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DesertRat Forum-Blogger© Pioneer100© Member 
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DISCLAIMER: Nothing posted in this thread is to be construed as legal advice, a solicitation to purchase insurance, or an inducement to delete, modify, or in anyway affect changes to an existing insurance policy. Insurance laws vary from state-to-state and are governed by the Department of Insurance for the state in which a policy is issued. Always consult a licensed and reputable insurance agent in your state before purchasing or changing an insurance policy. All comments posted here are solely the opinion(s) of the author(s) unless otherwise stated (as in quotes or WWW links). Do your research before acting on any advice or statements made in this forum. This "class" will be a basic class on insurance and is designed to educate you, the consumer, as to how insurance works the language used (and why) coverage types etc... and will hopefully leave you in a little better position when working with your personal insurance agent. Insurance plays a central role in the functioning of modern economies. Life insurance offers protection against the economic impact of an untimely death; health insurance covers the sometimes extraordinary costs of medical care; and bank deposits are insured by the federal government. In each case a small premium is paid by the insured to receive benefits should an unlikely but high-cost event occur. Insurance issues, traditionally a stodgy domain, have become subjects for intense debate and concern in recent years. The impact of the collapse of savings and loan institutions on the solvency of the deposit-insurance pool will burden the federal budget for decades. How to provide health insurance for the significant portion of Americans not now covered is a central political issue. Various states, attempting to hold back the tides of higher costs, have placed severe limits on auto insurance rates and have even sought refunds from insurers. The Basics An understanding of insurance must begin with the concept of risk, or the variation in possible outcomes of a situation. A's shipment of goods to Europe might arrive safely or might be lost in transit. C may incur zero medical expenses in a good year, but if she is struck by a car, they could be upward of $100,000. We cannot eliminate risk from life, even at extraordinary expense. Paying extra for double-hulled tankers still leaves oil spills possible. The only way to eliminate auto-related injuries is to eliminate automobiles. Thus, the effective response to risk combines two elements: efforts or expenditures to lessen the risk, and the purchase of insurance against the risk that remains. Consider A's shipment of, say, $1 million in goods. If the chance of loss on each trip is 3 percent, on average the loss will be $30,000 (3 percent of $1 million). Let us assume that A can ship by a more costly method and cut the risk by 1 percentage point, thus saving $10,000 on average. If the additional cost of this shipping method is less than $10,000, it is a worthwhile expenditure. But if cutting risk by a further percentage point will cost $15,000, it is not worthwhile. To deal with the remaining 2 percent risk of losing $1 million, A should think about insurance. To cover administrative costs, the insurer might charge $25,000 for a risk that will incur average losses of no more than $20,000. From A's standpoint, however, the insurance may be worthwhile because it is a comparatively inexpensive way to deal with the potential loss of $1 million. Note the important economic role of such insurance. Without it A might not be willing to risk shipping goods in the first place. In exchange for a premium, the insurer will pay a claim should a specified contingency, such as death, medical bills, or shipment loss, arise. The insurer is able to offer such protection against financial loss by pooling the risks from a large group of similarly situated individuals. With a large pool, the laws of probability assure that only a tiny fraction of insured shipments is lost, or only a small fraction of the insured population will be hospitalized in a year. If, for example, each of 100,000 individuals independently faces a 1 percent risk in a year, on average 1,000 will have losses. If each of the 100,000 people paid a premium of $1,000, the insurance company would collect a total of $100 million, enough to pay $100,000 to anyone who had a loss. But what would happen if 1,100 people had losses? The answer, fortunately, is that such an outcome is exceptionally unlikely. Insurance works through the magic of the Law of Large Numbers. This law assures that when a large number of people face a low-probability event, the proportion experiencing the event will be close to the expected proportion. For instance, with a pool of 100,000 people who each face a 1 percent risk, the law of large numbers dictates that 1,100 people or more will have losses only one time in 1,000. In many cases, however, the risks to different individuals are not independent. In a hurricane, airplane crash, or epidemic, many may suffer at the same time. Insurance companies spread such risks not only across individuals but also across good years and bad, building up reserves in the good years to deal with heavier claims in bad ones. For further protection they also diversify across lines, selling health insurance as well as homeowners' insurance, for example. The Identity and Behavior of the Insured To an economist insurance is like most other commodities. It obeys the laws of supply and demand, for example. However, it is unlike many other commodities in one important respect: the cost of providing insurance depends on the identity of the purchaser. A year of health insurance for an eighty-year-old costs more to provide than one for a fifty-year-old. It costs more to provide auto insurance to teenagers than to middle-aged people. If a company mistakenly sells health policies to old folks at a price that is appropriate for young folks, it will assuredly lose money, just as a restaurant will lose if it sells twenty-dollar steak dinners for ten dollars. The restaurant would lure lots of steak eaters. So, too, would the insurance company attract large numbers of older clients. Because of this differential cost of providing coverage, and because customers search for their lowest price, insurance companies go to great pains to set different premiums for different groups, depending on the risks they will impose. Recognizing that the identity of the purchaser affects the cost of insurance, insurers must be careful to whom they offer insurance at a particular price. High-risk individuals, with superior knowledge of the risks they impose, will step forth to purchase, knowing that they are getting a good deal. This is a process called adverse selection, which means that the mix of purchasers will be adverse to the insurer. In effect, the potential purchasers have "hidden" information that relates to their particular risk. Those whose information is unfavorable are most likely to be the purchasers. For example, if an insurer determines that 1 percent of fifty-year-olds would die in a year, it might establish a premium of $11 per $1,000 of coverage, $10 to cover claims and $1 to cover administrative costs. The insurer might expect to break even. However, insureds who ate poorly or who engaged in high-risk professions or whose parents had died young might have an annual risk of mortality of 3 percent. They would be most likely to insure. Health fanatics, by contrast, might forgo insurance because for them it is a bad deal. Through adverse selection, the insurer could end up with a group whose expected costs were, say, $20 per $1,000 rather than the $10 per $1,000 for the population as a whole. The traditional approach to the adverse selection problem is to inspect each potential insured. Individuals taking out substantial life insurance must submit to a medical exam. Fire insurance might be granted only after a check of the alarm and sprinkler system. But no matter how careful the inspection, some information will remain hidden, and those choosing to insure will be selected against the insurer. So insurers routinely set rates high to cope with adverse selection. One consequence is that high rates discourage ordinary-risk buyers from buying insurance. Moral Hazard or Hidden Action Once insured, an individual has less incentive to avoid risky behavior. With automobile collision insurance, for example, one is more likely to venture forth on an icy night. Federal deposit insurance made S&Ls more willing to take on risky loans. Federally subsidized flood insurance encourages citizens to build homes on flood plains. Insurers use the term "moral hazard" to describe this phenomenon. It means, simply, that insured people undertake actions they would otherwise avoid. In less judgmental language, people respond to incentives. Ideally, the insurer would like to be able to monitor the insured's behavior and take appropriate action. Flood insurance might not be sold to new residents of a flood plain. Collision insurance might not pay off if it can be proven that the policyholder had been drinking or otherwise engaged in reckless behavior. But given the difficulty of monitoring many actions, insurers merely take into account that once policies are issued, behavior will change and more claims will be made. The moral hazard problem is often encountered in areas that at first glance do not seem associated with traditional insurance. Products covered under optional warranties tend to get abused, as do autos that are leased with service contracts. And if all students are ensured a place in college, they are, in effect, insured against bad grades. Academic performance may suffer. Equity Issues The same insurance policy will have different costs for serving individuals whose behavior or underlying characteristics may differ. This introduces an equity dimension to insurance, since these cost differences will influence pricing. Is it fair that urban drivers should pay much more than rural drivers to protect themselves from auto liability? In some sense, perhaps not, but what is the alternative? If prices are not allowed to vary in relation to risk, insurers will seek to avoid various classes of customers altogether and availability will be restricted. When sellers of health insurance are not allowed to find out if potential clients are HIV positive, for example, insurance companies often respond by refusing to insure people in occupations in which an unusually large proportion of the population is gay. One way they do so is by refusing to cover males who are florists or hairdressers. Equity issues in insurance are addressed in a variety of ways in the real world. Most employers cross-subsidize health insurance, providing the same coverage at the same price to older, higher-risk workers and younger, lower-risk ones. Sometimes the government provides the insurance itself, as the federal government does with Medicare and Social Security (an insurance policy that pays off heavily if one lives long), or it may set the rates, as many states do with auto insurance. The traditional public-interest argument for government rate regulation is to control a monopoly. But this argument ignores the fact that there are dozens of competing insurers in most regulated insurance markets. Insurance rates are regulated to help some groups, usually those imposing high risks, at the expense of others. The Massachusetts auto insurance market provides an example. In 1988, 63 percent of drivers were in a subsidized pool. To fund this subsidy, unsubsidized drivers, whose claims averaged $323, paid premiums that averaged $750. Such practices raise a new class of equity issues. Should the government force people who live quiet, low-risk lives to subsidize the daredevil fringe? Most people's response to this question depends on whether they think people can control risks. Because most of us think we should not encourage people to engage in behavior that is costly to the system, we conclude, for example, that nonsmokers should not have to pay for smokers. The question becomes more complex when it comes to health care premiums for, say, gay men or recovering alcoholics, whose health care costs are likely to be greater than average. Moral judgments inevitably creep into such discussions. And sometimes the facts lead to disquieting considerations. For example, smokers tend to die early, reducing expected costs for Social Security. Should they therefore pay lower Social Security taxes? Conclusion The traditional role of insurance remains the essential one recognized in ancient civilizations, that of spreading risk among similarly situated individuals. Insurance works most effectively when losses are not under the control of individuals (thus avoiding moral hazard) and when the losses are readily determined (lest significant transactions costs associated with lawsuits become a burden). Individuals and firms insure against their most major risks—high health costs, the inability to pay depositors—which often are politically salient issues as well. Unsurprisingly, government participation—as a setter of rates, as a subsidizer, and as a direct provider of insurance services—has become a major feature in insurance markets. Political forces may sometimes triumph over sound insurance principles, but only temporarily. In a sound market, we must recognize that with insurance, as with bread and steel, the cost of providing it must be paid. About the Author Richard Zeckhauser is the Frank P. Ramsey Professor of Political Economy at Harvard University's John F. Kennedy School of Government. http://www.econlib.org/library/Enc/Insurance.html
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DesertRat Forum-Blogger© Pioneer100© Member
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The History of Insurance The roots of insurance might be traced to Babylonia, where traders were encouraged to assume the risks of the caravan trade through loans that were repaid (with interest) only after the goods had arrived safely—a practice resembling bottomry and given legal force in the Code of Hammurabi (c.2100 B.C.). The Phoenicians and the Greeks applied a similar system to their seaborne commerce. The Romans used burial clubs as a form of life insurance, providing funeral expenses for members and later payments to the survivors. With the growth of towns and trade in Europe, the medieval guilds undertook to protect their members from loss by fire and shipwreck, to ransom them from captivity by pirates, and to provide decent burial and support in sickness and poverty. By the middle of the 14th cent., as evidenced by the earliest known insurance contract (Genoa, 1347), marine insurance was practically universal among the maritime nations of Europe. In London, Lloyd's Coffee House (1688) was a place where merchants, shipowners, and underwriters met to transact business. By the end of the 18th cent. Lloyd's had progressed into one of the first modern insurance companies. In 1693 the astronomer Edmond Halley constructed the first mortality table, based on the statistical laws of mortality and compound interest. The table, corrected (1756) by Joseph Dodson, made it possible to scale the premium rate to age; previously the rate had been the same for all ages. Insurance developed rapidly with the growth of British commerce in the 17th and 18th cent. Prior to the formation of corporations devoted solely to the business of writing insurance, policies were signed by a number of individuals, each of whom wrote his name and the amount of risk he was assuming underneath the insurance proposal, hence the term underwriter. The first stock companies to engage in insurance were chartered in England in 1720, and in 1735, the first insurance company in the American colonies was founded at Charleston, S.C. Fire insurance corporations were formed in New York City (1787) and in Philadelphia (1794). The Presbyterian Synod of Philadelphia sponsored (1759) the first life insurance corporation in America, for the benefit of Presbyterian ministers and their dependents. After 1840, with the decline of religious prejudice against the practice, life insurance entered a boom period. In the 1830s the practice of classifying risks was begun. The New York fire of 1835 called attention to the need for adequate reserves to meet unexpectedly large losses; Massachusetts was the first state to require companies by law (1837) to maintain such reserves. The great Chicago fire (1871) emphasized the costly nature of fires in structurally dense modern cities. Reinsurance, whereby losses are distributed among many companies, was devised to meet such situations and is now common in other lines of insurance. The Workmen's Compensation Act of 1897 in Britain required employers to insure their employees against industrial accidents. Public liability insurance, fostered by legislation, made its appearance in the 1880s; it attained major importance with the advent of the automobile. In the 19th cent. many friendly or benefit societies were founded to insure the life and health of their members, and many fraternal orders were created to provide low-cost, members-only insurance. Fraternal orders continue to provide insurance coverage, as do most labor organizations. Many employers sponsor group insurance policies for their employees; such policies generally include not only life insurance, but sickness and accident benefits and old-age pensions, and the employees usually contribute a certain percentage of the premium. Since the late 19th cent. there has been a growing tendency for the state to enter the field of insurance, especially with respect to safeguarding workers against sickness and disability, either temporary or permanent, destitute old age, and unemployment. The U.S. government has also experimented with various types of crop insurance, a landmark in this field being the Federal Crop Insurance Act of 1938. In World War II the government provided life insurance for members of the armed forces; since then it has provided other forms of insurance such as pensions for veterans and for government employees. After 1944 the supervision and regulation of insurance companies, previously an exclusive responsibility of the states, became subject to regulation by Congress under the interstate commerce clause of the U.S. Constitution. Until the 1950s, most insurance companies in the United States were restricted to providing only one type of insurance, but then legislation was passed to permit fire and casualty companies to underwrite several classes of insurance. Many firms have since expanded, many mergers have occurred, and multiple-line companies now dominate the field. In 1999, Congress repealed banking laws that had prohibited commercial banks from being in the insurance business; this measure was expected to result in expansion by major banks into the insurance arena. In recent years insurance premiums (particularly for liability policies) have increased rapidly, leaving unprecedented numbers of Americans uninsured. Many blame the insurance conglomerates, contending that U.S. citizens are paying for bad risks made by the companies. Insurance companies place the burden of guilt on law firms and their clients, who they say have brought unreasonably large civil suits to court, a trend that has become so common in the United States that legislation has been proposed to limit lawsuit awards. Catastrophic earthquakes, hurricanes, and wildfires in late 1980s and the 90s have also strained many insurance company's reserves. "insurance: The History of Insurance." The Columbia Electronic Encyclopedia. © 1994, 2000-2005, on Infoplease. © 2000–2006 Pearson Education, publishing as Infoplease. 08 Sep. 2006 <http://www.infoplease.com/ce6/bus/A0858849.html>. Last edited on 12:24 am by DesertRat |
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Pussycat Forum-Blogger© Pioneer100© Member  Angel of Mischief!
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Desert Rat, Interesting stuff. What is the current legal situation in America regarding the 'Act of God' clause/cop-out? Billy Connelly (The Scottish Comedian), starred in a great movie called 'The Man who sued God', which took this clause and shook it silly. Basically the Church was perceived as God's conveyor, and the court had to decide who was responsible (The Church or not), and by the Church disclaiming it, they were to be seen as disclaiming their affiliation with God. It was a good movie. But I would like to know what the 'Real' situation is, if you can help.
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DesertRat Forum-Blogger© Pioneer100© Member
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Pussycat wrote: Desert Rat, In order to answer that question you first need to look at the definition. Just what is an "Act of God"? The American Heritage Dictionary (4th edition, 2000) defines it as - A manifestation especially of a violent or destructive natural force, such as a lightning strike or earthquake, that is beyond human power to cause, prevent, or control. Other dictionary's give a similar definition so we'll go with this one. It is important to understand, (I will get into this as I progress with the class) that there are insurance policies that have specified causes of loss and others that have specified exclusions (named peril and named exclusions). The language of a policy determines (from a legal standpoint) what is a covered cause of loss and what is not. This is why it is of vital importance to the consumer that you read and understand your policy. If we look at the definition again, it mentions lightning strike. Most policies covering structures or dwellings list lightning as a covered cause of loss and therefore lightning an "act of God" is covered in most all cases. The second example is earthquake. Earthquake/ground movement is a "named Exclusion" in a standard structure or dwelling policy and therefore damage caused by an earthquake is not covered by that policy under any circumstances. Floods are another type of named exclusion. There are however, policies that will cover those specific acts of god and again, these are known as "named Peril" policies ie: the peril it is covering is specifically named in the policy such as earthquake or flood. Under those policies, there is no coverage for losses occuring outside of a flood or earthquake. If it isn't named in the policy, it isn't covered period. There are exceptions when a situation of Concurrent Causation comes into play, but that is a subjet we'll cover class further down the line. So to specifically answer your question; "What is the current legal situation in America regarding the 'Act of God' clause/cop-out," there is no real simple catch-all answer. Many acts of God are covered under typical policies in America but it comes down to the specific act that created the damage and whether or not it is covered in the specific policy in question. As the class moves forward I will be dealing with terminology used in insurance policies as well as the mechanics of each type of policy and what is or is not covered. Luckily, due to the long history of insurance throughout the world, there have been a great many legal decisions handed down that help interpret questions just like yours. Thanks for asking and I look forward to having you in class 
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Pussycat Forum-Blogger© Pioneer100© Member Angel of Mischief!
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DesertRat wrote: Pussycat wrote:Desert Rat,
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DesertRat Forum-Blogger© Pioneer100© Member
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Pusssycat - To the best of my knowledge (and a little bit of research), the movie you are speaking of, "The Man Who Sued God" is a romantic comedy that has an underlying theological theme, however it is not based on an actual court case from what I can tell. The term "Act of God" was used in many legal documents prior to the era of political correctness. That term has been replaced most commonly by the term "Natural Phenomenon". As it applies to property insurance, I have previously stated that certain "acts of God" or "Natural Phenomena" are covered by policies and certain ones aren't. There is however, a very high profile case in the USA right now involving Bridgestone Corp., the manufacturer of the rubber roofing system used on the Superdome in New Orleans. Bridgestone's "warranty" states that the warranty does not cover "Acts of God" and they are claiming that hurricane Katrina is such an act. It will be interesting to see how that comes out in court. There is no mention in any of the articles I've read on this case of an insurance company being involved, so it is possible that the Superdome was "self-insured". When it comes to an insurance company denying payment for damages due to an "act of God" it is most likely to be found in the arena of "Liability" insurance. Where the insurance company is being asked to pay for damages to a third party over their claim of negilgence on the part of the insured. One example (I'm sure I could come up with many more given time and uninterrupted train of thought) would be an occurance at sea resulting in loss of life. I worked with the commercial fishing industry for a few years in the late 80's and was up in Seattle Washington to work on a 300' trawler/processor that had been heavily damaged by a rogue wave in the Bearing Sea. The story as told to me by one of the crew is that the vessel was in very calm seas on a clear and cloudless day when a very large wave came from seemingly out of nowhere and struck the ship bow-on. The wave was tall enough to break the pilot house windows out and tear deck machinery off the deck (possible 60-feet high). Now, had this wave struck a passenger ship or ferry and resulted in the death of one or more passengers, I have no doubt that the survivors would sue for damages and yet who would be the negligent party? A lawsuit for liability damages has to determine if there was negligence on the part of the boat owner that resulted in the death or injury to their passengers. Could the owner/operator of the vessel have done anything to prevent the wave from hitting the ship? The insurance policy would ordinarily not pay damages to anyone under the liability policy because there was nothing that could have been done to mitigate the loss, it was truly an "Act of God". A simpler example would be that you wouldn't (or shouldn't) be able to sue the city you live in simply because your family member was struck by lightning and killed while walking on a city sidewalk. There is no negligence on the part of the city. I hope that makes sense.
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INXS Guest
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DR, I own a condo that has a sprinkler system if one of the heads should go off without a fire will I be covered under my personal condo insurance for water damage? Thanks INXS
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DesertRat Forum-Blogger© Pioneer100© Member
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INXS wrote: DR, Without knowing the laws of your state and the language of your policy I cannot say with 100% certainty it would be covered but my best guess is yes. As a general rule water damage is only covered in cases of "sudden and accidental discharge of water" and your scenario would definitely fit that definition as long as it was not an intentional act.
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Cockney Guest
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Here is my question.....................I have driven a "company " vehicle for the last six years, the car is for both my work and personal use. The insurance is provided through a self insured JPA, consequently I have not carried personal insurance and have no need to until I retire. How much trouble will I have obtaining insurance when I retire. I do not own any vehicles in my own name. Thank You Teacher Would you like an apple?  How bout a kiss 
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DesertRat Forum-Blogger© Pioneer100© Member
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Cockney wrote: Here is my question.....................I have driven a "company " vehicle for the last six years, the car is for both my work and personal use. The insurance is provided through a self insured JPA, consequently I have not carried personal insurance and have no need to until I retire.  The answer to your question is you should have no trouble finding insurance when you retire. You have been insured and are simply changing policy/insurer. As long as you are insurable (licensed driver physically capable of operating a motor vehicle safely) most any insurance company worth its salt will insure you. Can you cut the apple into slices and remove the seeds please?
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DesertRat Forum-Blogger© Pioneer100© Member
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Glossary of Insurance Terms Common Insurance terms
ACTUAL CASH VALUE A temporary or preliminary agreement which provides coverage until a policy can be written or delivered. BODILY INJURY Any physical injury to a person. The purpose of liability insurance is to cover bodily injury to a third party resulting from the negligent or intentional acts of an insured. BOILER AND MACHINERY INSURANCE Covers losses resulting from the malfunction of boilers and machinery. This coverage is usually excluded from property insurance creating the need for this separate product. BROKER A licensed person or organization paid by you to look for insurance on your behalf. BURGLARY Coverage against loss as a result of forced entry into premises. CANCELLATION The termination of insurance coverage during the policy period. Flat cancellation is the cancellation of a policy as of its effective date, without any premium charge. CLAIM Notice to an insurer that under the terms of a policy, a loss maybe covered. CLAIMANT The first or third party. That is any person who asserts right of recovery. COLLISION (AUTO) Reimburses you for damage to YOUR automobile sustained in a collision with another car or with any other object, movable or fixed, (for example, you accidentally backed into another object while pulling out from a parking stall and causing damage to the bumper and fender of your covered automobile). COLLISION DEDUCTIVE WAIVER This coverage waves your collision deductible if you are hit by an negligent uninsured motorist. COMMON CARRIER LIABILITY Coverage for transportation firms that must carry any customer's goods so long as the customer is willing to pay. Examples include trucking companies, bus lines, and airlines. COMPREHENSIVE (AUTO) Provides coverage for any direct and accidental loss of, or damage to, YOUR covered automobile and its normal equipment, to include but not limited to fire, theft or malicious mischief. COMPREHENSIVE GLASS INSURANCE Coverage on an "all risks" basis for glass breakage, subject to exclusions of war and fire. CREDIT LIFE INSURANCE Insurance issued to a creditor (lender) to cover the life of a debtor (borrower) for an outstanding loan. DECLINE The company refuses to accept the request for insurance coverage. DEDUCTIBLE The amount of the loss which the insured is responsible to pay before benefits from the insurance company are payable. You may choose a higher deductible to lower your premium. DEPRECIATION A decrease in value due to age, wear and tear, etc. DISABILITY INSURANCE Health insurance that provides income payments to the insured wage earner when income is interrupted or terminated because of illness, sickness, or accident. ENDORSEMENT Amendment to the policy used to add or delete coverage. Also referred to as a "rider." EXCLUSION Certain causes and conditions, listed in the policy, which are not covered. EXPIRATION DATE The date on which the policy ends. FACE AMOUNT The dollar amount to be paid to the beneficiary when the insured dies. It does not include other amounts that may be paid from insurance purchased with dividends or any policy riders. FINANCIAL GUARANTEE INSURANCE A surety bond, insurance policy or, when issued by an insurer, an indemnity contract and any guaranty similar to the foregoing types, under which loss is payable upon proof of occurence of financial loss to an insured claimant, obligee, or indemnitee. FIRE INSURANCE Coverage for loss of or damage to a building and/or contents due to fire. GOOD DRIVER DISCOUNT To be eligible for the Good Drivers Discount all operators of the insured vehicles must have been licensed for three or more year, have no more than a one (1) point charge on their driving record and has not been determined "at fault" in an accident resulting in bodily injury or death to any person. GRACE PERIOD A period (usually 31 days) after the premium due date, during which an overdue premium may be paid without penalty. The policy remains in force throughout this period. GUARANTEED INSURABILITY An option that permits the policy holder to buy additional stated amounts of life insurance at stated times in the future without evidence of insurability. HEALTH INSURANCE A policy that will pay specifies sums for medical expenses or treatments. Health policies can offer many options and vary in their approaches to coverage. HOMEOWNER INSURANCE An elective combination of coverages for the risks of owning a home. Can include losses due to fire, burglary, vandalism, earthquake, and other perils. INCONTESTABLE CLAUSE A policy provision in which the company agrees not to contest the validity of the contract after it has been in force for a certain period of time, usually two years. INSURED The policyholder - the person(s) protected in case of a loss or claim. INSURER The insurance company. LEGAL INSURANCE Prepaid legal insurance coverage plan sold on a group basis. LIABILITY (AUTO) This coverage will pay for BODILY INJURY and/or PROPERTY DAMAGE to the OTHER party for which you become legally responsible of an automobile accident. LIABILITY INSURANCE Coverage for all sums that the insured becomes legally obligated to pay because of bodily injury or proprty damage, and sometimes other wrongs, to which an insurance policy applies. LIFE INSURANCE A policy that will pay a specified sum to beneficiaries upon the death of the insured. LIMIT Maximum amount a policy will pay either overall or under a particular coverage. LOAN VALUE The amount which can be borrowed at a specified rate of interest from the issuing company by the policyholder, using the value of the policy as collateral. In the event the policyholder dies with the debt partially or fully unpaid, then the amount borrowed plus any interest is deducted from the amount payable. MARINE INSURANCE Coverage for goods in transit and the vehicles of transportation on waterways, land, and air. MATERIAL MISREPRESENTATION The policyholder / applicant makes a false statement of any material (important) fact on his/her application. For instance, the policyholder provides false information regarding the location where the vehicle is garaged. MEDICAL PAYMENTS Will pay reasonable expenses incurred for necessary medical and /or funeral services because of bodily injury caused by accident and sustained by YOU OR ANY OTHER PERSON WHILE OCCUPYING A COVERED AUTOMOBILE. MISCELLANEOUS INSURANCE Includes insurance against loss from damage done, directly or indirectly by lightning, windstorm, tornado, earthquake or insurance under an open policy indemnifying the producer of any motion picture, television, theatrical, sport, or similar production, event, or exhibition against loss by reason of the interruption, postponement, or cancellation of such production, event, or exhibition due to death, accidental injury, or sickness preventing performers, directors, or other principals from commencing or continuing their respective performance or duties; and any insurance not included in any other classes and which is a proper subject of insurance (California Insurance Code §120). MISQUOTE An incorrect estimate of the insurance premium. MORTGAGE INSURANCE Life insurance that pays the balance of a mortgage if the mortgagor (insured) dies. PERIL The cause of a possible loss. For example, fire, theft, or hail. POLICY The written contract of insurance. POLICY LIMIT The maximum amount a policy will pay, either overall or | ||||||||||||||||||||||||||||||||||||||||
