Week 1 in Property and Casualty Insurance
Week 1 in Property and Casualty Insurance INS 3203
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This 3 page Class Notes was uploaded by Whitney Smith on Wednesday February 3, 2016. The Class Notes belongs to INS 3203 at Mississippi State University taught by Priscilla King in Winter 2016. Since its upload, it has received 33 views. For similar materials see Property and Casualty Insurance in Economcs at Mississippi State University.
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Date Created: 02/03/16
Assignment #1 1. According to the Common Policy Conditions, over what time period is the insurer permitted to examine and audit the insured’s books and related to the policy? a. The insurer is allowed to examine and audit any time during the policy and up to three years after the policy is terminated. 2. Describe the way in which each of the following risk control techniques prevents or reduces the cost of losses. a. Avoidance i. Avoidance eliminates any possibility of loss. The probability of loss from an avoided loss exposure is zero because an entity decides not to assume a loss exposure in the first place (proactive avoidance) or to eliminate one that already exists (abandonment). b. Loss Reduction i. Loss reduction involves reducing the severity of a particular loss. c. Separation i. Separation involves dispersing a particular activity or asset over several locations. 3. List the coverages are typically provided in businessowners policies. a. Business owners policies typically provide building and business personal property coverage, business income and extra expense coverage, and the equivalent of commercial general liability coverage. 4. For each condition shown, explain the insured's duties in the event of loss. a. Police Report i. If a law might have been broken, the police must be notified. For example, if theft is a covered cause of loss, theft losses must be reported to the police. Some policies contain exceptions for employee theft or dishonesty. b. Inventory and inspections i. A complete inventory of damaged and undamaged goods, including qualities, costs, values, and amount of loss claimed, may be required. The insured must allow the insurer to inspect the property and examine the records documenting the loss. c. Proof of loss i. The insurer may require insureds to sign a sworn proof of loss containing information requested. 5. What occurs during settlement of a loss when two or more of the policy’s coverages apply to a property loss? a. The insurer will pay no more than the actual loss amount. 6. What are the four categories of loss exposures faced by most organizations to which risk control techniques can be applied to prevent or reduce the cost of losses? a. Property b. Liability c. Personnel d. Net Income 7. According to the Common Policy Conditions, under what circumstances can the insured transfer rights or duties until under a policy? a. The insured cannot transfer any rights or duties under the policy to any other person or organization without the insurer's written consent. For example, if the insured sells a building covered by the policy, the insurance cannot be transferred to the new owner of the property without the insurer's written consent. The condition also provides specifically for the automatic transfer of coverage if an individual named insured dies. 8. For an organization located in an earthquakeprone area, what are the three risk control measures that can reduce losses from earthquakes? a. Building design b. Building construction c. Close consideration of the conditions of the soil on which the structure will rest. 9. What is the purpose of the liberalization clause in the policy conditions? a. The liberalization clause broadens coverage for the insured if the insurer, during the policy period or up to 45 days before policy inception adopts any policy revision that would broaden coverage without an additional premium. In those cases, the insured benefits automatically from the broadened coverage. 10. List the coverage parts that are required in a commercial package policy (CPP) under ISO's Commercial Lines Manual (CLM) rules. a. One of the coverage parts of a CPP must cover buildings and/or business personal property, and another must cover commercial general liability. Other coverage parts for property and liability lines can be added. 11. Explain how an output policy differs from a commercial package policy. a. Output Policy i. It combines all or most of an organization's commercial property coverages in one policy form and associated endorsements. ii. It often provides property coverage enhancements not contained in the standard forms used in CPPs. b. Commercial Package Policy i. It covers two or more lines of business by combining ISO's commercial lines coverage parts. 12. Explain how an organization can be insured by both multiline and monoline policies. a. Most organizations are insured under a multiline policy (also referred to as a package policy) for most of their property and liability loss exposures but may also have one or more monoline policies for coverages that cannot be included in their multiline policies. 13. Describe how a policy may be canceled by an ________ according to the Common Policy Conditions. a. Insurer i. The insurer can cancel the policy by mailing or delivering written notice of cancellation to the first named insured. b. Insured i. The insured may cancel the policy at any time by mailing or delivering written notice of cancellation to the insurer. If two or more insureds are listed in the declarations, only the one listed first (called the first named insured) can request cancellation.
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