NJ P&C cheat sheet

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

The principle of indemnity restores the insured to approximately the pre-loss financial position, not to a better position; actual cash value equals replacement cost minus depreciation.

Utmost good faith requires disclosure of material facts; concealment or material misrepresentation can allow the insurer to rescind or deny coverage.

A contract of adhesion is drafted by the insurer; ambiguities in wording are generally construed against the drafter.

An aleatory contract depends on chance: premiums paid may be much smaller than a covered loss, and performance is conditional on a fortuitous event.

Subrogation gives the insurer the right to pursue responsible third parties after paying a loss, preventing the insured from recovering twice.

The law of large numbers allows insurers to predict losses more accurately when exposure units are numerous and homogeneous.

Risk management techniques are avoidance, retention, reduction, sharing, and transfer; insurance is a transfer technique.

Hazards include moral hazard (dishonesty), morale hazard (carelessness), and physical hazard (tangible conditions).

A named-peril policy covers only causes of loss specifically listed; an open-peril or special policy covers all risks except those excluded.

Coinsurance formula: required insurance equals coinsurance percentage times replacement cost; claim payment equals loss times carried limit divided by required limit, capped by the policy limit.

Actual cash value equals replacement cost minus depreciation; replacement cost valuation pays for new property without depreciation, subject to policy limits.

Deductibles apply per occurrence; percentage deductibles are commonly calculated on the dwelling limit for wind, hail, or other specified perils.

Common property exclusions include earth movement, flood, war, nuclear hazard, intentional loss, and neglect.

Preservation of property expenses are reasonable costs incurred to protect covered property from further damage after a loss and are often covered.

Debris removal and ordinance-or-law coverage may be provided as additional coverage or subject to sublimits.

A mortgagee clause protects the lender's interest and gives the lender rights to loss payment and notice.

Blanket insurance covers multiple locations or items under one limit; specific insurance covers designated property with a separate limit.

Negligence elements are duty owed, breach of duty, proximate cause, and actual damages; all four are generally required for a liability claim.

Compensatory damages include special damages such as medical bills and lost wages and general damages such as pain and suffering; punitive damages punish conduct.

An occurrence policy responds to bodily injury or property damage that occurs during the policy period, regardless of when the claim is reported.

A claims-made policy responds to claims first made during the policy period; the retroactive date and extended reporting period affect coverage.

An aggregate limit is the maximum payable for all covered claims in a policy period; a per-occurrence limit is the maximum for one event.

Supplementary payments, such as defense costs, are often paid in addition to the liability limits.

Comparative negligence reduces an award by the plaintiff's percentage of fault; contributory negligence can bar recovery under the pure form.

Vicarious liability holds one party responsible for the acts of another, such as an employer for an employee's acts within scope of employment.

Absolute or strict liability applies without proof of negligence, such as for certain dangerous activities or defective products.

HO-3 covers the dwelling and other structures on an open-peril basis and personal property on a named-peril basis; HO-5 opens both to open peril.

HO-4 renters insurance covers personal property, loss of use, and liability, but does not cover the building.

HO-6 condo insurance covers the unit owner's personal property, improvements and betterments, loss of use, and liability; the association covers common elements.

Coverage C special limits cap payment for categories such as cash, jewelry theft, silverware, and firearms; endorsements can increase these limits.

Coverage D loss of use pays additional living expenses when the home is uninhabitable and fair rental value when rented.

Coverage E personal liability and Coverage F medical payments to others are liability sections; medical payments apply without regard to fault.

Dwelling policy DP-1 uses named perils, DP-2 broadens perils, and DP-3 uses open peril; liability coverage requires an endorsement.

Replacement cost on a dwelling generally requires carrying insurance to at least 80% of replacement cost to avoid a claim penalty.

Flood and earthquake are excluded and require a separate policy or endorsement.

New Jersey minimum auto liability is $15,000 per person and $30,000 per accident bodily injury liability and $5,000 property damage liability.

New Jersey requires personal injury protection, which pays medical expenses, lost wages, and essential services regardless of fault, subject to the selected limit.

A personal auto policy includes Part A liability, Part B medical payments or PIP, Part C uninsured/underinsured motorist, and Part D damage to your auto.

Collision covers damage to the insured auto from impact with another vehicle or object; other-than-collision covers theft, fire, glass, weather, and similar causes.

Uninsured motorist coverage pays when an at-fault driver has no insurance or is a hit-and-run driver; underinsured motorist coverage pays when the at-fault driver's limits are insufficient.

Common auto exclusions include intentional acts, racing, livery use, and undisclosed business use.

New Jersey's choice system offers basic and standard auto policies with different coverage packages and PIP options.

Deductibles apply to collision and other-than-collision coverage; liability and PIP coverage typically do not use a deductible.

Household members and regular drivers generally must be listed or rated, or coverage may be affected.

Commercial property forms cover the building, business personal property, and personal property of others.

Business income coverage pays lost net income and continuing expenses during restoration; extra expense pays costs to resume operations quickly.

A commercial general liability occurrence form covers bodily injury and property damage that occurs during the policy period; a claims-made form covers claims first made during the period.

CGL limits include each occurrence, general aggregate, products-completed operations aggregate, personal and advertising injury, and damage to premises rented.

CGL Coverage A covers bodily injury and property damage; Coverage B covers personal and advertising injury; Coverage C provides medical payments.

An additional insured endorsement extends liability coverage to another party for claims arising from the insured's operations or premises.

Commercial property coinsurance requires the limit to equal a specified percentage of value; underinsurance produces a reduced claim payment.

Equipment breakdown, flood, and earthquake are generally excluded and require endorsements or separate policies.

A certificate of insurance evidences coverage but does not amend, extend, or alter the policy.

An umbrella liability policy provides excess limits over underlying auto, general liability, and homeowners policies and may fill gaps subject to a self-insured retention.

NFIP flood insurance provides separate building and contents limits and typically imposes a 30-day waiting period before coverage begins.

Workers compensation covers employee work-related injury or illness and pays medical benefits and lost wages; exclusive remedy generally limits employee lawsuits.

Professional liability or errors and omissions coverage covers negligent acts, errors, or omissions in professional services.

Directors and officers coverage protects directors and officers for alleged wrongful acts; employment practices liability covers employment-related claims.

Inland marine covers movable property and property in transit; ocean marine covers hull, cargo, and related exposures.

Crime policies cover employee dishonesty, forgery, and theft; fidelity bonds guarantee employee honesty.

A surety bond is a three-party agreement among obligee, principal, and surety that guarantees performance or payment rather than insuring a two-party risk.

Residual markets such as FAIR plans and assigned risk plans provide coverage when the voluntary market is unavailable.

New Jersey insurance producers must be licensed by the New Jersey Department of Banking and Insurance and complete required continuing education for renewal.

Insurers must appoint producers, and appointment and termination information must be reported to the state.

Producers owe a fiduciary duty for premiums held; premiums must be held in trust and commingling with personal funds is prohibited.

Unfair trade practices include misrepresentation, false advertising, rebating, twisting, and unfair claim settlement practices.

Personal auto cancellation and nonrenewal are restricted, and required notice and premium payment grace periods apply.

The New Jersey Property Insurance Underwriting Association, known as the FAIR Plan, provides basic property insurance when the voluntary market is unavailable.

The New Jersey Property-Liability Insurance Guaranty Association pays covered claims of insolvent insurers, subject to statutory limits and exclusions.

New Jersey requires auto liability limits of $15,000 per person, $30,000 per accident, and $5,000 property damage, plus personal injury protection.

Rebating premiums or sharing commissions unlawfully is prohibited; producers may not offer inducements not specified in the policy.