AAI flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

HO-3 special form

Insures the dwelling and other structures against open perils but personal property against named perils only; the most widely used homeowners form in the United States.

HO-5 comprehensive form

Covers both the dwelling and personal property on an open-peril basis, subject to exclusions; used for higher-value homes needing broader coverage than the HO-3 provides.

Coverage C special limits

ISO homeowners forms cap theft of jewelry and furs at $1,500, firearms theft at $2,500, money at $200, and securities at $1,500 unless the limits are raised by endorsement.

Additional living expense

Pays the increase in living costs when a covered loss makes the home uninhabitable; ISO HO-3 caps it at 20 percent of Coverage A for the time reasonably needed to repair.

Personal auto policy parts

The PAP has four parts: A liability, B medical payments, C uninsured and underinsured motorists, and D damage to your auto, each with separate limits and exclusions.

PAP livery exclusion

The personal auto policy excludes vehicles used to carry persons or property for a fee, so rideshare and delivery drivers need a policy endorsement or commercial auto coverage.

Personal umbrella policy

Provides liability limits above required underlying homeowners and auto policies; a self-insured retention, often $250 to $1,000, applies to losses not covered by the underlying policies.

Flood exclusion

Homeowners policies exclude flood, surface water, and waves; coverage must be purchased separately through the NFIP or a private flood insurer, often with a 30-day waiting period.

Replacement cost valuation

Settles a loss at the cost to repair or replace damaged property with new property of like kind and quality, without deducting depreciation, subject to the policy limits.

Actual cash value

Replacement cost minus depreciation. It is the default valuation on many dwelling fire forms and older auto policies, producing a smaller settlement than replacement cost.

Scheduled personal property floater

Lists specific valuables such as jewelry, furs, or art with individual limits, broader perils, worldwide coverage, and often no deductible; items must be scheduled before loss.

Occurrence liability form

Covers bodily injury or property damage that takes place during the policy period, regardless of when the claim is reported, subject to the policy aggregates.

Claims-made liability form

Responds to claims first made during the policy period; the retroactive date bars earlier acts and an extended reporting period can extend the window for reporting claims.

CGL Coverage A

Pays sums the insured becomes legally obligated to pay as damages because of bodily injury or property damage caused by an occurrence, up to the stated limits.

Products-completed operations

Covers liability for injury or damage arising out of the insured's products or completed work away from the premises; it carries its own aggregate limit.

Additional insured endorsement

Extends liability coverage to another party, such as a landlord or general contractor, usually only for liability arising out of the named insured's work.

Employers liability Part Two

Workers compensation Part Two responds to employee injury suits that fall outside statutory benefits, including third-party-over actions, with separate per-accident and disease limits.

Business income coverage

Replaces lost net income plus continuing normal operating expenses during the period of restoration after a covered property loss, until the business resumes operations.

Property coinsurance clause

Requires the insured to carry at least a stated percentage of property value; if the limit is lower, partial losses pay the proportion (limit divided by required amount) times the loss.

Businessowners policy eligibility

A package of property and general liability with built-in business income for small, low-hazard businesses such as offices, retail stores, and apartments; workers compensation and auto are excluded.

Commercial auto symbol 1

Symbol 1, any auto, covers all autos the insured owns, hires, or borrows, including newly acquired vehicles, subject to the policy's other terms and limits.

Surety bond three parties

The obligee receives protection, the principal must perform, and the surety guarantees performance; the surety holds a right of indemnity against the principal.

Fiduciary premium duty

Premiums collected for an insurer are held in trust; commingling with agency operating funds or late remittance can bring license discipline and errors and omissions claims.

Binder

Temporary oral or written evidence of insurance that is effective immediately and lasts until the policy is issued or the binder expires; confirm limits in writing.

Certificate of insurance

An ACORD form summarizing coverage for a third party; it is informational only and does not amend, extend, or create coverage in the underlying policy.

GLBA privacy rule

Requires insurance agencies to safeguard nonpublic personal information, deliver privacy notices, and offer opt-out rights before sharing certain data with nonaffiliated third parties.

Express authority

Authority an agency holds because the insurer granted it specifically in the agency agreement, such as binding authority with stated monetary limits and classes of business.

Apparent authority

Authority a third party reasonably believes the agent has based on the insurer's conduct or representations; the insurer can be bound even without actual authority.

Conditional renewal notice

Many states require insurers to give advance written notice, often 30 to 60 days, before renewing a commercial policy with changed terms or a premium increase.

E&O loss prevention

Document client instructions and coverage declinations in writing, use coverage checklists, diary renewals, and confirm binders; documentation is the primary defense to errors and omissions claims.

Nonresident producer license

Obtained through state reciprocity, usually filed via NIPR, when the producer holds a resident license in good standing; the state exam is commonly waived and a fee applies.

Agency bill versus direct bill

Agency-billed premium flows through the agency and requires trust accounting and reconciliation; direct-billed premium is paid by the client to the insurer, reducing fiduciary exposure.