IN Property & Casualty cheat sheet

Risk management techniques: avoidance eliminates an exposure, reduction lowers frequency or severity, retention assumes the loss, and transfer shifts it to an insurer; insurance is a transfer technique.

Insurable risk tests: pure risk only, accidental loss, definite and measurable loss, large number of similar exposure units, losses that are not catastrophic, calculable probability, and premiums that are affordable.

Law of large numbers: as the number of similar exposure units increases, actual losses converge toward expected losses, making future losses more predictable and rates more stable.

Adverse selection: applicants with higher-than-average loss potential buy coverage first; insurers respond with underwriting, class rating, exclusions, and rates that match expected loss costs.

Indemnity: the insured is restored to pre-loss financial condition, no better and no worse; actual cash value, replacement cost, and valued policy settlements define how indemnity is measured.

Utmost good faith: a representation is believed true to the best of the applicant's knowledge, a warranty is guaranteed true; material misrepresentation or concealment supports rescission or denial.

Contract of adhesion: the insurer drafts the policy, so ambiguous wording is construed against the insurer and in favor of coverage for the insured.

Gross rate = pure premium (expected losses plus loss adjustment expense divided by exposure units) plus expense loading plus a provision for profit and contingencies.

Reinsurance cedes risk above the primary insurer's retention, reducing catastrophic exposure, stabilizing results, and freeing capacity to write more business.

Actual cash value = replacement cost − depreciation; older property therefore settles for less than the cost of new property of like kind and quality.

Coinsurance requirement = coinsurance percentage × value of the property; payment = (insurance carried ÷ insurance required) × loss, then subtract the deductible.

Example: 80% coinsurance on a $500,000 building requires $400,000; a $100,000 loss with only $300,000 carried pays (300,000 ÷ 400,000) × 100,000 = $75,000, minus the deductible.

Dwelling replacement cost settlement in homeowners forms requires Coverage A of at least 80% of the dwelling's full replacement cost; below that threshold the loss is settled on an actual cash value basis.

Named peril forms require the insured to prove a listed cause of loss; special (open peril) forms cover all direct physical loss except excluded causes, shifting the burden of proof to the insurer.

Deductibles apply per occurrence; percentage wind or hurricane deductibles are calculated on the Coverage A limit, not on the dollar amount of the loss.

Vacancy (no occupants and no contents for customary use) beyond 60 days in homeowners forms restricts vandalism, theft, and some water damage claims; unoccupancy alone does not trigger that exclusion.

Loss of use pays additional living expense and fair rental value for the shortest time needed to repair or replace, subject to the limit stated in the form.

Other insurance: when two property policies cover the same loss, each pays pro rata by its limit of liability, and the insured cannot collect more than the actual loss.

Negligence requires duty, breach, proximate cause, and damages; the claimant carries the burden of proof on each element.

Contributory negligence bars recovery entirely, pure comparative negligence reduces recovery by the claimant's percentage of fault, and modified comparative negligence also bars recovery above a stated fault threshold.

Compensatory damages are special (medical bills, lost wages) and general (pain and suffering); punitive damages punish conduct and are excluded or restricted in many liability policies.

Policy limits include per person, per occurrence, and aggregate; defense costs are usually paid in addition to the limit in commercial general liability and as supplementary payments in auto liability.

Occurrence policies respond to injury or damage that happens during the policy period; claims-made policies respond to claims first made during the period and use a retroactive date to exclude prior acts.

Strict liability applies without fault in defined situations such as defective products, wild animals, and abnormally dangerous activities; vicarious liability makes an employer responsible for employees acting within scope of employment.

Workers compensation is no-fault statutory coverage for medical costs, disability income, death benefits, and rehabilitation, and is generally the employee's exclusive remedy against the employer.

Medical payments coverage pays reasonable medical expenses regardless of fault, without a deductible, and requires no proof of negligence.

One combined single limit applies a single total to all injury and damage from one accident; split limits apply separate per-person, per-accident, and property damage caps.

Homeowners forms: HO-2 broad named peril, HO-3 special (open peril dwelling, named peril contents), HO-4 renters, HO-5 comprehensive, HO-6 condominium unit owners, HO-8 modified form for older homes.

Standard HO-3 limits: Coverage B other structures 10%, Coverage C personal property 50%, Coverage D loss of use 30% of Coverage A; Coverage E personal liability and Coverage F medical payments to others.

Personal auto policy: Part A liability, Part B medical payments, Part C uninsured/underinsured motorists, Part D coverage for damage to your auto, Part E duties after an accident, Part F general provisions.

Dwelling forms: DP-1 basic named perils, DP-2 broad named perils, DP-3 special (open peril) on the dwelling; liability is not included unless added by endorsement.

Businessowners policy: package of property and liability for eligible small businesses, with maximum building, contents, and liability limits and ineligible classes such as autos, farms, and large risks.

Commercial general liability: Coverage A bodily injury and property damage, Coverage B personal and advertising injury, Coverage C medical payments; occurrence and claims-made versions are both available.

Commercial auto symbols: symbol 1 any auto, symbol 7 specifically described autos, symbol 8 hired autos, symbol 9 nonowned autos; the symbol entered determines which vehicles are covered.

Umbrella policies sit above scheduled underlying policies and drop down for some otherwise uncovered losses after a self-insured retention; excess policies pay only after underlying limits are exhausted.

National Flood Insurance Program: a separate flood policy, usually a 30-day waiting period, and up to $250,000 building and $100,000 contents for a one- to four-family residence.

Policy structure: Declarations identify the insured and limits, the Insuring agreement grants coverage, Conditions set duties of both parties, and Exclusions remove coverage.

Duties after loss: give prompt notice, protect the property from further damage, cooperate in the investigation, submit a signed proof of loss, and submit to examination under oath when required.

Proof of loss is a sworn statement of the amount claimed; homeowners forms commonly require it within 60 days after the insurer's written request.

Subrogation transfers the insured's recovery rights to the insurer after payment; the insured must not release or otherwise impair those rights against the responsible party.

Other insurance methods include pro rata contribution by limits, contribution by equal shares, and primary versus excess; the insured cannot recover more than the actual loss.

Appraisal resolves only the amount of loss, never coverage; each party selects a competent appraiser and the appraisers select an umpire, with a written agreement binding the parties.

Cancellation: when the insured cancels, the short rate method refunds less than pro rata; when the insurer cancels, the pro rata method applies with advance written notice.

Mortgagee clause gives the lender the right to receive loss payments to the extent of its interest, notice of cancellation or nonrenewal, and rights to pay premium and submit proof of loss.

Endorsements amend the policy and control over conflicting printed form language; a liberalization clause automatically applies broadened coverage introduced during the policy period.

The Indiana Department of Insurance, headed by a Commissioner appointed by the Governor, licenses producers and insurers and enforces market conduct, rate, and consumer protection rules.

A producer must hold a valid Indiana license and be appointed by the insurer before soliciting, negotiating, or selling insurance; appointments and terminations are filed with the Department.

Resident producers renew biennially and must complete 24 hours of approved continuing education each two-year period, including at least 3 hours of ethics.

Premiums collected belong to the insurer or the insured, not the producer; commingling premium funds with personal or business accounts and converting premium are prohibited.

Prohibited unfair trade practices include misrepresentation, false advertising, rebating, twisting, boycott, coercion, intimidation, and unfair discrimination among similar risks.

Indiana minimum auto liability limits are 25/50/25 ($25,000 per person and $50,000 per accident bodily injury, $25,000 property damage); uninsured and underinsured motorist coverage must be offered and can be rejected only in writing.

Indiana is a tort liability rather than no-fault auto state and follows modified comparative fault: damages are reduced by the claimant's percentage of fault and recovery is barred if that fault exceeds 50%.

Unfair claim settlement practices include misrepresenting policy provisions, unreasonable delay, and failing to act promptly on claim communications; the Department may investigate and impose penalties.

Workers compensation benefits are statutory and the employer's exclusive remedy; insurance fraud, including knowingly presenting a false claim, is a crime reportable to the Department.