COP Insurance flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Pure risk
- A situation with only the possibility of loss or no loss, with no chance of gain. Pure risks such as fire or liability are insurable; speculative risks are not.
- Law of large numbers
- As the number of independent similar exposure units increases, actual loss experience converges toward expected loss, allowing insurers to predict losses and set stable premiums.
- Insurable interest
- A financial or legal stake in the continued life or property of the insured. It must exist at policy inception for property and at the time of loss for life.
- Subrogation
- The insurer's right, after paying a claim, to recover from the negligent third party responsible for the loss, preventing the insured from collecting twice.
- Admitted insurer
- An insurer licensed by the state to transact insurance, subject to rate and form filing, financial reporting, and guaranty association protection.
- Twisting
- Inducing a policyholder to lapse or surrender existing coverage through misrepresentation or incomplete comparison, a prohibited unfair trade practice.
- Rate adequacy
- A regulatory standard requiring premiums sufficient to cover expected losses and expenses, not excessive for the risk, and not unfairly discriminatory among similar risks.
- Guaranty association
- A state-established entity that pays covered claims of policyholders of an insolvent admitted insurer, up to statutory limits, funded by assessments on insurers.
- Level term insurance
- Term coverage with a fixed death benefit for a specified period and no cash value; renewable and convertible options preserve insurability.
- Universal life insurance
- Permanent coverage with flexible premiums, a cost-of-insurance deduction, and interest crediting; insufficient funding can cause the policy to lapse.
- Nonforfeiture options
- Choices available when a permanent policy is surrendered or lapses: cash surrender value, reduced paid-up insurance, extended term insurance, or automatic premium loan.
- Modified endowment contract
- A life policy that fails the seven-pay test, losing favorable tax treatment; loans and distributions are taxed LIFO with a 10% penalty before age 59½.
- Coordination of benefits
- Rules determining which health plan pays first when a person is covered by two plans; the primary plan pays, and the secondary pays the remainder up to its limit.
- Coinsurance clause
- A health cost-sharing requirement in which the insured pays a fixed percentage of covered expenses after the deductible, commonly 20 percent.
- Own occupation disability
- A disability definition that pays benefits if the insured cannot perform the duties of their own specific occupation, generally the most favorable definition for the insured.
- AD&D principal sum
- The face amount payable for accidental death under an accidental death and dismemberment policy; scheduled percentages of the principal sum apply for loss of limb or sight.
- Replacement cost
- The cost to repair or replace damaged property with new property of like kind and quality, without deduction for depreciation.
- Actual cash value
- Replacement cost minus depreciation; the standard valuation method for property losses when replacement cost coverage is not purchased.
- Coinsurance formula
- Claim payment equals insurance carried divided by insurance required, multiplied by the loss, subject to the policy limit.
- Open perils coverage
- A property form covering all risks of direct physical loss except those specifically excluded, such as flood, earth movement, and wear and tear.
- Negligence elements
- To establish negligence, a claimant must prove legal duty, breach of that duty, proximate cause, and actual damages.
- Claims-made policy
- A liability policy covering claims first made during the policy period, regardless of when the injury or damage occurred, often with a retroactive date.
- Umbrella liability policy
- Excess coverage above underlying auto, general liability, and employers liability limits, and may drop down to cover gaps in underlying coverage.
- Workers compensation Part Two
- Employer's liability coverage that responds to work-related injury claims outside the statutory benefit system, such as third-party actions against the employer.
- Conditional receipt
- A receipt providing temporary coverage only if the application is complete, the initial premium is paid, and the applicant meets the insurer's standard underwriting requirements.
- Risk classification
- The process of grouping applicants with similar expected loss characteristics so that each group pays a premium proportionate to its expected risk.
- Free-look period
- A statutory period, commonly 10 to 30 days after policy delivery, during which the policyholder may cancel for a full premium refund.
- Proof of loss
- A sworn statement from the insured detailing the date, cause, and amount of loss, submitted within the time period specified by the policy.
- Unfair claim settlement practices
- Prohibited conduct including unreasonable delay, failure to investigate, offering substantially less than the claim is worth, and denial without explanation.
- Salvage
- Damaged property retained by or transferred to the insurer after a total loss settlement; its value reduces the net cost of the claim.
- Rebating
- Offering part of the producer's commission or other inducement not stated in the policy to persuade a client to buy, an illegal unfair trade practice.
- Active listening
- A communication technique in which the representative reflects back the client's concern, confirms understanding, and responds to the underlying need.