Exam FX Property and casualty law. Exam Prep Questions and answers, Graded A

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Exam FX Property and casualty law. Exam Prep Questions and answers, Graded A - ✔✔-Insurance Terms To make whole again - ✔✔-Purpose of insurance Basic principle of insurance which the fi... nancial loss is assigned to another party. - ✔✔-Transfer A principle stating that the larger number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss. - ✔✔-Law of large numbers What you pay a month. - ✔✔-Premium The chance of a loss occurring that involves the opportunity for loss or gain. NOT INSURABLE - ✔✔- Speculative Risk Chance of a loss in a situation that can only result in a loss or no change. - ✔✔-Pure Risk Any interest an insured may have in property that is the subject of insurance, so that damage of that property would cause the insured financial loss. 3 elements: Financial (monetary interest) Blood (relative) Business (a business partner) - ✔✔-Insurable Interest Conditions that increase probability of an insured loss occurring. Examples: Smoking, Slippery floor, congested traffic. - ✔✔-Hazards The causes of loss. Examples: Death or cancer. - ✔✔-Peril Cause of loss specifically covered on policy that has to be listed. - ✔✔-Non-Peril Any risk of loss not specifically excluded. - ✔✔-Open Peril Reduction in value caused by a named peril. - ✔✔-Loss Compensation to insured that restores them to the same financial position that they enjoyed prior to loss. - ✔✔-Indemnity (Referred to as reimbursement) Insurer's (insurance company) legal right to seek damages from third parties, after it has reimbursed the insured. Also prevents the insured from collecting on the loss twice. (Can't sue the person that caused fault because insurance company already paid them). - ✔✔-Subrogation A sudden unplanned, unexpected event resulting in injury or damage. - ✔✔-Accident Losses caused by repeated conditions resulting in injury and damage. (over and over again). - ✔✔- Occurrence Direct physical damage to buildings and/or personal property. - ✔✔-Direct Loss Forced entry with intent to steal. - ✔✔-Burglary Intent to steal with bodily harm. - ✔✔-Robbery Burglary and robbery. - ✔✔-Theft Property that has disappeared without knowledge of the location. (forgot where it was placed). NOT COVERED. - ✔✔-Mysterious Disappearance A structure where no one has been living or working and no property stored for period or time required (usually 60 days). - ✔✔-Vacancy A structure where no one has been living or working but some property has been stored. - ✔✔- Unoccupancy Covers medical costs due to injury on no-fault basis. Sometimes referred to as MedPay. NOT THE SAME AS LIABILITY COVERAGE. - ✔✔-Medical Payments Single property insurance for multiple classes of property at one location. (Covers building and contents). - ✔✔-Blanket Insurance Covers specific kind or unit of property for a specific amount of insurance. - ✔✔-Specific Insurance Physical damage to tangible property of others caused by negligence of an insured. - ✔✔-Property Damage Claims by injured party for medical expenses, lost wages, disfigurement, pain and suffering, mental anguish and loss of consortium. - ✔✔-Bodily Injury Specific out of pocket expenses for medical, misc. expenses and loss of wages. - ✔✔-Special Damages (Compensatory) Covers injured person for pain and suffering, mental anguish and disfigurement. Can amount to what a judge feels is right. - ✔✔-General Damages (Compensatory) Form of punishment for extreme outrageous behavior, gross negligence or willful intent. - ✔✔-Punitive Damages Factor determining the premium charged and insurance required. - ✔✔-Loss valuation Recognizes the reduction of value of property as it ages due to wear and tear. Formula: Current replacement cost - Depreciation = Actual Cash Value (ACV) - ✔✔-Actual Cash Value ACV The cost to replace damaged property at TODAY'S price w/o deduction of depreciation. - ✔✔- Replacement Cost Cost and value of property is lower because of location and structures surrounding the land. - ✔✔- Market Value Scheduled amount an adjuster writes for the item. - ✔✔-Stated Value Estimated value an asset is worth when sold at the end of it's useful life. - ✔✔-Salvage Value Injured party does not have to prove. The hazard is clear. - ✔✔-Absolute Liability The product is warrantied that it was safe but turned out not to be. Proven it was faulty, defendant is strictly liable. - ✔✔-Strict Liability Parents held responsible for children's actions. Employers responsible for actions of employees. - ✔✔- Vicarious Liability Insurer's liability for payment as stated in the policy. - ✔✔-Limits of Liability Liability policy that puts a ceiling on the payment for all claims from a single accident/occurrence. - ✔✔- Per Occurrence Max amount for payment of bodily injury to a single person, no matter the policy limit. - ✔✔-Per Person Maximum limit of coverage available under a liability policy, during a year, regardless of number of claims made or number of accidents. - ✔✔-Aggregate Limit Limits that are separately stated of liability for different coverages. (25/50/20) - ($25,000 for injury of single person/50,000 for bodily injury to two or more, but no more than $25,000 to any one person/up to $20,000 for damage to property of others). - ✔✔-Split Single dollar limit of liability to total damages for bodily injury and property damages combined from one accident or occurrence. - ✔✔-Combined Single Act or event that happens naturally and did not know about. - ✔✔-Proximate Cause Money that the insured pays monthly before the insurance company provides coverage. - ✔✔- Deductible A clause that states the insured agrees to maintain a certain minimum amount of insurance on the insured property. 80% formula = (Insurance carried/Insurance required x Loss amount = Loss payment) - ✔✔-Coinsurance Property insured to exact dollar amount or percentage of value. - ✔✔-Insurance to Value Pay in advance - determine a certain amount of losses. - ✔✔-Deposit Premium If you go over the certain amount paid, you pay them back. - ✔✔-Deposit Premium Audit Written evidence of policy issued. - ✔✔-Certificate of Insurance Protects consumers against inaccurate or old information - ✔✔-Fair Credit Reporting Act - ✔✔-Policy Provisions and Contract Law 1. Agreement - Offer (me) and acceptance (insurance co.) 2. Consideration - Me to pay monthly/co. provides insurance. 3. Competent parties - legal age, mentally comp., not under influence of drugs or alcohol. 4. Legal purpose - Contract has to be for a lawful reason and not against public policy. - ✔✔-Elements of a Contract Customer (Me) - offer made when application is submitted. - ✔✔-Offer Underwriter approves application and issues policy. - ✔✔-Acceptance States that I will pay monthly charge and insurance company will provide insurance. - ✔✔-Consideration Both parties are of legal age, mentally competent and not under influence of drugs or alcohol. - ✔✔- Competent Parties Contract is for a lawful reason. - ✔✔-Legal Purpose Statements true to the best of one's knowledge. - ✔✔-Representations Untrue statements. - ✔✔-Misrepresentation [Show More]

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