise the loss and either agree or submit differences to the umpire. Agreement of any two of the three will be binding. Each party will pay its own appraiser and share equally the expenses of the appraisal and the umpire.
A structure belonging to the insured structure, such as a tool shed. Appurtenant structures are provided for in the Homeowners policy and other dwelling policies. This coverage is often called Other Structures or Out Buildings.
There are some applicants that underwriters do not care to insure, but because of state law or otherwise, must be provided protection. To become authorized, a Casualty company must agree to participate in the Assigned Risk Pool and take its turn providing Auto insurance to high-risk drivers.
AKA the auto insurance "plan"
A survey of the financial records of the insured conducted to determine exposures, limits, etc., which are needed to calculate the premium. the initial premium is only a deposit.
A person who has temporary custody of property belonging to another person.
An example of a Bailee: the dry cleaners.
Bailees Customers Policy
Insurance obtained by a bailee, to cover loss or damage to customers' property in the bailee's custody, without regard to liability.
Binders and other temporary insurance contracts may be made orally or in writing. Each binder is deemed to include all usual terms of the policy for which it was given plus endorsements. Life or Disability insurance utilizes conditional receipts instead of binders.
Blanket Position Bond
Fidelity bond that specifies a single limit of liability applicable to each employee involved in a loss.
Usually defined to include bodily harm, sickness, disease, including required care, loss of services and resulting death.
Boiler and Machinery Policy
Insurance that covers the insured against loss (Liability and Physical Damage) arising out of the use of steam boilers or other machinery. May be written as a separate policy or as part of a Commercial Package Policy.
An obligation of the insurance company to protect one against financial loss caused by the acts of others.
One who represents an insured in the solicitation, negotiation, or procurement of contracts of insurance, and who may render services incidental to those functions. Brokers may also be licensed as agents.
As it is defined in Crime insurance policies, the unlawful taking of property by forced entry into the premises, or exit from the premises, while the premises are closed for business. There must be visible evidence of forced entry or exit.
Business Owners Policy (BOP)
A commercial package policy designed for certain types of small business, combining Property and Liability coverages. Very similar to a Commercial Package Policy (CPP)
Termination of a contract of insurance in force mid-term (rather than at the renewal date) by voluntary act of the insurance company or insured, effected in accordance with provisions in the contract or by mutual agreement.
A type of insurance that is primarily concerned with losses caused by injury to person and legal liability imposed upon the insured for injury or damage to property of others.
In Property insurance, a clause under which the insured is required to carry a certain percentage of the replacement cost of the property in order to have replacement cost coverage and partial losses paid in full.
Coinsurance in personal lines polices is 80%. The coinsurance is also called the "80% clause".
Coinsurance Penalty: In Property insurance, a clause under which the insured shares in losses to the extent that she is underinsured at the time of the loss
Commercial Package Policy:
A multi-peril, multiline policy that provides a broad spectrum of Property and Casualty coverages for businesses. In addition to required basic Property and Liability insurance, the insured may add additional Marine, Boiler and Machinery, Glass, Crime, Business Auto or Farm coverages.
Doctrine that a defendant is liable only for the amount of damages allocated to that defendant in direct proportion to the defendant 's percentage of fault if not 51 % or more at fault, defendant is not held liable)
Competitive State Fund:
A state fund writing Workers Compensation insurance in competition with private insurers
Comprehensive Personal Liability
Nonbusiness Liability exposure of individuals who are insured under this policy. The most common Personal Liability exposures arise out of the residence premises and activities of individuals and family members. Comprehensive Personal Liability coverage first became available as a separate policy. Eventually it was incorporated into Homeowners policies.
Any form of insurance which is required by law. In many states, for example, automobile bodily injury liability insurance is compulsory for all owners of automobiles
The withholding material facts by an applicant for insurance, which materially affects an insurance risk or loss.
May void the policy.
The portion of a insurance contract that sets forth the rights and duties of the insured and the insurance company.
Indirect losses that occur as a "consequence" of a direct loss. Includes time element coverages, such as coverage for rental value.
A characteristic of a legal contract: the thing of value exchanged for the performance promised in the contract. In insurance, the applicant's answers and the policy premium paid constitute the consideration.
Contingent Business Income
A time-element coverage that protects the insured against indirect loss that results because of a direct loss to a supplier business, subcontractor or manufacturer location.
Liability that an insured person or business incurs because of the actions of others (family or employees).
A legal agreement between two parties promising a certain performance in exchange for a certain consideration, offer, acceptance and legal purpose
(Remember the acronym COAL)
. Parties to the contract must also have legal capacity.
Provides coverage against liability arising out of an insured's contractual obligations.
The signature of a licensed agent, which, in most states, must appear on the policy to validate the contract.
In crime insurance, a custodian is the insured or regular employee or partner of the insured who has care or control of property within the premises. The term custodian does not include watchman, porter, or janitor.
A coverage provided in many property contracts that reimburses the insured for expenses involved in removing debris produced by a loss from peril insured against.
Declarations Page (Dec Sheet)
A portion of the insurance contract that contains information such as the name and address of the insured, the property insured, its location and description, the policy period, the amount of insurance coverage, applicable premiums, and supplemental representations by the insured.
Usually, a dollar amount or percentage the insured must pay in each loss to which the deductible applies. the insurance company pays the remainder of each covered loss up to the policy limits
Decrease in the value of property over a period of time due to use, wear and tear, and obsolescence.
Loss that is direct result of peril, Like a fire.
An insurance company that sells its policies through licensed agents who represent the insurer exclusively, rather than trough independent local agents, who represent several insurance companies. Direct writing producers are also called "Exclusive" or "Captive" producers.
The return of part of the premium paid for a participating policy.
Domestic Insurance Company
An insurance company formed under the laws of the state in which the insurance is written.
The portion of the premium for which policy protection has already been given during the now-expired portion of the policy term.
The date on which an insurance policy or bond goes into effect and form which protection is furnished.
Employers Liability Coverage
Coverage provided under a Workers Compensation policy to cover the employer's liability arising out of employees' work-related injuries.
A document, agreed to by both parties, that is attached to the policy and modifies or changes the original policy in some way. No change to a policy may become effective until approved by a company officer.
Errors and Omissions
A professional Liability coverage that protects the insured against liability for committing an error or omission in performance of professional duties.
Causes, conditions, or property listed in the policy that are not covered and for which no benefits are payable.
A boiler and Machinery coverage that covers the cost of temporary repairs and the costs of speeding up permanent repairs.
Examples: Overtime, express transportation charges.
The loss record of an insured, a class of coverage, or an insurance company.
Extended Coverage Endorsement (ECE)
A specific endorsement, attached to a standard Fire policy, usually providing coverage for windstorm, hail, explosion, riot, civil commotion, aircraft, vehicular damage, volcanic eruption, and smoke damage.
Extra Expense Insurance
A time-element coverage for additional expenses incurred by the insured business to continue operations following a Direct Loss by a peril insured against.
Fair Access to Insurance Requirements. A program established by law that makes Property insurance available and affordable to insureds who might otherwise be uninsurable because of "environmental hazards".
Federal Crime Insurance
A federally administered program that makes crime insurance available and affordable to risks that might otherwise have found coverage difficult to obtain.
A class of bonds that guarantees an employee's honest discharge of duty.
A person who occupies a position of special trust and confidence.
For example: One handling or supervising the affairs or funds of another. Insurance producers are considered to be fiduciaries.
Financial Responsibility Laws
State laws that require owners or operators of autos to provide evidence that they have the funds to pay for automobiles losses for which they might become liable. Insurance is the usual method for providing this evidence to the state.
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