FL 6-20 CLAIM ADJUSTER QUESTIONS WITH CORRECT ANSWERS GRADED TO PASS

What is Insurance? - Financial tool that protects individuals and organizations from unforeseen and extraordinary financial losses by transferring risk to another party. What is the Principle of Indemnity? - Restoration of approximate previous financial condition; no more, no less. What is a Premium? - A fee that the insured pays in exchange for insurance coverage. What is a Reserve? - A pool of collected premiums that the insurer sets aside to pay claims. Legal Contract - Insurance Policy - A contract to provide financial protection for a fee. Four Requirements of a Legal Contract - 1. Agreement (i.e. Offer and Acceptance) 2. Consideration 3. Competent Parties 4. Legal purpose Termination of Offer - Offer may be terminated by: 1. Revocation by offeror 2. Rejection by offeree 3. Time lapse 4. Termination by operation of law: a. Either party does or becomes disabled b. Performance of contract becomes illegal after offer c. Subject matter is destroyed Six Special Characteristics of Insurance Contracts - 1. Personal 2. Adhesion 3. Utmost Hood Faith 4. Aleatory 5. Unilateral 6. Conditional Personal Contract - 1. It protects the policyholder from financial losses. 2. It does not protect property from becoming damaged. 3. Coverage follows the person, not the property. Contract of Adhesion - 1. The insurer is responsible for the terms of the contract. 2. The insured has no say in the wording. 3. Courts favor the insured in the event of an ambiguity. 4. The contract should be interpreted as a reasonable person would interpret it. Utmost Good Faith - 1. Applicants are expected to be completely honest about the risk to the insurer. 2. The insurer must rely on the applicants not to conceal or misrepresent pertinent facts. Aleatory Contract - (It depends on an unknown future event) 1. Neither party can know future losses. 2. Insurer only has to pay if and when covered losses occur. 3. Policyholders could pay more in premiums than they ever get for claims, or insurer could pay more in claims than it receives. Unilateral Contracts - 1. The insurer has an obligation to pay for covered losses. 2. The insured has no obligation (he can stop paying premiums). Conditional Contracts - 1. The insurer only has to perform if certain conditions are met (such as a covered loss). 2. The insured must fulfill all conditions listed in the policy. DICE - An insurance contract has four essential parts: 1. Declaration Page 2. Insuring Agreement 3. Conditions 4. Exclusions Declarations Page - Makes the contract specific to the policyholder. Always the first section. It establishes: 1. Names of both parties (insured and insurer) 2. Policy number 3. Location and description of insured item 4. Value of insured item 5. Dates of the policy (beginning and end) 6. Amount and limit of coverage 7. Deductible 8. Premium Definitions Section - - is not technically essential, but common in policies - defines terms used to write policy including: "collison", "decay", "like and quality" - includes important language for adjusters to know Insuring Agreement - - what is covered - which causes of loss are covered - any services provided - any exclusions to coverage - the max limit of policy coverage in dollars Conditions - The insurer specifies any limits or qualifications the policyholder must meet (ex. requiring a security guard for a jewelry store, how to file a proof of loss, or how to protect the property after a loss). Exclusions - Exclusions list what the policy does not cover (ex. earthquakes, flooding, war, nuclear hazards, intentional acts, etc). Endorsements - Endorsements are additions to the policy that can: - add or reduce ins coverage - change policy provisions - change the premium price after the policy period Synonyms: Rider, Addendum, Attachment Certificate of Insurance - - Includes basic details of the ins policy - Constitutes proof of coverage - Often required for drivers Types of Insurers - Insurers include: - ins companies - other private groups - govt entities