IN Property & Casualty flashcards

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

Law of large numbers

Statistical principle that as the number of similar exposure units in an insured pool increases, actual loss experience becomes more predictable and closer to expected losses, allowing more reliable rates.

Insurable interest

A financial stake in the insured person or property such that damage would cause a measurable economic loss; in property insurance it must exist at the time of the loss.

Adverse selection

The tendency for people with the greatest likelihood of loss to seek insurance most eagerly; underwriters counter it with class rating, exclusions, and careful risk selection so premiums stay adequate.

Principle of indemnity

The rule that an insured should be restored to approximately the same financial position held before a loss, no better and no worse, so insurance pays actual loss rather than profit.

Utmost good faith

A principle requiring insured and insurer to deal honestly and disclose material facts; concealment or material misrepresentation on an application can give the insurer grounds to rescind the policy.

Contract of adhesion

A policy drafted by the insurer and offered to the insured on a take-it-or-leave-it basis; because the insurer writes the wording, ambiguous language is generally interpreted in favor of the insured.

Actual cash value

Cost to replace damaged property with new property of like kind and quality, less depreciation, reflecting the property's value at the time of loss; commonly used to settle personal property claims.

Coinsurance formula

Payment equals the insurance carried divided by the insurance required, multiplied by the loss, minus the deductible; carrying less than the required amount makes the insured a coinsurer.

Replacement cost coverage

Settles a covered loss at the cost to repair or replace with new property of similar kind and quality without deducting depreciation, typically after the property is actually repaired or replaced.

Special (open peril) form

Covers risks of direct physical loss unless the cause of loss is specifically excluded; the insurer, not the insured, must show that an exclusion applies to deny the claim.

Additional living expense

Pays the necessary increase in living costs when a covered loss makes the residence uninhabitable, typically limited to the shortest time needed to repair or replace or a stated period.

Vacancy

Condition in which a structure has no occupants and lacks enough personal property to conduct customary operations; many property policies restrict theft, vandalism, and water damage coverage after 60 days.

Negligence elements

To recover in negligence, a claimant must prove the defendant owed a legal duty, breached that duty, the breach proximately caused the injury, and actual damages resulted.

Compensatory damages

Awards that reimburse an injured party for actual harm; special damages cover measurable expenses such as medical bills and lost wages, while general damages cover non-economic harm like pain and suffering.

Strict liability

Liability imposed without proof of negligence for harm from certain activities or products, such as keeping wild animals or selling defective products; the claimant need not show a breach of duty.

Vicarious liability

Legal responsibility of one party for the acts of another, such as an employer's liability for an employee's negligent acts committed within the scope of employment.

Occurrence versus claims-made

An occurrence policy covers injury or damage that happens during the policy period whenever the claim is later filed; a claims-made policy covers claims first made during the period, subject to a retroactive date.

Split limits

Separate dollar limits for bodily injury per person, bodily injury per accident, and property damage per accident, such as 25/50/25, each capping coverage independently.

HO-3 special form

Homeowners policy insuring the dwelling and other structures on an open peril basis while personal property is covered for named perils only; it is the most widely used homeowners form.

HO-4 tenants form

A homeowners-type policy for renters that insures personal property on a named peril basis and provides liability and additional living expense coverage, but does not insure the building.

Personal auto policy parts

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

Businessowners policy

A package policy for eligible small businesses combining commercial property and general liability with common extensions, using simplified forms and subject to size, occupancy, and class eligibility rules.

Umbrella liability policy

Provides limits above underlying auto, general liability, and employers liability policies and can drop down to cover some losses excluded below, after a self-insured retention is satisfied.

Declarations page

The policy section listing the named insured, policy period, covered locations, limits, deductibles, and premium, identifying which forms and endorsements apply to that insured.

Subrogation

After paying a loss, the insurer acquires the insured's right to recover from the party that caused the damage; the insured must not impair that right by releasing the responsible party.

Other insurance clause

States how a loss is shared when more than one policy covers it, often by pro rata contribution based on limits or equal shares, or by making one policy primary and the other excess.

Appraisal provision

A method to resolve disputes about the amount of loss, not coverage; each side picks a competent appraiser, and an umpire chosen by them settles differences, with a written agreement binding.

Mortgagee clause

Protects a lender's interest in insured property by paying loss to the mortgagee to the extent of its interest and giving the mortgagee notice, claim, and premium payment rights.

Indiana Department of Insurance

The state agency regulating insurers and producers in Indiana, headed by an Insurance Commissioner appointed by the Governor, enforcing licensing, rate, market conduct, and consumer protection rules.

Indiana minimum auto limits

Indiana requires liability coverage of at least $25,000 per person and $50,000 per accident for bodily injury plus $25,000 for property damage, commonly written as 25/50/25.

Indiana comparative fault

Indiana uses modified comparative fault: a claimant's damages are reduced by his or her percentage of fault, and recovery is barred when the claimant's fault exceeds 50 percent.

Indiana producer continuing education

Indiana resident producers must complete 24 hours of approved continuing education every two years, including at least 3 hours of ethics, to renew an insurance producer license.