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Basics of Property and Casualty Insurance

Terms in this set (35)

Property Insurance
Provides payment to the insured person if his or her property is damaged or destroyed by an accident covered by the insurance policy.
Casualty policies, Liability Insurance
Pays the other guy, Third party losses. Someone gets hurt at your house due to your negligence, casualty policy will pay for the expense of the injury
Declerations
information relative to who, what, when, and where is found on the first page
Insuring Agreement
Summary of the major promises of the insurer (what the policy covers)
Conditions Section
Rules of policy
Endorsements
add, modify, or take away coverage
Exclusions
items not covered
Additional/Supplementary Coverage
-Payment for additional expenses not normally covered
-May have separate limit of insurance
Short-rated basis
surcharge or penalty for early cancellation
Other Insurance
Specifies the process to be followed when more than one policy covers the same loss. Each policy pays no more than its share of the loss.
Nonconcurrency
A situation in which other insurance is written on the same risk, but not on the same coverage basis.
Excess Coverage
Umbrella Policy
pro rata
Each policy pays its share according to the total insurance
Contributions 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
provisions
lists the duties and rights of both the names insured and the insurer
Duties of Loss
Prompt notice to insurer, protect property from further damage, complete proof of loss, make property available for inspections, submit to examination under oath and cooperate with insurer
Transfer of Rights and Duties
Rights and duties of the insured under the policy can be transferred to another only with the written consent of the insurer. However, in the event of the insured's death, rights and duties are automatically transferred to the insured's legal representative.
Abandonment Condition
A condition often contained in property insurance policies that states that the insured cannot abandon damaged property to the insurer and demand to be reimbursed for its full value.
Salvage
salvaged property can lower claim cost for he insurance company
Liberation
Extended Coverage to insured, No Additional premium Charged, No action required by insured.
Subrogation
Insurer has the right to sue an at-fault party for damages the insurer had to pay to the insured. Common when at-fault party does not have insurance.
Insurable Interest
Risk of financial loss and may be present at the time of application and must be present at time of loss
Underwriting
Field underwriting is performed by the agent or producer. Company underwriters decide if a policy is to be issued
Binder
A temporary written or oral agreement to provide insurance coverage until a formal written policy is issued.
Loss Ratio
Compares company's operations year over year
Earned Premium
the portion of premium paid in advance that now belongs to the insurer because it applies to the elapsed part of the policy
incurred losses
The sum of the paid losses and loss reserves and loss adjustment expense reserves
Expense Ratio
cost of doing business
Written Premium
gross amount of premium income received from insureds
Combined Ratio
loss ratio + expense ratio
Rates
Judgment-no set rates, based upon underwriters experience. Manual set rates for specific risk classes. Experience rating- Modification factor based on loss experience.
Loss Costs
Pure claims data; no operating expenses included; no profits included
Rate Components
-Loss costs (estimate of claim costs)
-Claims handling costs
-Operating
-Expenses
-Profit
TRIPRA
Result of 9/11 attacks on US congress enacted in 2002.
-Limits exposure of insurers in case of another terrorist attack
-Triggering event- $100 million (increases to 200 million from 2015 to 2020 in 20 million increments)
Gramm-Leach-Bliley Act
requires financial institutions to ensure the security and confidentiality of customer data
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