SD Property & Casualty key terms

A financial stake in the person or property being insured, such that the insured would suffer a genuine economic loss if a loss occurred. It must exist at the time of the loss for property coverage.

The principle that an insured should be restored to roughly the same financial position held before a loss, no better and no worse. It prevents collecting more than the actual value of the damage.

The requirement that applicants and insurers deal honestly and disclose all material facts. A misstatement that would change the insurer's decision to accept or price the risk can void coverage.

An insurance policy drafted by the insurer and offered to the buyer on a take-it-or-leave-it basis. Because the insured has no input into the wording, ambiguity is generally resolved in the insured's favor.

An agreement in which the amounts exchanged are unequal and depend on chance. The insured pays a set premium, but the insurer may pay nothing or a large claim.

The insurer's right, after paying a claim, to pursue the party that caused the loss and recover those costs. It prevents the insured from collecting twice for the same damage.

The specific cause of a loss, such as fire, wind, theft, or collision. Policies list covered perils and exclude others, so identifying the peril is essential to a claim decision.

A condition that increases the likelihood or severity of a loss from a given peril. Examples include oily rags in a garage or a poorly maintained roof.

The dominant, uninterrupted cause of a loss, even if other events follow. When a covered peril sets an unbroken chain of events in motion, the resulting damage is generally covered.

A valuation method that pays the cost to replace damaged property minus depreciation. It reflects what the item was worth just before the loss rather than what a new one costs.

A property policy provision requiring the insured to carry coverage equal to a stated percentage of the property's value. Falling below that amount reduces claim payments proportionally.

A homeowners policy that covers the dwelling and other structures on an open-peril basis while personal property is covered for named perils. It is the most widely used homeowners form.

Homeowners coverage that pays extra costs, like motel or restaurant bills, when a covered loss makes the residence unfit to live in. Payments usually last until the home is repaired or a stated time limit ends.

An addition to a homeowners policy that lists specific valuable items, such as jewelry or cameras, for broader coverage and higher limits. Items are typically described and valued individually.

A policy provision naming the lender as a loss payee. The lender is paid for its interest in damaged property and receives notice of cancellation or nonrenewal.

Commercial property coverage that replaces lost net income and continuing normal expenses while a business is shut down by a covered loss. It usually applies during the period of restoration.

Coverage for the added cost of rebuilding to current building codes, and for the value of the undamaged portion that must be demolished. Standard property forms exclude these costs unless endorsed.

Property coverage for goods in transit, portable equipment, and property of others that standard property forms handle poorly. It is often written as a separate policy or floater.

A federal program that makes flood coverage available through participating insurers and agents. Standard property policies exclude flood, so a separate NFIP policy is needed.

A property condition in which a building is empty and not being used for its intended purpose. Vacancy can sharply limit or suspend coverage under many property forms.

Physical harm, sickness, or disease to a person, including death resulting from it. Liability policies define the term carefully because it sets the scope of covered claims.

A liability policy that covers claims first made against the insured during the policy period, regardless of when the injury happened. Retroactive dates and extended reporting periods shape the coverage.

Liability coverage for injury or damage caused by the insured's product or completed work away from the premises. It typically carries its own limit within the general aggregate.

The most a liability policy will pay for all covered claims during a policy period. Once it is used up, no more payments are made even if the occurrence limit remains.

Separate dollar limits for different parts of an auto liability claim, such as a per-person amount for bodily injury, a per-accident amount, and a property damage amount.

Coverage that pays reasonable medical and funeral expenses for injuries, regardless of who was at fault. It is available under auto and general liability policies and usually has a modest limit.

Auto coverage that responds when an at-fault driver has no insurance or cannot be identified in a hit-and-run. It pays the insured's bodily injury damages up to policy limits.

A state-mandated system that pays medical benefits and lost wages to employees injured on the job, regardless of fault. Insurers or self-insured employers provide the benefits.

The rule that workers compensation benefits are the employee's only recovery from the employer for a work injury. It generally bars a separate lawsuit against the employer.

A license issued by the state insurance regulator that allows an insurer to transact insurance business in that state. Insurers without one are considered nonadmitted.

An insurer that is not licensed to do business in a state and therefore is not regulated by that state's insurance division. Nonadmitted coverage is placed through surplus lines.

The market for coverage written by nonadmitted insurers when admitted carriers decline a risk. The broker must usually show that admitted insurers refused the business first.

The insurer's authorization, filed with the state, allowing a licensed producer to sell insurance on its behalf. Selling without an appointment can lead to license penalties.

The producer's duty to hold premiums and other client money in trust and account for it properly. Mixing that money with personal or business funds is called commingling and is prohibited.

Offering a client part of the producer's commission or anything of value not stated in the policy as an inducement to buy insurance. It is an illegal unfair trade practice in most states.

Persuading a policyholder to drop existing coverage through misleading or incomplete comparisons in order to sell a replacement policy. It is classified as an unfair trade practice.

Improper claim handling, such as unreasonable delay, low offers without support, or failing to explain a denial. Regulators may impose penalties for these prohibited acts.

A state-created entity, funded by insurers, that pays claims of policyholders when an admitted insurer becomes insolvent. It does not cover nonadmitted insurers or every type of policy.