MD Property & Casualty flashcards

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

Insurable interest

A financial stake in the subject matter such that its loss causes the insured monetary harm; required at the time of loss for property insurance and at application for life insurance.

Principle of indemnity

Restores the insured to approximately the same financial position held before the loss, never better, so the insured cannot profit from insurance; it underlies actual cash value valuation.

Aleatory contract

A contract in which the amounts exchanged by the parties are unequal and depend on chance events; insurance premiums buy a large, uncertain promise of payment.

Contract of adhesion

A contract drafted by one party and offered to the other on a take-it-or-leave-it basis; because the insurer writes the wording, ambiguities are construed against the insurer.

Utmost good faith

An implied duty requiring both parties to disclose material facts; concealment or material misrepresentation by the applicant can void the policy.

Moral hazard

A condition arising from the insured's dishonesty or character, such as intentionally causing a loss to collect insurance, that increases the chance of loss.

Elements of insurable risk

Large numbers of similar exposure units, accidental and measurable losses, calculable probability, losses that are not catastrophic, and a premium the buyer can afford.

Proximate cause

The unbroken chain of events set in motion by a covered peril that produces the loss; coverage applies when the initiating cause is a covered peril.

HO-3 special form

The most common homeowners form; it insures the dwelling and other structures on an open perils basis and personal property for broad named perils.

Coverage B other structures

Pays for direct damage to structures on the residence premises not attached to the dwelling, such as detached garages and fences; default limit 10% of Coverage A.

Coverage C personal property

Covers the insured's personal belongings worldwide, on and off the premises, for covered perils; the default limit is 50% of the Coverage A amount.

Coverage D loss of use

Pays additional living expenses and fair rental value when a covered loss makes the residence premises uninhabitable; the default limit is 30% of Coverage A.

HO-4 tenants form

A renters policy insuring personal property and liability only; the building itself is insured by the landlord, so no dwelling coverage is provided.

Property coinsurance clause

Requires the insured to carry a stated percentage, often 80%, of replacement cost; payment equals (carried ÷ required) × loss, less the deductible.

Replacement cost coverage

Pays to repair or replace damaged property with new property of like kind and quality without deducting depreciation, subject to the policy limit.

Flood insurance waiting period

Coverage under the National Flood Insurance Program generally takes effect 30 days after purchase, except when a lender requires flood coverage at a loan closing.

CGL occurrence form

Commercial general liability form that covers injury or damage occurring during the policy period, regardless of when the claim is later reported to the insurer.

Claims-made liability form

Covers claims first made against the insured during the policy period; a retroactive date limits prior acts and extended reporting periods can be purchased.

Maryland contributory negligence

Maryland rule barring a claimant who was negligent to any degree from recovering damages, unlike the comparative negligence rule used in most states.

Maryland minimum auto limits

Required limits of $30,000 per person and $60,000 per accident for bodily injury plus $15,000 for property damage, written as 30/60/15.

Maryland personal injury protection

At least $2,500 of coverage for the insured's medical expenses, lost wages, and essential services after an auto accident regardless of fault; waivable in writing.

Maryland uninsured motorist coverage

Must be issued at limits equal to the policy's liability limits unless the insured signs a written waiver; it pays for injuries caused by uninsured and underinsured drivers.

Workers compensation exclusive remedy

A no-fault statutory system paying medical, disability, and death benefits for work-related injury; in exchange, the employee gives up the right to sue the employer.

Businessowners policy (BOP)

A package policy combining commercial property, general liability, and business income coverage, written for small businesses in eligible low-hazard classes.

Maryland Insurance Administration

The state agency, led by a Commissioner appointed by the Governor, that licenses insurers and producers and enforces the Maryland Insurance Article.

Producer appointment

An insurer's authorization for a producer to act on its behalf; the insurer files the appointment with the Commissioner and must report terminations.

Fiduciary duty of producers

Premiums and return premiums held by a producer belong to the insurer or the insured, must be kept in a separate account, and may not be commingled.

Rebating

Offering any inducement not stated in the policy, such as part of the commission, to persuade a buyer to purchase insurance; prohibited as an unfair trade practice.

Twisting

Misrepresenting the terms of an existing policy to induce a policyholder to lapse, surrender, or replace it; classified as an unfair trade practice.

Producer continuing education

Maryland licensees must complete 24 credit hours every two years, including at least 3 hours of ethics, before renewing a producer license.

Maryland Auto Insurance Fund

The state residual market that offers auto liability coverage to Maryland drivers who cannot obtain insurance in the voluntary market and meet eligibility rules.

Notice of auto cancellation

Maryland requires 45 days' written notice before cancelling or nonrenewing a private passenger auto policy, shortened to 10 days for nonpayment of premium.