ID Property & Casualty flashcards

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

McCarran-Ferguson Act

1945 federal law that reserves insurance regulation to the states and exempts insurance from most federal antitrust law to the extent the states regulate the business.

Fiduciary premium handling

Producers hold collected premiums in a fiduciary capacity; commingling premium funds with personal or business money is prohibited and can be grounds for license revocation.

Diligent search

Documentation by a surplus lines broker proving the coverage was unavailable from admitted insurers before the risk was placed with a nonadmitted insurer.

Certificate of authority

A license issued by a state insurance department authorizing an insurer to transact insurance business in that state.

Twisting

Inducing a policyholder to lapse or surrender existing coverage through misrepresentation in order to sell replacement insurance; classified as an unfair trade practice.

Nonresident producer license

A license granted through state reciprocity, often filed through NIPR, allowing a producer licensed in one state to conduct insurance business in another state.

Insurable interest

A financial stake in the person or property insured such that a loss would cause monetary harm; required at application for life insurance and at time of loss for property.

Principle of indemnity

The rule that insurance restores the insured to approximately the same financial position held before the loss, never allowing a profit from the claim.

Aleatory contract

A contract in which the monetary values exchanged by the parties are unequal and depend on the outcome of an uncertain future event.

Contract of adhesion

A contract drafted by one party, the insurer, and offered on a take-it-or-leave-it basis; ambiguities are construed against the party that drafted it.

Proximate cause

The dominant, uninterrupted cause that sets in motion the chain of events leading to a loss, without which the loss would not have occurred.

Coinsurance clause formula

Recovery equals (insurance carried divided by insurance required) times the loss; insurance required is a stated percentage of replacement cost, and the deductible applies afterward.

Coverage B other structures

On the HO-3 it equals 10 percent of Coverage A unless another amount is shown; structures used for business or rented to others are excluded.

Actual cash value

Replacement cost minus depreciation; the valuation method used when replacement cost coverage has not been selected for the damaged property.

Loss of use coverage

Pays additional living expenses and fair rental value when a covered peril makes the residence premises uninhabitable during the reasonable time to repair or replace.

Business income coverage

Pays the net income loss plus continuing normal operating expenses incurred during the period of restoration following covered physical damage at the described premises.

Mortgagee clause

Gives the lender the right to receive loss payments and pay premiums, and keeps the lender's protection intact even when acts of the insured void the insured's coverage.

Claims-made policy

A liability policy covering claims first reported during the policy period for wrongful acts that occurred on or after the stated retroactive date.

Extended reporting period

An optional endorsement after a claims-made policy ends that extends the time allowed to report claims for acts occurring before the policy expiration date.

Products-completed operations aggregate

The CGL limit capping total payments for bodily injury or property damage arising out of the insured's products or completed work away from the insured premises.

Uninsured motorist coverage

Pays damages the insured is legally entitled to recover from an at-fault driver who carries no liability insurance, including a hit-and-run driver.

Workers compensation Part Two

Employers liability coverage that responds to employee injury claims which the exclusive remedy provisions of workers compensation law do not cover.

Guaranty association

A state entity funded by assessments on insurers that pays covered claims of policyholders when an admitted insurer becomes insolvent, up to statutory limits.

Gramm-Leach-Bliley Act

Federal law requiring insurers to provide privacy notices and, in many situations, let customers opt out of sharing nonpublic personal financial information with third parties.

Unfair claim settlement practices

Statutory violations such as failing to acknowledge a claim promptly, delaying payment without cause, or offering substantially less than the amount owed.

Rebating

Giving anything of value not stated in the policy as an inducement to buy insurance; prohibited as an unfair trade practice in most states.

Residual market plan

A state-created program such as a FAIR plan or assigned risk plan that provides insurance to applicants unable to obtain coverage in the voluntary market.

Elements of a valid contract

Offer, acceptance, consideration, legal purpose, and competent parties; if any element is missing, the agreement is not enforceable.

Proof of loss

A sworn statement from the insured detailing the amount of the loss, required within a stated number of days after the insurer requests it.

Waiver and estoppel

Waiver is the voluntary surrender of a known right; estoppel prevents the insurer from later asserting that right when the insured relied on the waiver.

Policy endorsement

A written amendment attached to the policy that changes, adds, or removes coverage; it takes precedence over conflicting language in the printed policy form.

Insurance binder

A temporary written or oral evidence of coverage issued while the policy is being underwritten, serving as the insurer's acceptance of the application offer.