RMI 3011

Exam II

Chapter 6--Parts of an Insurance Contract

What are the main parts of an insurance contract? What is discussed in each?

Basic Parts of the Insurance Contract

Declarations

Definitions

Insuring Agreement

Exclusions

Conditions

Miscellaneous (provisions)

Declarations

Tells who, what, where, when

Lists amounts of coverage, premiums, deductibles

Usually is the first page of contract

Definitions

Defines terms, like “Your covered auto” and “Insured”

(trailers, substitute vehicles) (Not just named insured)

Insuring Agreement

Summarizes major promises of insurer

“Named-perils”

–If not named, not covered

“All-risks” (or open perils)

–All perils covered unless excluded

Different burdens of proof for these two types

(Named perils: burden is on insured to prove cause of loss; very important for home owner contracts; must be named for coverage to apply)

(Open perils: burden is on insurer to show exclusion; this coverage is more expensive)

Exclusions

Excluded perils

–Flood in the HO policy, suicide in a life policy (2 years) (acts of war, etc…)

Excluded losses

–Losses from operation of a business in HO policy (under $2000 covered, over not covered)

Excluded property

–Cars, planes, animals in HO policy

(car example: If house buns down with car in garage, not covered; land is excluded. Dink holes coverage will be provided by Florida {citizen})

(Cat fund/reinsurance; Citizen/primary run by state)

Reasons for exclusions:

Some perils are considered uninsurable (catastrophic loss)

Some hazards are extraordinary

Coverage provided by other contracts

Moral hazard problems (intentional losses)

Coverage not needed by typical insureds

Conditions

Provisions in the policy that qualify or limit the insurer’s promise to perform

Notifying insurer after loss occurs

Protecting property from further damage after a loss occurs

Cooperating with the insurer in the event of a liability lawsuit

Misc. Provisions

Property/Casualty Insurance

–Assignment of policy

–Cancellation

1) 1^st 60 days

2) Non payment of premium

3) Material misrepresentation

4) Driver’s license suspended or revoked

–“Other-insurance” provisions

Life/Health Insurance

–Grace period (written into contract)

–Reinstatement of Lapsed Policy

What are the two main types of insuring agreements (the basis on which perils are covered)? On whom does the burden of proof fall in each of these cases?

Insuring Agreement

Summarizes major promises of insurer

“Named-perils”

–If not named, not covered

“All-risks” (or open perils)

–All perils covered unless excluded

Different burdens of proof for these two types

(Named perils: burden is on insured to prove cause of loss; very important for home owner contracts; must be named for coverage to apply)

(Open perils: burden is on insurer to show exclusion; this coverage is more expensive)

What are the types of exclusions found in insurance contracts? Why are there exclusions?

Exclusions

Excluded perils

–Flood in the HO policy, suicide in a life policy (2 years) (acts of war, etc…)

Excluded losses

–Losses from operation of a business in HO policy (under $2000 covered, over not covered)

Excluded property

–Cars, planes, animals in HO policy

(car example: If house buns down with car in garage, not covered; land is excluded. Dink holes coverage will be provided by Florida {citizen})

(Cat fund/reinsurance; Citizen/primary run by state)

Reasons for exclusions:

Some perils are considered uninsurable (catastrophic loss)

Some hazards are extraordinary

Coverage provided by other contracts

Moral hazard problems (intentional losses)

Coverage not needed by typical insureds

*What are some common conditions found in insurance contracts? What happens if a condition is not met?

Conditions

Provisions in the policy that qualify or limit the insurer’s promise to perform

Notifying insurer after loss occurs

Protecting property from further damage after a loss occurs

Cooperating with the insurer in the event of a liability lawsuit

*When can a policy be assigned? What has to happen for this to be allowable?

A property insurance policy cannot be assigned. A life insurance policy can be assigned anytime as long as the insurer agrees to it



	RMI 3011 RMI 3011 Exam II Chapter 6--Parts of an Insurance Contract What are the main parts of an insurance contract? What is discussed in each? Basic Parts of the Insurance Contract Declarations Definitions Insuring Agreement Exclusions Conditions Miscellaneous (provisions) Declarations Tells who, what, where, when Lists amounts of coverage, premiums, deductibles Usually is the first page of contract Definitions Defines terms, like “Your covered auto” and “Insured” (trailers, substitute vehicles) (Not just named insured) Insuring Agreement Summarizes major promises of insurer “Named-perils” –If not named, not covered “All-risks” (or open perils) –All perils covered unless excluded Different burdens of proof for these two types (Named perils: burden is on insured to prove cause of loss; very important for home owner contracts; must be named for coverage to apply) (Open perils: burden is on insurer to show exclusion; this coverage is more expensive) Exclusions Excluded perils –Flood in the HO policy, suicide in a life policy (2 years) (acts of war, etc…) Excluded losses –Losses from operation of a business in HO policy (under $2000 covered, over not covered) Excluded property –Cars, planes, animals in HO policy (car example: If house buns down with car in garage, not covered; land is excluded. Dink holes coverage will be provided by Florida {citizen}) (Cat fund/reinsurance; Citizen/primary run by state) Reasons for exclusions: Some perils are considered uninsurable (catastrophic loss) Some hazards are extraordinary Coverage provided by other contracts Moral hazard problems (intentional losses) Coverage not needed by typical insureds Conditions Provisions in the policy that qualify or limit the insurer’s promise to perform Notifying insurer after loss occurs Protecting property from further damage after a loss occurs Cooperating with the insurer in the event of a liability lawsuit Misc. Provisions Property/Casualty Insurance –Assignment of policy –Cancellation 1) 1^st 60 days 2) Non payment of premium 3) Material misrepresentation 4) Driver’s license suspended or revoked –“Other-insurance” provisions Life/Health Insurance –Grace period (written into contract) –Reinstatement of Lapsed Policy What are the two main types of insuring agreements (the basis on which perils are covered)? On whom does the burden of proof fall in each of these cases? Insuring Agreement Summarizes major promises of insurer “Named-perils” –If not named, not covered “All-risks” (or open perils) –All perils covered unless excluded Different burdens of proof for these two types (Named perils: burden is on insured to prove cause of loss; very important for home owner contracts; must be named for coverage to apply) (Open perils: burden is on insurer to show exclusion; this coverage is more expensive) What are the types of exclusions found in insurance contracts? Why are there exclusions? Exclusions Excluded perils –Flood in the HO policy, suicide in a life policy (2 years) (acts of war, etc…) Excluded losses –Losses from operation of a business in HO policy (under $2000 covered, over not covered) Excluded property –Cars, planes, animals in HO policy (car example: If house buns down with car in garage, not covered; land is excluded. Dink holes coverage will be provided by Florida {citizen}) (Cat fund/reinsurance; Citizen/primary run by state) Reasons for exclusions: Some perils are considered uninsurable (catastrophic loss) Some hazards are extraordinary Coverage provided by other contracts Moral hazard problems (intentional losses) Coverage not needed by typical insureds **What are some common conditions found in insurance contracts? What happens if a condition is not met?*** Conditions Provisions in the policy that qualify or limit the insurer’s promise to perform Notifying insurer after loss occurs Protecting property from further damage after a loss occurs Cooperating with the insurer in the event of a liability lawsuit *When can a policy be assigned? What has to happen for this to be allowable? A property insurance policy cannot be assigned. A life insurance policy can be assigned anytime as long as the insurer agrees to it