COP Insurance cheat sheet

Risk = uncertainty about loss; pure risk (loss or no loss) is insurable, speculative risk (gain or loss) is not.

Insurable risk tests: large number of similar exposure units, accidental and unintentional loss, definite and measurable loss, calculable probability, non-catastrophic, and affordable premium.

Law of large numbers: as the number of independent similar exposure units increases, actual loss experience converges toward expected loss, enabling stable pricing.

Indemnity principle: the insured is restored to approximately the pre-loss financial position, no better; valued policies and replacement cost are exceptions to strict indemnity.

Utmost good faith requires both parties to disclose material facts; materiality is judged by whether the fact would affect the insurer's underwriting decision or premium.

Insurable interest must exist at policy inception for property and at the time of loss for life insurance; without it the contract is void.

Subrogation transfers the insured's right of recovery against a negligent third party to the insurer after payment, preventing double recovery.

Risk management sequence: identify exposures, measure frequency and severity, select techniques (avoid, retain, reduce, transfer), implement, monitor.

Hazards are conditions that increase loss probability or severity: physical (icy steps), moral (fraud), and morale (carelessness because insured).

Primary regulatory goals: insurer solvency, fair treatment of policyholders, market confidence, and availability/affordability of coverage.

Admitted insurers hold a license/certificate of authority in the state and are subject to rate, form, and financial filing requirements; non-admitted (surplus lines) insurers are not.

Rate regulation standards: rates must be adequate, not excessive, and not unfairly discriminatory among similar risks.

State guaranty associations pay covered claims up to statutory limits when an admitted insurer becomes insolvent; they do not cover surplus lines or self-funded plans.

Unfair trade practice acts prohibit misrepresentation, twisting, churning, rebating, false advertising, and unfair claim settlement practices.

Producer licensing: appointment by the insurer, license renewal with continuing education, and notification of address or name changes within statutory timeframes.

Twinning or twisting involves inducing a policyholder to lapse or surrender a policy through misrepresentation; both are market-conduct violations.

Regulators examine insurer financial condition using risk-based capital ratios, reserve adequacy, and investment quality standards.

Level term: death benefit fixed for the term, no cash value; convertible and renewable riders preserve insurability options.

Whole life: level premium for life, guaranteed death benefit, guaranteed cash value, and policy loans against cash value.

Universal life: unbounded flexible premium with a cost-of-insurance deduction and interest crediting; underfunding risks lapse.

Variable life and variable universal life: cash value invested in separate accounts and not guaranteed; requires securities registration and prospectus delivery.

Nonforfeiture options on permanent policies: cash surrender, reduced paid-up, extended term, and automatic premium loan.

Settlement options: lump sum, life income, fixed period, fixed amount, and interest only; life income with period certain guarantees a minimum payout.

Riders: waiver of premium, accidental death benefit, guaranteed insurability, child term, accelerated death benefit, long-term care.

MEC status: policies failing the 7-pay test lose tax-free loan and distribution treatment; distributions are taxed LIFO with a 10% penalty before 59½.

Suicide clause limits payout to return of premium during the contestability period, typically two years.

Major medical features: deductible, coinsurance (commonly 80/20), out-of-pocket maximum, and covered benefit schedule.

Managed care models: HMO requires in-network care and PCP referrals; PPO allows out-of-network care at higher cost sharing; POS blends both.

Coordination of benefits: when two plans cover the same person, the primary plan pays first and the secondary pays the remainder up to its allowable amount.

Individual health underwriting considers medical history, occupation, and avocations; group underwriting focuses on group size, industry, and participation percentage.

Disability income definitions: own occupation (most favorable), any occupation, and split definition; benefit periods range from short-term to age 65 or lifetime.

Accidental death and dismemberment pays principal sum for accidental death and a scheduled percentage for loss of limb or sight.

Health insurance portability protections limit pre-existing condition exclusions for creditable coverage and prohibit discrimination based on health status.

Key health policy provisions: grace period, reinstatement, incontestability after two years, and claims filing deadlines.

Coverage forms: basic (named perils), broad (named perils, expanded), special (open perils, all risk except exclusions).

Replacement cost pays the cost to repair or replace with new property of like kind and quality; actual cash value = replacement cost minus depreciation.

Coinsurance clause in property policies requires insurance to at least a stated percentage of value; otherwise a penalty reduces the claim payment.

Claim formula with coinsurance: (insurance carried ÷ insurance required) × loss, subject to the policy limit.

HO forms: HO-2 broad, HO-3 special on dwelling, HO-4 renters, HO-5 comprehensive, HO-6 condominium, HO-8 older homes.

Dwelling policy (DP-1 to DP-3) covers the structure and rental value but not personal liability; homeowners policies include liability.

Common exclusions: earth movement, flood, ordinance or law, intentional loss, neglect, and wear and tear.

Other insurance and pro rata clauses divide payment among multiple policies covering the same loss.

Negligence elements: legal duty, breach of duty, proximate cause, and actual damages; comparative or contributory negligence rules vary by jurisdiction.

CGL Coverage A pays damages for bodily injury and property damage; Coverage B pays personal and advertising injury; Coverage C pays medical payments.

Occurrence form covers injury or damage during the policy period regardless of when the claim is made; claims-made form covers claims first made during the policy period.

Workers compensation is statutory no-fault coverage for work-related injury; Part Two employer's liability covers liability outside the statutory benefit system.

Commercial auto symbols distinguish covered autos: any auto, owned autos, hired autos, non-owned autos.

Umbrella and excess liability policies respond after underlying limits are exhausted; umbrella may drop down for uncovered exposures.

Personal auto Part A liability, Part B medical payments, Part C uninsured/underinsured motorist, Part D damage to your auto.

Absolute liability applies to ultrahazardous activities and products liability for defective products without proof of negligence.

Underwriting evaluates the hazard, determines the risk class, and decides issue, rating, exclusion, or decline.

Risk classification factors for life: age, sex, health history, family history, occupation, avocations, tobacco use, and build.

Field underwriter duties: complete accurate applications, report known material facts, obtain signatures, collect initial premium, and deliver the policy.

Conditional receipt provides temporary coverage only if the application is completed, premium paid, and the applicant is found insurable under standard rules.

Policy issue process: application, underwriting, policy generation, delivery, free-look period, and premium mode selection.

Endorsements and riders amend coverage; they must be attached and acknowledged by the insured.

Reinstatement after lapse usually requires evidence of insurability and payment of overdue premium with interest.

Premium modes: annual, semiannual, quarterly, monthly; more frequent modes increase total annual cost due to loading.

Claim process: notice of loss, investigation, evaluation, negotiation, settlement, and subrogation or recovery.

Proof of loss is a sworn statement from the insured detailing the loss, required within a policy-specified period.

Unfair claim practices include unreasonable delay, failure to investigate, low offers without basis, and denial without explanation.

Total loss settlement: actual cash value for older vehicles, replacement cost for real property under replacement cost endorsement; salvage may be retained or sold.

Liability claim evaluation considers medical expenses, lost wages, pain and suffering, and comparative fault.

Bad faith exposure arises from unreasonable denial or delay; insurers must document claim decisions and communicate promptly.

Appraisal and arbitration clauses resolve valuation or coverage disputes without litigation.

Salvage and subrogation recoveries reduce the net loss to the insurer and may affect the insured's deductible recovery.

Fiduciary duty: the producer holds premiums in trust and must remit them promptly to the insurer.

Suitability requires recommending products consistent with the client's needs, financial situation, and objectives.

Prohibited conduct: misrepresentation, rebating, twisting, churning, commingling funds, and forging signatures.

Disclosure must include policy features, exclusions, costs, and the producer's compensation when required by regulation.

Replacement of existing coverage requires a notice and comparison; the producer must document the reason for replacement.

Continuing education and license renewal demonstrate ongoing competence; lapses prohibit solicitation until reinstated.

Confidentiality: client information may be shared only with consent or as required by law.

Advertising must be accurate, not misleading, and approved by the insurer before use.

Active listening: reflect back the client's concern, confirm understanding, and respond to the underlying need.

Policy servicing tasks: address changes, beneficiary updates, premium mode changes, loan requests, and claims guidance.

Clear communication avoids jargon, uses plain language, and confirms important instructions in writing.

Complaint handling: acknowledge promptly, investigate, resolve within stated timeframes, and document the resolution.

Privacy practices: verify identity before disclosing policy information and follow consent requirements.

Service standards: response time, accuracy, empathy, and follow-through; measure with customer satisfaction surveys.

Escalation path: unresolved issues move to a supervisor, then to the insurer's complaint or regulatory channel.

Cultural competence and accessibility: offer translated materials and accommodations when needed.