NM P&C flashcards

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

Principle of Indemnity

Restores the insured to approximately the pre-loss financial condition with no profit; property claims pay at actual cash value, which is replacement cost minus depreciation, unless replacement cost coverage applies.

Insurable Interest

A financial stake in property or a person such that a loss causes monetary harm; it must exist at the time of loss for property insurance and at application for life insurance.

Contract of Adhesion

The insurer drafts all policy terms and the insured accepts or rejects them; because of this unequal bargaining position, ambiguous wording is construed against the insurer.

Aleatory Contract

An exchange of unequal values in which the insured pays a comparatively small premium for a promise of a potentially large benefit payable only if a chance event occurs.

Moral Hazard

Dishonest or intentional behavior that increases the chance or size of a loss, such as arson, a staged theft, or deliberately exaggerating a claim.

Morale Hazard

Carelessness or indifference toward loss that exists because insurance is in place, such as leaving keys in an unlocked car or neglecting maintenance.

Subrogation

After paying a covered loss, the insurer acquires the insured's legal right to recover from the at-fault party; the insured must not do anything that impairs that right.

Coinsurance Clause

A property condition requiring the insured to carry a stated percentage of value, often 80 percent; payment equals limit carried divided by limit required, times the loss.

HO-3 Coverage Structure

The HO-3 insures the dwelling on an open-perils basis and personal property on named perils; HO-5 uses open perils for both, and HO-2 named perils for both.

Homeowners Percentage Limits

Coverage B other structures equals 10 percent of Coverage A; C personal property 50 percent; D loss of use 30 percent; E personal liability 50 percent; F medical payments $500 per person.

Replacement Cost Condition

Loss settlement pays full replacement cost only when the Coverage A limit is at least 80 percent of the dwelling's replacement cost at the time of loss.

Actual Cash Value

Replacement cost of damaged property minus depreciation; it is the default valuation for most personal property and applies when a replacement cost condition is not satisfied.

Commercial Coinsurance Formula

Payment equals limit carried divided by limit required, multiplied by the loss, where the required limit is the coinsurance percentage times the property value at the time of loss.

Special Causes of Loss Form

An open-perils form covering risks of direct physical loss unless specifically excluded, broader than the Basic and Broad named-peril forms used in commercial property.

Business Income Coverage

Pays the net income the business would have earned plus continuing normal operating expenses during the period of restoration, typically limited to 12 consecutive months.

NFIP Flood Insurance

A separate federal flood program generally carrying a 30-day waiting period; building losses settle at replacement cost and contents at actual cash value, while homeowners policies exclude flood.

Negligence Elements

Four elements must be proven for liability: a legal duty owed to the claimant, a breach of that duty, proximate cause, and actual damages.

Occurrence vs Claims-Made

Occurrence forms cover injury that happens during the policy period whenever the claim is filed; claims-made forms cover claims first made during the period, subject to a retroactive date.

CGL Aggregate Limits

The general aggregate is the most payable in one policy period for most claims; the each-occurrence limit caps a single loss, and products-completed operations has its own aggregate.

Personal Auto Policy Parts

Part A liability, Part B medical payments, Part C uninsured/underinsured motorists, and Part D damage to your auto, which includes collision and other-than-collision coverage.

Split Limits

Separate limits for bodily injury per person, bodily injury per accident, and property damage per accident; a combined single limit applies one total amount to all damages from one accident.

Workers Compensation Exclusive Remedy

Statutory benefits, including medical care, disability income, and death benefits, are the employee's exclusive remedy against the employer for a work-related injury.

Umbrella Policy

Provides excess limits above underlying auto, general liability, and employers liability policies, and can drop down to cover gaps after a self-insured retention is exhausted.

Products-Completed Operations

Covers bodily injury or property damage occurring away from the premises and arising from the insured's product or completed work after it has been released to others.

New Mexico Insurance Regulator

The New Mexico Office of Superintendent of Insurance licenses producers and insurers, examines market conduct, and enforces the state Insurance Code through the Superintendent.

NM Producer License Term

New Mexico producer licenses are issued for a two-year term and must be renewed before expiration, with required continuing education completed beforehand.

NM Continuing Education

New Mexico requires 24 continuing education credit hours every two-year license term, including at least 3 hours of ethics instruction, with records retained by the producer.

NM Auto Minimum Limits

New Mexico requires liability limits of at least $25,000 per person and $50,000 per accident for bodily injury and $10,000 per accident for property damage.

NM UM/UIM Requirement

Insurers must offer uninsured and underinsured motorist coverage at limits equal to the liability coverage; the named insured may reject it only by a written rejection.

Rebating Prohibition

Giving or offering anything of value not stated in the policy, such as paying a commission to an unlicensed person, is a prohibited unfair trade practice in New Mexico.

Reporting Administrative Action

A New Mexico producer must notify the Superintendent within 30 days after an administrative action, criminal prosecution, or other event affecting the license.

NM Guaranty Fund

The New Mexico property and casualty guaranty fund pays covered claims of insolvent insurers; an insurer's insolvency is not a lawful reason to replace a policy.