FI 341: Test 2 Study Guide
FI 341: Test 2 Study Guide FI 341
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This 8 page Study Guide was uploaded by Julie Knight on Saturday February 27, 2016. The Study Guide belongs to FI 341 at University of Alabama - Tuscaloosa taught by William Rabel in Fall 2015. Since its upload, it has received 138 views. For similar materials see Fundamentals of Risk Management and Insurance in Business at University of Alabama - Tuscaloosa.
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Date Created: 02/27/16
FI 341 Principles of Risk Management & Insurance Review for Exam 2 Chapters 20, 19, 21, 22, 23, 24 * It is important for you to know all the Key Concepts and Terms for every Chapter. Chapter 20. Homeowners Insurance, Section I Key Words Review Questions 2, 3a.b.c.d.e., 4.a.b, 5.a.b., 6, 7, 8.a.b., 9.a.b, 10 Application Questions 1, 2, 3.a.b.c.d.e., 4.a.b.c.d.e.f.g.h.i.j.k.l.m., 5.a.b.c., 6, 7,a.b.c., 8. Chapter 19. The Liability Risk Key Words Review Questions 1.a.b., 2., 3.a.b., 4.a.b.d., 5., 7.a.b.c.d.e.f.g., 8.a. Application Questions 1.a.b.c., 2.a.b., 4., 8. Chapter 21. Homeowner’s Insurance, Section II Key Words Review Questions 1., 2., 3.a.b., 4., 5., 6., 7.a.b.c.d., 10. Application Questions 1.a.c.e.f.g.h.j., 2.a.,b., 4.a.b.c. Chapter 22. Auto Insurance Key Words Review Questions 1.a.b.c.d., 2. 3., 4., 5.a., 6., 7.a.b.c., 8.a.b., 9. Application Questions 1.a.b.d.g., 2.a.b., 3.a.b., 4.a.b., 5 Chapter 23. Auto Insurance and Society Key Words Review Questions 1.a.b., 2.a., 4.a.d., 10. Application Questions 1.a.b., 2.a.b., 3.a.b.c.d., 4,a, Chapter 24. Other P&L Coverages (specifically PUP) Review Questions 10. Application Questions 4. Chapter 20: Key Words Additional living expense the increase in living expenses actually incurred by the insured to maintain the family’s normal standard of living Appraisal clause used when the insured and insurer agree that the loss is covered, but the amount of the loss is in dispute Extended replacement cost endorsement pays up to an extra 20% or more above the policy limits, depending on the insurer Fair rental value means the rental value of that part of the residence premises rented to others or held for rental less any expenses that do not continue while the premises are not fit to live in Guaranteed replacement cost insured agrees to insure the home to 100% of its estimated replacement cost rather than 80% Homeowners 2 (broad form) a named perils policy that insures the dwelling, other structures (e.g., a detached garage or tool shed), and personal property against loss from certain listed perils Homeowners 3 (special form) insures the dwelling and other structures against direct physical loss to property Homeowners 4 (contents broad form) designed for tenants who rent apartments, houses, or rooms Homeowners 5 (comprehensive form) insures the dwelling, other structures, and personal property against direct physical loss to property Homeowners 6 (unitowners form) designed for the owners of condominiums units and cooperative apartments Homeowners 8 (modified coverage form) a modified coverage form that covers loss to the dwelling and other structures on the basis of repair cost, which is the amount required to repair or place damaged property using common construction materials and methods Loss to a pair or set the insurer can elect either (1) to repair or replace any part so that the pair or set is restored to its value before the loss occurred, or (2) pay the difference in actual cash value of the property before and after the loss Mortgage clause designed to protect the mortgagee’s insurable interest; if the mortgagee is entitled to receive a loss payment from the insurer to the extent of its interest, regardless of any policy violation by the insured Proximate clause means there is an unbroken chain of events between the occurrence of a covered peril and damage or destruction of the property Replacement cost the amount necessary to repair or replace the dwelling with material of like kind and quality at current prices Schedule a list of covered property with specific amounts of insurance Review Questions: 2. a homeowner’s policy on a private dwelling is designed for the owner occupants of a one, two, three, or four family dwelling used exclusively for private residential purposes 3. a) Coverage ADwelling covers the dwelling and any structures attached to the dwelling b) Coverage B Other Structures covers other buildings not attached to the dwelling c) Coverage C Personal Property personal property is covered anywhere in the world d) Coverage D Loss of Use provides protection when the residence premises cannot be used because of a covered loss e) Additional Coverages debris removal, reasonable repairs, etc 4. a) b) 5. a) physical loss that is caused directly from the incident b) money, bank notes, gold, silver, watercrafts, jewelry, watches, furs, firearms 6. Section I exclusions concurrent causation, loss due to ordinance of law, loss due to earth movement, loss due to water losses, loss due to neglect, intentional losses, war, certain weather conditions 7. give prompt notice, protect the property from further damage, prepare an inventory, exhibit damaged personal property, file a proof of loss 8. a) actual cash value b) paid on the basis of replacement cost with no deduction for depreciation 9. a) b) 10. still required to receive a loss payment Chapter 19: Key Words Alternative dispute resolution (ADR) a technique for resolving a legal dispute without litigation Arbitration a technique by which parties in a dispute agree to be bound by the decision of an independent third party Assumption of risk a person who understands and recognizes the danger inherent in a particular activity cannot recover damages in the event of an injury Attractive nuisance a condition that can attract and injure children Collateral source rule the defendant cannot introduce any evidence that shows the injured party has received compensation from other collateral sources Comparative negligence law if both the plaintiff and the defendant contribute to the plaintiff’s injury, the financial burden of the injury is shared by both parties according to their respective degrees of fault Compensatory damages awards that compensate injured victims for the losses actually incurred Contributory negligence if the injured person’s conduct falls below the standard of care required for his or her protection, and such conduct contributed to the injury, the injured person cannot collect damages Dram shop law a business that sells liquor can be held liable for damages that may result from the sale of liquor Elements of negligence (1) existence of a legal duty; (2) failure to perform that duty; (3) damage or injury; (4) proximate cause relationship Family purpose doctrine the owner of an automobile can be held liable for the negligent acts committed by immediate family members while they are operating the family car General damages awards for losses that cannot be specifically measured or itemized, such as compensation for pain and suffering Governmental function ex. The planning of a sewer system immunity from lawsuits also has eroded over time Imputed negligence under certain conditions, the negligence of one person can be attributed to another Invitee a person who is invited onto the premises for the benefit of the occupant Joint and several liability rule several people may be responsible for the injury, but a defendant who is only slightly responsible may be required to pay the full amount of damages Last clear chance rule a plaintiff who is endangered by his or her own negligence can still recover damages from the defendant if the defendant has a last clear chance to avoid the accident but fails to do so Legal wrong a violation of a person’s legal rights, or a failure to perform a legal duty owed to a certain person or to society as a whole Licensee a person who enters or remains on the premises with the occupant’s expressed or implied permission Mediation a technique by which a neutral third party tries to arrange a settlement without resorting to litigation Negligence the failure to exercise the standard of care required by law to protect others from an unreasonable risk of harm Plaintiff person who is injured or harmed Proprietary function the operation of water plants; electrical, transportation, and telephone systems Proximate clause a cause unbroken by any new and independent cause, which produces an event that otherwise would not have occurred Punitive damages awards designed to punish people and organizations for egregious acts so that others are deterred from committing the same wrongful act Res ipsa loquitur “the thing speaks for itself” the very fact that the injury or damage occurred establishes a presumption of negligence on behalf of the defendant Respondeat superior an employer can be held liable for the negligent acts of employees while they are acting on the employer’s behalf Sovereign immunity the king or queen can do no wrong Special damages awards for losses that can be determined and documented, such as medical expenses, lost earnings, or property damage Strict liability (absolute liability) liability is imposed regardless of negligence or fault Tort a legal wrong for which the law allows a remedy in the form of money damages Tortfeasor (alleged wrongdoer) defendant can sue for damages Trespasser a person who enters or remains on the owner’s property without the owner’s consent Vicarious liability law a motorist’s negligence is imputed to the vehicle’s owner Chapter 21: Key Words Claim expenses paid as an additional coverage Contractual liability an insured agrees to assume the legal liability of another party by a written or oral contract Damage to property of others pays up to $1000 per occurrence for property damage caused by an insured Earthquake endorsement covers direct physical loss to property covered under Section I caused by an earthquake Firstaid expenses incurred by the insured for bodily injury covered under the policy Home business insurance coverage endorsement covers both business property and legal liability arising out a homebased business Identity theft endorsement reimburses crime victims for the cost of restoring their identity and cleaning up their credit report Inflation guard endorsement designed for use with the ISO homeowner forms and provides for an annual pro rata increase in the limits of insurance Insurance score a creditbased score that is highly predictive of future claim costs Loss history report reveals the prior claim history of a home Medical payments to others pays the reasonable medical expenses of another person who is accidentally injured while on an insured location, or by the activates of an insured, resident employee, or animal owned by or in the care of an insured Occurrence an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results in bodily injury or property damage during the policy period Personal injury legal liability arising out of (1) false arrest, detention or imprisonment; (2) malicious prosecution; (3) wrongful eviction; (4) slander/libel Personal liability insurance protects an insured when a claim or suit for damages is brought because of bodily injury or property dunnage allegedly caused by an insured’s negligence Personal property replacement cost loss settlement endorsement claims are paid on the basis of replacement cost with no deduction for depreciation Personal umbrella policy provides an additional $1 million to $10 million of liability insurance after the underlying coverage is exhausted Scheduled personal property endorsement (with agreed value loss settlement) additional coverage for nine classes of property: (1) jewelry; (2) furs; (3) cameras; (4) musical instruments; (5) silverware; (6) golfer’s equipment; (7) fine arts; (8) postage stamps; (9) rare and current coins Watercraft endorsement watercraft that are otherwise excluded under the homeowners policy Chapter 22: Key Words Appraisal provision covers an appraisal of the loss Betterment when the value of the vehicle is increased after repairs are competed, the insurer will not pay for the betterment Cancellation the insured can cancel at any time Collision the upset of your covered auto or nonowned auto or its impact with another vehicle or object Coverage for damage to your auto coverage for damage or theft Diminution in value any loss in market or resale value from a direct and accidental physical damage loss to a covered auto is not covered Extended nonowned coverage endorsement covers the insured while operating a nonowned auto on a regular basis Gap insurance which pays the difference between the amount your insurer pays for a totaled car and the amount owed on the loan or lease Liability coverage (part A) the most important part of the PAP as legal liability arising from negligent use of an auto; protects a covered person against a lawsuit or claim arising out of the ownership or operation of a covered vehicle Medical payments coverage paid without regard to fault Miscellaneoustype vehicle endorsement insure motorcycles, motor scooter, golf carts, motor homes, dune buggies Nonowned auto a private passenger auto, pickup, can or trailer not owned by or furnished or made available for the regular use of the named insured or family member, while it is in the custody of or is being operated by the named insured or family member Nonrenewal the insurer does not renew the coverage Otherthancollision loss loss not from a collision Single limit applies to both bodily injury and property damage liability: the total amount of insurance applies to the entire accident without a separate limit for each injured person Split limit the amounts of insurance for bodily injury liability and property damage liability are stated separately Supplementary payments (1) up to $250 for the cost of a bail bond; (2) premiums on appeal bonds and bonds to release attachments; (3) interest accruing after a judgment; (4) up to $200 daily for the loss of earnings; (5) other reasonable expenses Temporary substitute vehicle a nonowned auto or trailer that you are temporarily using because of mechanical breakdown, repair, servicing, loss, or destruction of a covered vehicle Underinsured motorists coverage can be added to the PAP to provide more complete protection; applies when a negligent third party driver carries liability insurance, but the limits carried are less than the insured’s actual damages for bodily injury Uninsured motorists coverage pays for bodily injury caused by an uninsured motorist, by a hit and run driver, or by a negligent driver whole insurance company is insolvent Your covered auto (1) any vehicle shown in the declarations; (2) a newly acquired auto; (3) a trailer owned by the named insured; (4) a temporary substitute vehicle Chapter 23: Key Words Addon plan pays benefits to an accident victim without regard to fault, and the injured person still has the right to sue the negligent driver who caused the accident Automobile insurance plan (assigned risk plan) makes auto insurance available to drivers who are unable to obtain insurance in the voluntary market Choice no fault plan motorists can elect to be covered under the state’s no fault law and pay lower premiums Compulsory insurance law requires motorists to carry at least a minimum amount of liability insurance before the vehicle can be licensed or registered Data recorder an electronic device that can be installed in a vehicle to track certain driving behaviors Essential services expenses ordinarily performed by the injured person Financial responsibility law does not require proof of financial responsibility until after the driver has his or her first accident or until after conviction for certain offenses, such as driving under the influence of alcohol Good student discount can reduce premiums Insurance score a credit based score that proponents claim is highly predictive of future claim costs Joint underwriting association (JUA) an organization of auto insurers operating in the state in which high risk business is placed in a common pool, and each company pays its pro rata share of pool losses and expenses Low cost auto insurance provides minimum amounts of liability insurance at reduced rates to motorists who cannot afford regular insurance or have limited financial assets to protect Maryland Automobile Insurance Fund a state fund that makes auto insurance available to Maryland motorists who are unable to obtain insurance in the voluntary markets Modified nofault plan an injured person has the right to sue a negligent driver only if the bodily injury claim exceeds the dollar or verbal threshold Monetary threshold collect from his or her own insurer Multicar discount available if the insured owns two or more cars No fault auto insurance after an auto accident involving bodily injury, each party collects from his or her own insurer regardless of fault “No pay, no play” laws restrict uninsured motorists from suing negligent drivers for noneconomic damages, such as compensation for pain and suffering Optional deductibles used to restrict or eliminate certain no fault coverages Optional nofault benefits minimums be made available Pure no fault plan accident victims could not sue at all, regardless of the amount of the claim, and no payments would be made for pain and suffering Reinsurance facility the insurance company must accept all applicants for insurance both good and bad drivers Safe driver plans based on the individual driving records Shared market plans in which auto insurers participate to make insurance available to drivers who are unable to obtain coverage in the standard markets Specialty insurers Survivors’ loss benefit payable to eligible survivors, such as a surviving spouse and dependent children Uninsured motorists coverage the injured person’s insurer agrees to pay the accident victim who has a bodily injury caused by an uninsured motorist Unsatisfied judgment fund a state fund for compensating auto accident victims who have exhausted all other means of recovery Verbal threshold a suit for damages is allowed only in serious cases, such as those involving death, dismemberment, disfigurement, or permanent loss of a bodily member or function
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