QUESTIONS AND ANSWERS SURE A+
✔✔Conditions - ✔✔One of the Four Parts of an Insurance Contract
The obligations or duties of each party to the contract.
✔✔Exclusions - ✔✔One of the Four Parts of an Insurance Contract
Modify the policy's agreement to eliminate uninsurable perils or other coverages not
contemplated under the terms of the contract. Common exclusions are losses due to
war, flood, and earth movement.
✔✔Third-Party Provisions - ✔✔Insurance provisions that address the rights of someone
other than the policyowner to have a secured financial interest in the insured property.
✔✔Extensions - ✔✔Included in the policy to extend coverage beyond the policy limits of
liability.
Ex: An auto policy has an extension that allows the insured to get rental car costs that
are over and above the policy limits.
✔✔Utmost Good Faith - ✔✔An obligation to act in complete honesty and to disclose all
relevant facts (both parties).
✔✔Reasonable Expectations - ✔✔The insured is entitled to coverage under a policy
that any sensible person would expect it to provide. This protects the insured from
technical language, hidden provisions, and confusing language.
✔✔Representations - ✔✔Statements made by the applicant on the insurance
application that are believed to be true, but are not guaranteed to be true.
✔✔Warranties - ✔✔Answers specific questions on an application. Unlike
representations, if warranted statements are found to be false, the policy will be voided.
Ex: An insured warrants that a burglar alarm will always be operational. If, following a
loss, it is determined that the alarm was broken, the insurer may suspend or refuse
coverage.
, ✔✔Waiver and Estoppel - ✔✔Giving up a right.
Agent acts in a misleading way, therefore the insured is not required to perform.
✔✔Binder - ✔✔A temporary written or oral agreement to provide insurance coverage
until a formal written policy is issued. Usually 30 days but rarely more than 60 days.
✔✔Proposal - ✔✔Outline or quotation of coverage and premium before any coverage is
issued.
✔✔Actuarial - ✔✔Part of Insurance Company Structure
Calculating. This department is responsible for rate-making. Determined by the amount
an INS company needs collect over expected losses.
For a final rate, the actuary will add other policy expenses and profits to the loss costs.
✔✔Underwriting - ✔✔Part of Insurance Company Structure
Selection, classification, and acceptance or rejection of proposed insured.
✔✔Loss Ratio - ✔✔Part of Insurance Company Structure
Formula to define Loss Ratio:
(Incurred losses + loss adjustment expenses) / Premiums earned
✔✔Investment - ✔✔Part of Insurance Company Structure
The investment department invests the premiums collected by the company.
✔✔ADR (Alternative Dispute Resolution) - ✔✔Method to Resolve Insurance Disputes
Settling disputes outside of the courtroom. Typically includes early negotiation
(compromise), conciliation, mediation (neutral third party helps resolve the dispute; does
not have the final decision), arbitration (both sides select an impartial 3rd party, agree in
advance to comply with the arbitrator's award, then participate in a hearing), and
appraisal process.
✔✔5 Negotiation Tactics - ✔✔Accommodating: Individuals who enjoy solving the other
party's problems and tries to preserve the relationship.
Avoiding: Individuals who do not like to negotiate and don't do it unless warranted.
Collaborating: Individuals who enjoy negotiations that involve solving tough problems in
creative ways.
Competing: Individuals who enjoy negotiations because they present an opportunity to
win something.
Compromising: Individuals who are eager to close the deal by doing what is fair and
equal for all parties.
✔✔The Appraisal Panel - ✔✔Consists of independent appraiser for both the insurance
company and the policyholder, and an Umpire (if the appraisers cannot agree).