Personal Lines flashcards

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

McCarran-Ferguson Act

Federal law (1945) that gives states primary authority to regulate insurance; federal antitrust laws apply only where states do not regulate.

Fiduciary duty

A producer's obligation to hold premiums in trust, avoid commingling with personal funds, and remit promptly to the insurer.

Insurable interest

A financial interest in the insured property or person; required at the time of loss for property insurance and at application for life insurance.

Aleatory contract

An insurance contract in which the exchange of values is unequal; the insurer may pay much more or less than the premium collected.

Coinsurance formula

Property payment = (limit carried ÷ limit required) × loss, where limit required equals coinsurance percentage times replacement cost; payment never exceeds the policy limit.

Actual cash value

Replacement cost minus depreciation; used to settle losses on an indemnity basis so the insured is restored to pre-loss financial position, not better.

HO-3 special form

Homeowners policy covering the dwelling on an open-peril basis and personal property for broad named perils; most common homeowners form.

Coverage C special limits

Dollar caps on categories of personal property, such as $200 for money and $1,500 for jewelry theft, regardless of the overall Coverage C limit.

Ordinance or law exclusion

Homeowners exclusion barring costs to comply with building codes or ordinances after a loss, unless coverage is added by endorsement.

Coverage F medical payments

Homeowners liability coverage paying reasonable medical expenses to others injured on the insured location, regardless of fault, subject to a per-person limit.

Appraisal condition

Policy provision allowing insurer and insured to resolve disagreements over loss amount by each selecting an appraiser and an umpire; a written agreement is binding.

Mortgagee clause

Provision giving the mortgagee the right to receive loss payments to the extent of its interest and to notice of cancellation or nonrenewal.

DP-3 dwelling policy

Dwelling form covering the dwelling on an open-peril basis; personal property is not included unless endorsed, and liability coverage is not provided.

HO-4 renters policy

Homeowners form for tenants covering personal property and liability, but not the building structure; may include limited building additions.

HO-6 condo policy

Homeowners form for condominium owners covering personal property, liability, and limited building items such as alterations and improvements.

Part A liability

Personal auto coverage paying damages for bodily injury and property damage the insured is legally liable for, with defense costs paid in addition to limits.

Part B medical payments

Personal auto coverage paying reasonable medical expenses for the insured and passengers regardless of fault, subject to a per-person limit.

Split limits

Auto liability limits stated as three numbers, such as 25/50/25, representing per-person bodily injury, per-accident bodily injury, and property damage limits.

Part C UM/UIM

Personal auto coverage for bodily injury caused by an uninsured or underinsured motorist; mandatory in some states and may include property damage.

Part D collision

Personal auto coverage for damage to the covered auto from collision with another object or overturn, subject to a deductible.

Other than collision

Personal auto comprehensive coverage for damage from theft, fire, vandalism, glass breakage, or weather, subject to a deductible.

Transportation expenses

Personal auto coverage paying a daily amount, up to a maximum, for rental or other transportation when a covered auto is disabled by a covered loss.

Personal umbrella policy

Excess liability coverage above underlying homeowners and auto limits; may drop down to cover some losses not covered by underlying policies.

NFIP flood policy

Federal flood insurance program providing building and contents coverage, typically with a 30-day waiting period and maximum residential limits of $250,000 building and $100,000 contents.

Personal articles floater

Inland marine policy scheduling valuables such as jewelry and furs on an open-peril, worldwide basis, often with no deductible and replacement cost settlement.

Watercraft endorsement

Homeowners endorsement extending liability and sometimes physical damage coverage to small watercraft that exceed the policy's built-in size or horsepower limits.

Endorsement precedence

An endorsement modifies the policy and takes precedence over conflicting policy language; it must be attached and made part of the policy.

Pro rata cancellation

Refund of unearned premium calculated in proportion to the unused policy period; typically used when the insurer cancels the policy.

Proof of loss

A sworn statement, required within a specified period after insurer request, detailing the loss, damage, and amount claimed by the insured.

Subrogation

The insurer's right to recover from a negligent third party after paying a covered loss, preventing double recovery by the insured.

Short rate cancellation

Refund of unearned premium that is less than pro rata, used when the insured cancels; the insurer retains a penalty amount.

Unfair claim practices

Prohibited insurer conduct such as denying a claim without reasonable investigation or failing to communicate claim status, regulated by state insurance departments.