FX Exam 2022 study guide with complete solution
Insurance Terms
To make whole again
Purpose of insurance
Basic principle of insurance which the financial 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)
Insurance Terms
To make whole again
Purpose of insurance
Basic principle of insurance which the financial 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)
