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Property and Liability Insurance Concepts.
Terms in this set (28)
The chance of a Financial Loss
Policy: A written contract of or written agreement
Insurance: Contract whereby one undertakes to indemnify another or pay or allow a specified amount or a determinable benefit upon determinable contingencies.
Property and Liability Insurance
Property Insurance: Insurance wherein payment by the insurer will be paid directly to the insured.
Liability Insurance: Payment will be on behalf of the insured to another.
Cover PERSONS not property or operations.
*Any payment is based on economic loss suffered by the person.
Obligation of the insurer to perform may be conditioned upon the insured satisfying certain conditions.
Contract of Adhesion
Property and Liability Insurance policies
Property are of unequal bargaining power, and one party (the insured) cannot negotiate the terms, having to take the offer of the other party (the insurer) has made.
Perils and Hazards
Peril: Contingency that may cause loss (fire/windstorm)
Hazard: Condition that introduces or increase the likelihood of a loss from a peril.
Unbroken connection between an occurrence and damage that grows out of the occurrence, then resultant damage is all part of the occurrence.
Direct VS. Indirect Loss
Direct Loss: Physical harm to tangible property.
Indirect Loss: means economic loss which flows consequence of direct loss.
Insurance that gives the lender the needed protection to make the loan, by assuring that the collateral may be resorted if it is damaged.
Loss Settlement Valuations
Most basic property insurance polices state that direct losses will be settled based on the Actual Cash Value. (ACV) of the property at the time of the loss.
Valued Policy Law (FS. 627.702)
If there is a total loss by a covered peril to a building, structure, mobile home, or manufactured hosing unit, the insurer must pay the amount provided in the policy for which premium has been paid.
Equity in premiums by gaining lower rates to those insured's who accept the responsibility of insuring for amount which reflect a high percentage of the valued of the subject property.
Specific vs. Blanket Insurance
Specific: Property insurance policies are issued subject to separate limits for each building, the contents of each building, the indirect exposure at each building, the amount in each safe covered or in possession of each person away from the premise for each crime exposures.
Blanket: Single amount to two or more coverage items which are subject to a specific rating, with any part of the full amount available to apply to any item
Straight: specify the deduction of a flat amount from a loss payment, regardless of the size of the loss.
Franchise: deductibles specify that no payment shall be made until the loss equals or exceeds a prescribed amount, then the loss is paid in full.
Liability Policy Insuring Agreement
Insurer agrees "to pay on behalf of the insured all sums the insured becomes legally obligated to pay as damages."
Rules of law dictate that one must provide reparations to another normally based upon negligence.
Negligence: Failure to exercise that degree of care that the law requires to protect others from an unreasonable rick or harm.
Insured's Under a Liability Policy
For liability to pay, the one who is legally liable must have the status of an "insured" under the policy
Liability insurance to pay for "damages", meaning money amounts, but it is only money damages with which liability insurance is concerned.
Liability Policy Limits
Three ways in which the limits of a liability policy insuring agreement may be expressed. Single, spilt or aggregate limits.
Single: A single amount is the maximum liability of the insurer with respect to any one accident or occurrence
Spilt: The limit of liability is expressed by two figures.
Aggregate: A limit is applied which represents the total insurance coverage that will be paid for the policy for the perils to which the aggregate limits applies.
Insured's Duties Following a Loss
-Cooperate with insurer
-Act in a way to preserve the insurer's rights.
Found many standard polices, states that if the insurer adopts a revision which would broaden coverage without additional premium within some period of time prior to the policy period (typically, 60 days) or during the policy period, the insured receives the benefit of such broadened coverage.
Provides for the insured and company each to select an appraiser, and for those two to select a third (or for a court to appoint a third if they cannot agree), with agreement by any two of the three being binding.
Property insurance policies usually contain abandonment clause, stating the insured cannot " dump" damaged property on the insurer and demand its full value.
Standard liability insurance polices provide for "severability of interests"
*Insurance applies separately to each insured as if other insured's did not exist.
Bases for Insurance Avoidance of Performance
The Insurer may NOT perform if the insured breaches a warranty or was guilty of a misrepresentation or concealment.
Makes application information representations rather than warranties, and provides clear criteria for when misrepresentation or concealment will have legal effect.
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