API flashcards

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

Insurable Interest

A financial stake in the preservation of property or a life such that loss causes economic harm; required for a valid policy and claim.

Indemnity Principle

Property insurance restores the insured to approximately pre-loss financial condition, never allowing profit from a loss; capped by the policy limit.

Actual Cash Value

Replacement cost minus depreciation, reflecting the used value of damaged property at the time of loss.

Replacement Cost

The cost to repair or replace damaged property with new property of like kind and quality, without deduction for depreciation.

Coinsurance Formula

Claim payment equals limit carried divided by limit required, multiplied by the loss, not exceeding the policy limit.

Utmost Good Faith

A mutual duty requiring both insurer and insured to disclose material facts honestly; concealment or material misrepresentation can void coverage.

Subrogation

The insurer's right, after paying a claim, to pursue recovery from the negligent party who caused the loss.

Declarations Page

Policy section listing named insured, covered property, limits, deductibles, and effective dates that define the contract scope.

HO-3 Policy Form

Homeowners form covering the dwelling on an open-peril basis and personal property on a named-peril basis.

HO-4 Renters Form

Covers a tenant's personal property, loss of use, and personal liability, but excludes the building structure.

HO-5 Comprehensive Form

Homeowners form that extends open-peril coverage to both the dwelling and personal property, broader than HO-3.

Coverage C Special Limits

Caps on payouts for categories such as money, jewelry theft, firearms theft, and business property on premises.

Loss of Use Coverage

Pays additional living expenses and fair rental value when a covered loss makes the residence uninhabitable.

Flood Exclusion

Standard homeowners forms exclude flood and surface water; separate flood insurance is required for that peril.

Off-Premises Property Limit

Personal property away from the residence is covered worldwide at a stated percentage of Coverage C, typically ten percent.

HO-6 Condo Form

Covers personal property, liability, and building elements the unit owner must insure, such as fixtures and improvements.

Replacement Cost Condition

Requires carrying insurance to at least a stated percentage of replacement cost to receive full partial-loss settlement.

Coverage E Personal Liability

Pays sums the insured is legally obligated to pay for bodily injury or property damage caused by an occurrence.

Coverage F Medical Payments

Pays reasonable medical expenses to others injured on the premises regardless of fault, subject to per-person limits.

Occurrence Definition

An accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Duty to Defend

The insurer's obligation to provide legal defense for covered claims, with costs generally paid in addition to the liability limit.

Personal Injury Coverage

Covers libel, slander, invasion of privacy, and false arrest; separate from bodily injury and often added by endorsement.

Business Pursuits Exclusion

Excludes liability arising from the insured's business activities, which require commercial coverage instead.

Umbrella Liability Policy

Provides excess limits above underlying auto and home policies and may fill coverage gaps subject to a self-insured retention.

Intentional Acts Exclusion

Bars coverage for injury or damage expected or intended by the insured, though innocent coinsureds may still be covered.

Protection Class

A rating from one to ten reflecting fire protection quality based on hydrant distance and fire station proximity.

Moral Hazard

Risk arising from an applicant's character or dishonest intent, such as inflated claims or misrepresented information.

Morale Hazard

Carelessness or indifference toward loss because insurance exists, increasing the likelihood or severity of claims.

Adverse Selection

A tendency for higher-risk applicants to seek coverage disproportionately, threatening rate adequacy without underwriting controls.

Vacancy Risk

Unoccupied property increases vandalism and damage risk; policies often reduce or suspend coverage after a stated vacancy period.

Credit-Based Insurance Score

A underwriting and rating factor derived from credit history that statistically correlates with future insurance loss experience.

Replacement Cost Estimator

A valuation tool using square footage, construction type, roof, and features to set dwelling limits, excluding land value.