III IC-99 flashcards

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

Certificate of authority

A license issued by a state insurance department authorizing an insurer to transact specified lines of insurance business within that state; operating without one is unauthorized insurance.

Appointment

The insurer's authorization for a producer to act as its agent; termination triggers notice requirements to the state and often to the producer.

Twisting

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

Insurable interest

A financial interest in the subject matter such that loss or damage causes the insured a direct economic detriment; required at inception for property and at loss for life.

Coinsurance penalty formula

Claim payment equals insurance carried divided by insurance required, multiplied by the loss, subject to the policy limit and deductible.

Subrogation

The insurer's right, after paying a claim, to pursue recovery from the negligent third party responsible for the loss, preventing double recovery by the insured.

Replacement cost

Settlement that pays to repair or replace damaged property with new property of like kind and quality, without deducting depreciation, subject to policy limits.

Business income coverage

Pays lost net income plus continuing normal operating expenses during the period of restoration following direct physical loss to covered property.

Ordinance or law coverage

Pays increased costs to rebuild in compliance with current building codes after a covered loss; often excluded or sublimited without endorsement.

Claims-made trigger

Coverage responds to claims first made and reported during the policy period, subject to a retroactive date, regardless of when the injury occurred.

Products-completed operations

Liability coverage for bodily injury or property damage arising from products or completed work away from the insured's premises, with a separate aggregate limit.

Additional insured endorsement

Extends liability coverage to another party, such as a landlord or general contractor, for liability arising from the named insured's operations.

Businessowners policy

A package policy combining property and general liability for eligible small and medium businesses, with eligibility defined by class, size, and occupancy.

Risk control techniques

Methods that reduce loss frequency or severity, including avoidance, prevention, protection, separation, and duplication of exposures.

Builders risk coverage

Covers property under construction, including materials, supplies, and fixtures, until the project is completed or occupied.

HO-3 special form

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

Loss of use coverage

Pays additional living expenses and fair rental value when the residence is uninhabitable because of a covered peril.

Personal umbrella policy

Excess liability coverage above underlying auto and homeowners limits, often extending to personal injury offenses and some gaps.

Experience modification

A rating factor comparing an employer's actual losses to expected losses for its class; below 1.00 indicates better-than-average experience.

Reservation of rights letter

Written notice informing the insured that the insurer is investigating a claim while coverage questions remain unresolved, preserving the insurer's defenses.

Combined ratio

The sum of the loss ratio and expense ratio; a value below 100 percent indicates an underwriting profit.

Fiduciary duty

A producer's obligation to act in the client's best interest when handling premiums or funds, accounting for and remitting them promptly.

Commingling

Mixing client premiums with personal or general business funds; prohibited because it breaches the producer's fiduciary trust account obligations.

Suitability

Recommending products consistent with the client's needs, objectives, and financial capacity, with the basis for the recommendation documented.

Unfair claim settlement practices

Prohibited conduct including misrepresenting policy provisions, unreasonable delay, and failing to investigate or explain claim denials.

Guaranty association

A state entity that pays covered claims of insolvent insurers, subject to statutory limits and residency requirements.

Efficient proximate cause

The dominant cause that sets other causes in motion; if it is an excluded peril, the loss may be denied even when covered perils contribute.

Other insurance clause

Policy provision determining how coverage is shared when multiple policies cover the same loss, using pro rata, excess, or primary approaches.

Proof of loss

A sworn statement by the insured documenting the amount claimed and supporting evidence, submitted within the period stated in the policy.

Mortgagee clause

Protects the lender's interest in insured property; claim payments may be made jointly to the insured and the mortgagee.

Cyber liability coverage

Covers data breach response costs, notification expenses, and network security liability; standard property forms typically exclude these losses.

Surety bond

A three-party contract among surety, principal, and obligee guaranteeing performance or payment; it is not an insurance policy.

Water backup endorsement

Adds coverage for loss caused by sewer or drain backup and sump overflow, which homeowners forms otherwise exclude.

Scheduled personal property

An endorsement listing specific valuables with higher limits and broader perils than the standard personal property special limits.

Loss costs

Advisory pure premium components published by rating bureaus reflecting expected losses; insurers add expenses and profit to derive final rates.

Schedule rating

Discretionary debits and credits applied to a risk for individual characteristics not captured by class rating, within filed ranges.

Replacement notice

A disclosure required when a new life or annuity policy replaces existing coverage, comparing the new and existing contracts.

Suitability documentation

A file record of client needs, alternatives considered, and the basis for a recommendation, supporting compliance and defending against claims.

Prompt payment statute

State law requiring insurers to pay undisputed claim amounts within a specified period, often imposing interest on late payments.

Total loss valuation

Determining settlement for a destroyed vehicle or property using actual cash value, replacement cost, or agreed value per the policy and state rules.

Nonresident license

A license issued by a state other than the producer's home state, typically granted reciprocally when the producer is in good standing at home.

Premium trust account

A separate account holding client premiums that a producer must maintain without commingling, remitting funds to insurers promptly.

Self-insured retention

The amount an insured pays before insurance responds; unlike a deductible, the insured may control the defense of the claim.

Hold-harmless agreement

A contract clause shifting liability from one party to another; additional insured status is often used to support the transfer.

Personal injury protection

No-fault auto coverage paying medical expenses and lost wages for the insured regardless of fault, required in no-fault states.

Uninsured motorist coverage

Pays damages for injury caused by a driver with no liability insurance, up to the policy limits.

Agreed value policy

A property policy paying a stated amount for a total loss without applying a coinsurance test or depreciation.

Functional replacement cost

Settlement paying for less costly modern materials or methods that restore the function of the damaged property rather than replicating it.

Care, custody, and control exclusion

Bars liability coverage for damage to property in the insured's care; bailee or inland marine coverage may fill the gap.

Personal and advertising injury

Liability coverage for offenses such as libel, slander, and wrongful eviction, distinct from bodily injury and property damage.

Risk-based capital ratio

A measure comparing an insurer's capital to the amount required for its risk profile; low ratios trigger regulatory action levels.

Surplus lines insurer

A nonadmitted insurer that may be placed only through a licensed surplus lines broker after a diligent search for admitted market coverage.

Contingent business income

Covers lost income when a supplier's or customer's property is damaged by a covered peril, disrupting the insured's operations.

Civil authority coverage

Pays business income loss when a government order prohibits access to the premises because of nearby covered damage.

Free-look period

A stated number of days after policy delivery during which the policyholder may return the policy for a refund.

Coordination of benefits

Rules determining which of multiple health plans pays first and how the secondary plan pays the remaining allowable expenses.

Binder

Temporary written or oral evidence of coverage issued before the policy is delivered, subject to the terms of the eventual policy.

Moral hazard

Risk characteristics suggesting increased loss potential, such as poor maintenance, questionable integrity, or a history of frequent claims.

Examination under oath

A policy condition allowing the insurer to question the insured under oath during claim investigation, often used in suspicious claims.

Pure premium

Expected losses divided by exposure units, excluding expenses; it is a building block used to derive final insurance rates.

Premium audit

A post-term review adjusting premium based on actual exposure, such as payroll or sales, for policies rated on estimated exposures.

Terrorism Risk Insurance Act

Federal law providing a government backstop for insured losses from certified acts of terrorism, subject to thresholds and program conditions.

Gramm-Leach-Bliley Act

Federal law requiring financial institutions, including insurers, to provide privacy notices and safeguard nonpublic personal information.

Motor truck cargo coverage

Inland marine coverage for goods in transit, protecting the carrier's liability for cargo damage or loss during shipment.

Garagekeepers coverage

Coverage protecting a business for damage to customers' vehicles left in its care, such as at a repair shop or parking facility.

Contra proferentem

The interpretive rule that ambiguous policy language is construed against the drafter, typically the insurer.

Quota share reinsurance

A treaty arrangement ceding a fixed percentage of premium and losses on covered business to the reinsurer.

Excess of loss reinsurance

Reinsurance responding to losses above a stated retention up to a limit, protecting the ceding insurer from large or catastrophic claims.

Prior approval rating

A rate regulatory system requiring regulator approval of rates before they may be used in the state.

File-and-use rating

A system allowing rates to be used immediately upon filing with the regulator, subject to later review.