in order to be insured an induvidual has to have a resource that he may lose if an

even occurs. What term describes this concept?

insurable interest
What is the legal concept in which an individual is responsible for the harm that
occurred because the individual failed to perform the actions that a reasonable
person in a similar situation would take to ensure the safety of other individuals
negligence

A legal concept in which an indivudal must COMPENSATE an individual for the harm
that he or she caused
liability
a legal concept in which an individual is responsible for the harm that occurred
because the individual was performing an extremely hazardous activity, which
caused harm even though the individual took all of the necessary precautions
absolute liability
a legal concept in which an individual is responsible for the harm that occurred due
to the actions of another individual because the individual is responsible for the
SUPERVISION OR CARE of the individual who caused the harm
vicarious liability
The declarations section of an insurance policy that identifies the specific resources
and/or perils that the policy covers
insuring agreement
the declarations section of an insurance policy that identifies the specific
resources/perils that the policy does not cover
exclusions
The declarations section of an insurance policy that identifies what key items who
is covered\nname of insurer\namount of coverage\nphone # & address\ncost of
premium\nspecific property covered
an individual who is covered by an insurance policy that he or she does now own
but is listed on the policy additional insured
an individual or organization that is covered by the policy because the individual or
organization owns the policy
named insured
individual or organization that is covered by the policy because the individual or
organization is considered to be the PRIMARY owner first named insured
covered by the policy because the individual or organization owns the policy but the
individual or organization is not considered to be the primary owner
an additional
named insured
a provision that allows an insurer to acquire the rights to a piece of damaged
property in exchange for a payment equal to the amount necessary to replace the
property
salvage provision

a provision that prohibits the policyholder from transferring the policy to another
individual or organization during his lifetime unless the insurer has agreed to the
transfer in writing assignment provision
provision that allows an insured individual or organization to collect the benefits of
the policy even if the individual or or organization decides to abandon the property
abandonment provision
a provision allows an insurer to seek the amount that it paid for a claim from the
individual who caused the harm if the insurer is required to pay a claim related to an
incident for which the insured individual(s) are not responsible subrogation
provision
The Dwelling policy Broad form (DP1) will only cover damage to a dwelling that
occurs as a result of
a fire, internal explosion, and/or lightning
The Dwelling policy Broad form (DP2) will only cover damage to a dwelling that
occurs as a result of (COVERS THE MOST!!) accidental dischararge or overflow of
liquids\nan aircraft; burglary; civil commotion; an explision; falling objects; a fire;
freezing pipes; hail; lightning; smoke; sudden and accidental damage from electrical
current; cracking; a sprinkler system; vandalism
Dwelling policy Broad form with extended coverage will cover
commotion, an explosion, hail, smoke, vehicles, and/or wind

an aircraft, civil

The Dwelling policy Broad form (DP3) will only cover damage to a dwelling that
occurs as a result of
any even that is not specifically excluded in the policy
A type of dwelling coverage in which an insurer agrees to pay an amount equal to
the income that a landlord would lose if the landlord's rental property is damaged
and a tenant is no longer able to occupy the property
Fair Rental Value
A type of dwelling coverage in which an insurer agrees to pay an amount equal to
the value of an individual's personal property if the individual's property is stolen
Broad Theft Coverage
A type of dwelling coverage in which an insurer agrees to pay an amount equal to
the amount that an individual would need to pay to LIVE in another location if the
individual's property is damaged
Coverage E Additional Living Expense
A type of dwelling coverage in which an insurer agrees to pay some of the MEDICAL
expenses for an individual other than the insured if an individual is injured on the
insured individual's property
Coverage M Medical Payments to others
an exclusion that states that an insurer will not pay any claim in which an
individual's property is damaged as a result of A LAW OR ORDINANCE THAT

COMPELS AN INDIVIDUAL TO MODIFY OR REMOVE THE STRUCTURES

exclusion

Building Law

an exclusion that states that an insurer will not pay any claim in which an
individual's property is damaged or seized by the government
Governmental
Action exclusion
an exclusion that states that an insurer will not pay any claim in which an
individual's property is damaged as a result of an earthquake, mudslide. landslide,
sinkhole
An Earth Movement exclusion
an exclusion that states that an insurer will not pay any claim in which an
individual's property is damaged as a result of the fact that the individual did not
maintain the property
A Neglect exclusion
Which Home Owners form covers damage to a condo owner's PROPERTY that occurs
as the result of any event that is not specifically excluded in the policy HO6 Unit
Owner's form
Which Home Owner's form covers damage to a tenant's PROPERTY that occurs as
the result of an aircraft, civil commotion, an explosion, fire, hail, lightning, smoke,
theft, vandalism, vehicles, and/or wind HO4 Contents Broad form
Which Home Owner's form covers damage to the DWELLING that occurs as the
result of any event that is not specifically excluded in the policy and damage to the
PROPERTY inside the dwelling that occurs as the result of an aircraft, civil
commotion, an explosion, fire, hail, lightning, smoke, theft, vandalism, vehicles,
and/or wind HO3 Special form
Which Home Owners form covers damage to the DWELLING and PROPERTY inside
the dwelling that occurs as the result of any event that is not specifically excluded
in the policy HO5 Comprehensive form
What means conducting business in accordance with current rules and laws set by
government regulatory agencies and the courts
compliance
standards of conduct and moral judgement

ethics

legal term that describes the relationship between two parties

agency

what is the term to describe how an insurer appoints an individual to act on its
behalf agency contract
an individdual whose position and responsibilities involve a high degree of trust and
confidence (trustees, guardians & executors) fiduciary
the name for the fact that a producer must sell the kind of policies that best fit the
prospect's needs and in amounts that the prospect can afford
needs selling

what is given when the applicant pays the initial premium at the time the
application for a policy is signed conditional receipt
what is the term for informing the prospect or client of all facts involving a specific
policy or plan so that an informed decision can be made full disclosure
what is the name for the watchdog group whose member companies agree to
adhere to and enforce ethical principles
Insurance marketplace Standards
Association (IMSA)
what act deals with the inappropriate use of advertising

Unfair Trade Practices Act

any written or oral statement that does not accurately describe a policy's features,
benefits, or coverage
misrepresentation
any false, maliciously critical, or derogatory communication that injures another's
reputation, fame or character
defamation
what is the term if the buyer of an insurance policy receives any part of the
producer's commission or anything else of significant value as an inducement to
purchase a policy rebating
the unethical act of persuading a policyowner to drop a policy solely for the purpose
of selling another policy without regard to possible disadvantages to the policy
owner twisting
a resident producer license must meet what two requirements
in PA or have their principal place of business in this state

may either reside

in what two situations is it not required to be licensed as a manager or exclusive

general agent
a licensee who has limited underwriting authority\na manager
or agent who started before Dec 22, 1965
Which of the following can not be issued a temporary license:\nsurviving spouse of
a decesed producer in order to sell the business\na deceased producer's personal
representative until new personnel is trained to run the business\na person holding
a power of attorney for a producer in the armed forces\na person selling insurance
for the estate of a deceased producer a person selling insurance for the estate of a
deceased producer
which of the following is not a reason for a license to be suspended or revoked\n
making a factual but subjective comparison of two policies\nintentionally violating
a cease and desist order\nmaking false statement in a license application\n
violating an insurance regulation
making a factual but subjective comparison
of two policies
increases the chance of loss

hazard (leaving the door unlocked)

the chance of loss risk

a means of transferring the risk of loss insurance
the cause of loss

peril (types of peril fire; flood; collision; theft)

states that there must be an adequate spread of risk for insurance to be effective
law of large numbers more examples used, more reliable the statistic
(predict the number of losses; predict the charge for premium)
installing an automatic sprinkler system is an example of what
avoid risk but can reduce risk)

reduction (can not

deciding not to produce a product due to serious potential side effects avoidance
(avoid the risk of being sued)
person in good health cancels health insurance policy what risk management
method
retention (retaining risk)
under what regulation in PA does it state that insurers must maintain specified
minimum levels of capital stock and surplus Regulation of insurer solvency
Who regulates insurance rates to avoid excessive, inadequate, or unfairly
discriminatory rates
Casualty and Surety Rate Regulatory Act
who must an insurer notify when they terminate a producer's appointment
Commissioner and the producer

the

which of the following is not a power and duty of the Insurance Commissioner
issuing cease and desist orders\nprosecuting producers who violate state
insurance laws\nconducting complaint hearings\nappointing examiners
what unfiar practices is when a producer offers, promises, allows, gives, sets off or
pays a rebate on the contract of insurance
rebating
what unfair insurance practice is the purchase of insurance from a financial
institution or from a designated insurer or producer as a condition of any loan or
deposit transaction Tiein sales
what unfair insurance practive occurs when a producer makes, issues, circulates, or
uses any written or oral statement misrepresenting the terms of a policy or contract
of insurance misrepresentation
what unair insurance policy occurs when a producer misrepresents or provides an
icomplete comparison of policies to induce the policyholder to lapse, forfeit or
surrender his insurance to take out a similar policy in another company twisting
nonpublic personal financial information about individuals Privacy of Consumer
Financial Information

what is the term for an instruction by the consumer to the licensee not to disclose
nonpublic personal financial informationabout that consumer to a nonaffiliated third
party Opt out
When can a producer share a commission with an unlicensed person
if licensee
was held at time of sale\nreferring person can receive a one time nominal set fee
when a personal fire insurance policy is cancelled because the insured's acts
increase the hazard insured against, how many days' notice must be provided to the
insured
30 days
When an automobile policy is cancelled for a reason other than non payment of
premium, how many days' notice must be provided to the insured
60
If an insured's driver's license has been suspended, the insurer may cancel the
automobile insurance policy by giving how many days' notice? 15
what are the minimum limits of liability any individual must provide for bodily injury
and property damage?
15/30/5\n$15000 per person bodily injury\n$30000 per
accident for body injury\n$5000 per accident property damage
purchased in the normal or standard market Pennsylvania Fair Plan Act
After an accident, what is the waiting period before the insured can apply for
income loss benefits
5 work days
what must occur in order for funeral expenses to be paid death within 24 hours of
accident
When an automobile policy is cancelled for a reason other than non payment of
premium, how many days' notice must be provided to the insured
60
If an insured's driver's license has been suspended, the insurer may cancel the
automobile insurance policy by giving how many days' notice? 15
what are the minimum limits of liability any individual must provide for bodily injury
and property damage?
15/30/5\n$15000 per person bodily injury\n$30000 per
accident for body injury\n$500 per accident property damage
What act is intended to provide property owners with fire, extended coverages,
vandalism and malicious mischief coverage when insurance is unable to be
purchased in the normal or standard market Pennsylvania Fair Trade Ace
After an accident, what is the waiting period before the insured can apply for
income loss benefits
5 work days
an insurer must notify an insured at least how many days before increasing the
premium on a commercial casualty insurance policy?
30

Which agency provides motor vehicle insurance to those applicants who would
otherwise by uninsurable?
Pennsylvania Auto Assigned Risk Plan
When an employer must provide workers' compensation insurance but is unable to
do so through normal channels, which organization can provide the required
coverage? State Workers Insurance fund
What term describes a producer who converts premiums for his own use
Breach of fiduciary duty
What insurance option lets the insured seek recovery for all medical and other out
ofpocket damages, pain and suffering, and other nonmonetary damages as a result
of injuries caused by other drivers
Full Tort option
With Crop insurance, at what percent can crops be insured of their expected value?
75%

Peril: Peril: A cause of loss [md] for example, fire, collision, or flood.
Hazard:
Hazard: Something that increases the chance of loss [md] for example,
overloaded electrical outlets, worn brakes on a car, or building on a flood plain.
Law of large numbers:
Law of large numbers: Principle that helps insurers predict
the number of losses that will occur and allows them to provide large amounts of
insurance for relatively little money. It states that the more examples used to
develop any statistic, the more reliable the statistic will be.
Insurable risk:
Insurable risk: A risk must meet certain criteria to be a suitable
subject for insurance. These criteria are: pure risk, definite as to time and place, not
expected, large enough to create financial hardship for insured, affordable to
insured, can be assigned a financial value, will not occur to large number of
insureds at the same time, and large number of persons with similar potential loss.
Indemnity: Indemnity: Insurance policies are contracts of indemnity because they
restore the insured to approximately the same financial condition he or she was in
before a loss. A person whose twoyearold car is totaled in an accident will be paid
the value of that car, not the amount required to purchase a new car.
Aleatory contract: Aleatory contract: Contract that is contingent on an uncertain
event. An insurance policy is an aleatory contract because an insured does not
receive claim payments unless a covered loss occurs.
Contract of adhesion:
Contract of adhesion: A contract in which only one party
draws up the terms and the other party simply consents to them; ambiguities in the
terms are interpreted by courts in favor of the party who did not write the terms.
Insurance is a contract of adhesion.

Unilateral contract: Unilateral contract: A contract in which only one party is legally
bound to perform its part of the agreement. An insurance policy is a unilateral
contract because the insurer is legally required to pay for covered losses under the
policy. An insured is not legally required to pay premiums or comply with the policy
terms.
First named insured:
First named insured: Person whose name appears first in
the declarations as an insured. Might be responsible for paying premiums, receiving
cancellation notices, and agreeing to changes in the policy.
Offer and acceptance:
Offer and acceptance: One party to a contract must make
an offer, and the other party must accept it. With an insurance contract, the insured
makes the offer by completing an application and the insurance company accepts
the offer by issuing a policy.
Consideration:
Consideration: Both parties to a contract must provide
consideration, which is a thing of value exchanged for the performance promised in
the contract. The consideration the insured provides is the premium; the
consideration the insurance company provides is the promise to pay if certain losses
occur.
Binder:
Binder: Oral or written statement used to provide immediate insurance
protection for a specified time period. Can be issued by the agent or the insurance
company. Guarantees temporary coverage, but is not a guarantee that a policy will
be issued.
Material fact:
Material fact: A fact that would cause an insurer to decline a risk,
charge a different premium, or change the provisions of a policy that was issued.
The fact that an individual has caused three auto accidents in the past five years
would be a material fact for a company issuing auto liability insurance
Misrepresentation: Misrepresentation: Written or verbal misstatement of a material
fact involved in the contract on which the insurer relies. Can be grounds for the
insurer to void the policy. Might be intentional or unintentional.
Fraud: Fraud: A deliberate misrepresentation that causes harm. Unlike
misrepresentation, which might be either intentional or unintentional, fraud is
always intentional and involves an allout effort by one party to deceive and cheat
the other.
Representations versus warranties:
Representations versus warranties: A
representation is a statement in an application that the insured believes is true. A
warranty is a specific agreement between the insured and insurer that certain
conditions will be met. The key difference between the two is that a representation
is not a part of the contract, but a warranty is. A policy cannot be voided on the
basis of a representation, but it can be voided for breach of warranty.

Waiver:
Waiver: Intentional relinquishment of a known right, such as not
applying a policy condition that could be grounds to deny payment of a claim.
Estoppel:
Estoppel: Legal principle that prevents someone from asserting that
something is not true after creating the impression that it is true. Under this
principle, if a producer misinterprets a policy and tells an insured that a loss will be
covered, the insurer cannot deny payment of the claim.
Short rate versus pro rata cancellation:
Short rate versus pro rata
cancellation: When an insurance policy is cancelled before its expiration date, any
premium paid for insurance that will not be provided (unearned premium) must be
returned to the insured. If the insured cancels the policy, the insurer is also allowed
to keep a certain amount for expenses involved in issuing the policy (short rate
cancellation). This is not permitted when the insurer cancels the policy (pro rata
cancellation).
Direct loss versus indirect loss: Direct loss versus indirect loss: A direct loss is a
financial loss resulting directly from a loss to property, such as tornado damage to a
home. An indirect loss is a consequence of a direct loss, such as the expenses
required to stay at a motel while tornado damage to a home is repaired.
Actual cash value: Actual cash value: Method of determining reimbursement for an
insured loss; usually calculated by determining the property's replacement cost and
subtracting an amount for depreciation. Depreciation is deducted because the
insured has already had use of the property. Paying the full replacement cost would
violate the principle of indemnity.
Replacement cost: Replacement cost: Losses may be reimbursed on a replacement
cost basis, without deduction for depreciation, if the insured agrees to maintain
insurance equal to a specified percentage of the property's value.
Blanket insurance: Blanket insurance: Insurance that is written to cover more than
one item of property at a single location or one or more items of property at
multiple locations. Personal property coverage in Dwelling and homeowners policies
is an example of blanket insurance.
Valued policy:
Valued policy: Certain hardtovalue items, such as art work,
may be insured under a valued policy to avoid the difficulty involved in determining
the property's value after it is damaged. The property is written for a specified
amount that is used to value losses. Also called an agreed amount policy.
Coinsurance:Coinsurance: Policy condition that benefits insureds who insure
property for its full value. If the insured maintains insurance equal to a specified
percentage of the property's value, the insurer will fully reimburse losses (up to the
policy limits). If the coinsurance requirement is not met, the amount paid for the
loss will be reduced.

Subrogation: Subrogation: The transfer of an insured's right to collect from a

negligent third party to the insurance company. Under the subrogation condition,
the insurance company will initially pay an insured's loss, and then attempt to
recover that amount from the party who was responsible for the loss.
Other insurance: Other insurance: Policy condition that stipulates how losses will
be paid when more than one policy applies to a loss. If losses are paid on a
primary/excess basis, the primary policy pays the entire loss (up to the policy limit)
first, and the excess policy pays any amount not covered under the primary policy.
When losses are paid on a pro rata basis, each policy pays a proportion of the loss
based on the amount of coverage under its policy.
Nonconcurrency: Nonconcurrency: Occurs when property is insured by two or
more policies that do not provide identical coverage. Nonconcurrency can result in
coverage gaps or disputed claim payments.
Negligence: Negligence: Liability insurance policies cover certain losses arising out
of an insured's negligence. Negligence is the lack of reasonable care that is required
to protect others from the unreasonable chance of harm.
Proximate cause: Proximate cause: Action that establishes a link between a
person's negligent actions and resulting damage to a third party.
Intervening cause: Intervening cause: A separate action that breaks the chain of
causation between a person's negligent actions and resulting damage to a third
party. The intervening cause then becomes the proximate cause of loss.
Personal injury:
Personal injury: In the insurance industry, this term does not
have the same meaning as bodily injury. It refers to losses arising out of such things
as slander, libel, and invasion of privacy.
Absolute liability: Absolute liability: Type of law imposed on those involved in
activities considered especially hazardous, such as activities involving dangerous
materials, hazardous operations, and dangerous animals. A person involved in these
activities can be held liable for damages arising out of them, even though the
individual was not negligent.
Supplementary payments:
Supplementary payments: Expenses included in a
liability insurance policy that are paid in addition to the policy's regular limit of
liability. Typically includes defense costs, claim investigation expenses, bond
premiums, first aid expenses, expenses incurred by the insured at the insurer's
request, loss of earnings, prejudgment interest, and postjudgment interest.
Covered perils: (Dwelling and Homeowner Coverages)
Covered perils: Dwelling
forms can provide basic, broad, or special coverage. Homeowner forms can provide
broad or special coverage for owneroccupied dwellings and broad form coverage
for tenants or condominium unit owners.

Removal coverage: (Dwelling and Homeowner Coverages) both cover property

against loss from any peril while being removed from a premises endangered by a
covered peril, and for a specified number of days while it is away from the premises.
Debris removal: (Dwelling and Homeowner Coverages)
both contain debris
removal coverage, which pays for the expense of removing debris resulting from a
covered loss.
Temporary substitute auto:
Temporary substitute auto: An auto the insured
rents or borrows while the insured's damaged auto is out of service because of its
breakdown, repair, servicing, loss, or destruction. In both personal and commercial
auto policies, temporary substitute autos are considered covered autos for liability
coverage.
Collision:
Collision: One of two physical damage coverage options in personal
and commercial auto policies. Covers damage caused by the impact of the auto
with another object or vehicle or by the upset of the vehicle.
Nonowned auto:
Nonowned auto: In the personal auto policy, it is any private
passenger auto, pickup truck, trailer, or van not owned by or available for the
regular use of the named insured or a family member. Under the policy's physical
damage coverage (but not liability coverage), a temporary substitute auto is
considered a nonowned auto instead of a covered auto.
Transportation expenses: Transportation expenses: Physical damage coverage in
personal and commercial auto policies that covers transportation expenses incurred
because of physical damage losses to the covered auto and loss of use expenses for
which the insured is legally responsible because of loss to a nonowned auto.
Extended nonowned coverage: Extended nonowned coverage: Personal auto policy
endorsement that eliminates most policy exclusions applicable to autos that are
furnished or available for the regular use of the named insured or family members
Named nonowner coverage:
Named nonowner coverage: Personal auto policy
endorsement that provides extended coverage for the use of nonowned autos to
individuals who do not own a car.
Interline endorsements: \n\n(Commercial Package policy) Interline endorsements:
They may be used with more than one line of insurance. A single interline
endorsement can be included in a package policy to modify several lines of
insurance.
Eligible occupancies:(Businessowners Policy) Generally, the business may not
exceed 25,000 square feet of floor area or have more than $3 million in annual
gross sales. For some types of risks, the building may not exceed a specified
number of stories. Only certain wholesale, processing and service, restaurant,
convenience store, and contract risks are eligible.

Ineligible risks: (Businessowners Policy)

The following risks cannot be covered
under a Businessowners policy: auto repair or service stations; auto, motor home,
mobile home, and motorcycle dealers; banks, credit unions, stockbrokers, and
similar financial institutions; bars and pubs; buildings with a manufacturing
occupancy; condominium associations other than office or residential
condominiums; household personal property; business operations that involve
manufacturing; one or twofamily dwellings; parking lots or garages; and places of
amusement.
Covered causes of loss: (Businessowners Policy)
Covered causes of loss:
Businessowners property coverage is written on an open peril basis.
Coverage extensions: Businessowners Policy) Coverage extensions: In the
Businessowners policy, they include newly acquired or constructed property,
property off premises, outdoor property, personal effects, valuable papers and
records, and accounts receivable.
Optional coverages:(Businessowners Policy) Optional coverages: In the
Businessowners policy, they apply only if designated in the declarations and usually
require an additional premium. Optional coverages are available for employee
dishonesty, mechanical breakdown, outdoor signs, and money and securities.
Business personal property: (Commercial Property Insurance)
Business personal
property: Commercial property insurance can be written to cover business personal
property, such as furniture, fixtures, machinery, and inventory.
Personal property of others:\n (Commercial Property Insurance) Personal property
of others: Commercial property insurance can be written to cover damage to
personal property of others in the insured's care, custody, or control, regardless of
whether the insured is legally liable for that loss.
Agreed value: \n(Commercial Property Insurance) Agreed value: Optional
commercial property coverage that suspends the coinsurance requirement and
stipulates a certain value for designated property. If the policy limit equals or
exceeds this amount, the insured will not be assessed a coinsurance penalty.
Business Income From Dependent Properties Form:\n (Commercial Property
Insurance) Business Income From Dependent Properties Form: Commercial
Property form designed for insureds whose business income is dependent on the
ongoing operations of other businesses they do not own. This includes businesses
that: deliver materials or services to the insured (contributing locations), are the
primary purchasers of the insured's products or services (recipient locations),
manufacture products for delivery to the insured's customers (manufacturing
locations), or attract customers to the insured's business (leader locations).

Additional coverages: \n(Commercial Property Insurance) Additional coverages: The

Commercial Property Building and Personal Property coverage form includes the
following additional coverages: debris removal, preservation of property, fire
department service charge, pollutant cleanup and removal, increased cost of
construction, and electronic data.
Coverage extensions:\n (Commercial Property Insurance) Coverage extensions: The
commercial property building and personal property coverage form includes the
following coverage extensions, which apply only if the insured has agreed to meet
an 80% or higher coinsurance requirement or has purchased a reporting form:
newly acquired or constructed property, personal effects and property of others,
valuable papers and records [md] other than electronic data, property off premises,
outdoor property, and nonowned detached trailers.
Optional coverages: \n(Commercial Property Insurance)
Optional coverages: The
commercial property building and personal property coverage form includes the
following optional coverages, which apply only if designated in the declarations and
require an additional premium: agreed value coverage, inflation guard coverage,
and replacement cost coverage.
Business personal property:
Business personal property: Commercial property
insurance can be written to cover business personal property, such as furniture,
fixtures, machinery, and inventory.
Personal property of others:
Personal property of others: Commercial property
insurance can be written to cover damage to personal property of others in the
insured's care, custody, or control, regardless of whether the insured is legally liable
for that loss.
Agreed value:
Agreed value: Optional commercial property coverage that
suspends the coinsurance requirement and stipulates a certain value for designated
property. If the policy limit equals or exceeds this amount, the insured will not be
assessed a coinsurance penalty.
Business Income From Dependent Properties Form: Commercial Property form
designed for insureds whose business income is dependent on the ongoing
operations of other businesses they do not own. This includes businesses that:
deliver materials or services to the insured (contributing locations), are the primary
purchasers of the insured's products or services (recipient locations), manufacture
products for delivery to the insured's customers (manufacturing locations), or
attract customers to the insured's business (leader locations).
Additional coverages: \n(Commercial Property Insurance) Additional coverages: The
Commercial Property Building and Personal Property coverage form includes the
following additional coverages: debris removal, preservation of property, fire

department service charge, pollutant cleanup and removal, increased cost of

construction, and electronic data.
Coverage extensions: \n(Commercial Property Insurance) Coverage extensions: The
commercial property building and personal property coverage form includes the
following coverage extensions, which apply only if the insured has agreed to meet
an 80% or higher coinsurance requirement or has purchased a reporting form:
newly acquired or constructed property, personal effects and property of others,
valuable papers and records [md] other than electronic data, property off premises,
outdoor property, and nonowned detached trailers.
Optional coverages: \n(Commercial Property Insurance)
Optional coverages: The
commercial property building and personal property coverage form includes the
following optional coverages, which apply only if designated in the declarations and
require an additional premium: agreed value coverage, inflation guard coverage,
and replacement cost coverage.
Personal and advertising injury: \n(Commercial General Liability Insurance)
Personal and advertising injury: In the Commercial General Liability (CGL)
forms, this is injury that results from false arrest or imprisonment, malicious
prosecution, wrongful eviction or entry, slander, libel, violation of personal privacy,
use of another's advertising idea, or copyright infringement.
Occurrence versus claims made forms: \n(Commercial General Liability Insurance)
CGL coverage can be written on an occurrence or claimsmade basis. The
major difference between occurrence and claimsmade forms is how coverage
under the form is activated, or triggered. An occurrence form covers bodily injury
(BI) or property damage (PD) that occurs during the policy period, regardless of
when the claim is made. A claimsmade form pays for BI or PD losses for which a
claim was first made against the insured during the policy period.
Supplementary payments:\n(Commercial General Liability Insurance) The
following supplementary payments are available under Coverage A and Coverage B
of the CGL: expenses incurred by the insurance company; up to $250 for the cost of
bail bonds; cost of bonds to release attachments; reasonable expenses incurred by
insured to assist in investigation and defense of a claim, including up to $250 per
day for loss of earnings; all costs taxed against the insured in a suit; prejudgment
and postjudgment interest; and defense costs for an indemnitee.
General aggregate limit: \n(Commercial General Liability Insurance)
General
aggregate limit: Total limit of insurance coverage that will be paid in one policy for
all coverages except the productscompleted operations hazard.
Medical expense limit: \n(Commercial General Liability Insurance)
Medical
expense limit: Separate sublimit in the CGL for Coverage C [md] Medical Payments
coverage. It is subject to both the per occurrence and the general aggregate limit.

Loss sustained versus discovery forms:\n(Commercial Crime Insurance) Commercial

Crime coverage is written on a loss sustained or discovery basis. The major
difference between the forms is how coverage under the form is activated.
Coverage under a loss sustained form is triggered by a loss sustained during the
policy period, but not necessarily discovered during the policy period. Coverage
under the discovery form is triggered by a loss discovered during the policy period,
but not necessarily sustained during the policy period.
Common law defenses:\n(Workers Compensation) Common law defenses:
Assumption of risk, contributory negligence, and the fellow servant rule.
Compulsory compensation laws: \n(Workers Compensation)
Compulsory
compensation laws: A type of state workers compensation law requiring each
employer to accept and comply with all the law's provisions. Most state workers
compensation laws are compulsory.
Elective compensation laws: \n(Workers Compensation)
Elective compensation
laws: A type of state workers compensation law under which employers have the
option to accept or reject the law's provisions. If rejected, the employer cannot use
the three common law defenses.
Exclusive remedy: \n(Workers Compensation) Exclusive remedy: The benefits
stipulated in workers compensation laws are the only means available to employees
against employers for injuries covered by those laws. Employees cannot sue their
employers in court to obtain additional compensation.
Expediting expenses:
Expediting expenses: Coverage under the Equipment
Breakdown Protection coverage form that pays extra costs necessarily incurred by
the insured to make temporary repairs and expedite permanent repairs or
replacement of the damaged property.
Errors and omissions insurance: Errors and omissions insurance: Type of
professional liability insurance written for nonmedical professionals, such as
insurance agents, accountants, architects, stockbrokers, and attorneys.
Difference in conditions insurance:
Difference in conditions insurance: Type of
Commercial Property policy that covers most insurable perils but excludes basic fire
and extended coverage perils. It is usually written on large risks with a high
deductible.

Surplus lines:
Surplus lines: Term used to describe highly specialized insurance
coverages that are not available or cannot be procured from authorized insurers
within a state.

Assumption of the risk,

means that you agree\nto take the risk of engaging in
certain activities and if you are injured during the course of that\nactivity, you may
not sue.
tort threshold.

assumed the risk up to a certain level,

Doctrine of Contributory Negligence

ontributory negligence, if proven, would bar
recovery even if your degree of\nfault was minor. This doctrine has been abandoned
in most states, since it was not fair to injured\nparties. For example, if you were
10% at fault and the other party was 90% at fault, you could not\nrecover at all,
since you contributed to your own injury.
Comparative Negligence: This has replaced contributory negligence in most
jurisdictions because it\nis much more fair to a party who is partly at fault. In
comparative negligence, a degree of fault is\nassigned to both parties. If you
suffered injuries in an auto accident in the amount of $10,000 and you\nwere 10%
at fault, then you could still recover the 90% from the other party. This way, the
degree of\nfault is allocated on a proportionate basis to each party.
Statutes of Limitations
These limit the time\nduring which a lawsuit may be filed
after the occurrence of claim. They vary by state, but are usually\nbetween two and
seven years.
Damages:

special, punitive, or general

General damage: Unlike special damages, which are determined by incurred

expenditures,\ngeneral damages do not directly relate to an expense or an amount
of lost income. By paying for\ngeneral damages, the insurer is attempting to
compensate the injured party for his or her mental\nand physical distress, including
pain and suffering, disfigurement and loss of consortium.
Special Damage: Consist of medical expenses and lost wages. These are the costs
a claimant\nincurs, sometimes called outofpocket expenses. They are an exact
and verifiable figure.
Punitive Damages: These are awarded when the injury was caused by the gross
negligence of the\ndefendant. Often, these awards are triple the amount of the
general damages awarded and are\nsometimes not covered by insurance. Gross
negligence is defined as willful and wanton\nnegligence. For example, a defendant
knew their product was faulty, but continued to sell it\nanyway.
Absolute or Strict Liability:
Although generally the burden of proof is on the
injured party to show\nthat the defendant was negligent, some things are inherently

so dangerous that liability is absolute or\nstatutory. For example, keeping a wild

tiger as a pet makes you absolutely responsible for any injury\nor damage the tiger
may cause. Another area of strict liability is the responsibility for
handling\nexplosives.
Vicarious Liability Some state statutes spell out situations where one party may be
responsible for\nthe negligent activities of another party. For example, if you ask
your secretary to drive her own car\non your companys business, you can be sued
if they negligently injure someone.
Blanket Property
Blanket property insurance provides a single amount
of\ninsurance that may apply to different types of property or to different locations.
Specific Property Coverage
a single limit\nto apply to just one type of property
at more than one location or a single limit to apply to all types of\nproperty at
various locations.
fire resistive property

steel and concrete

Assumption of the risk,

means that you agree\nto take the risk of engaging in
certain activities and if you are injured during the course of that\nactivity, you may
not sue.
tort threshold.

assumed the risk up to a certain level,

Doctrine of Contributory Negligenceontributory negligence, if proven, would bar

recovery even if your degree of\nfault was minor. This doctrine has been abandoned
in most states, since it was not fair to injured\nparties. For example, if you were
10% at fault and the other party was 90% at fault, you could not\nrecover at all,
since you contributed to your own injury.
Comparative Negligence: This has replaced contributory negligence in most
jurisdictions because it\nis much more fair to a party who is partly at fault. In
comparative negligence, a degree of fault is\nassigned to both parties. If you
suffered injuries in an auto accident in the amount of $10,000 and you\nwere 10%
at fault, then you could still recover the 90% from the other party. This way, the
degree of\nfault is allocated on a proportionate basis to each party.
Statutes of Limitations
These limit the time\nduring which a lawsuit may be filed
after the occurrence of claim. They vary by state, but are usually\nbetween two and
seven years.
Damages:

special, punitive, or general

General damage: Unlike special damages, which are determined by incurred

expenditures,\ngeneral damages do not directly relate to an expense or an amount

of lost income. By paying for\ngeneral damages, the insurer is attempting to

compensate the injured party for his or her mental\nand physical distress, including
pain and suffering, disfigurement and loss of consortium.
Special Damage: Consist of medical expenses and lost wages. These are the costs
a claimant\nincurs, sometimes called outofpocket expenses. They are an exact
and verifiable figure.
Punitive Damages: These are awarded when the injury was caused by the gross
negligence of the\ndefendant. Often, these awards are triple the amount of the
general damages awarded and are\nsometimes not covered by insurance. Gross
negligence is defined as willful and wanton\nnegligence. For example, a defendant
knew their product was faulty, but continued to sell it\nanyway.
Absolute or Strict Liability:
Although generally the burden of proof is on the
injured party to show\nthat the defendant was negligent, some things are inherently
so dangerous that liability is absolute or\nstatutory. For example, keeping a wild
tiger as a pet makes you absolutely responsible for any injury\nor damage the tiger
may cause. Another area of strict liability is the responsibility for
handling\nexplosives.
Vicarious Liability Some state statutes spell out situations where one party may be
responsible for\nthe negligent activities of another party. For example, if you ask
your secretary to drive her own car\non your companys business, you can be sued
if they negligently injure someone.
Blanket Property
Blanket property insurance provides a single amount
of\ninsurance that may apply to different types of property or to different locations.
Specific Property Coverage
a single limit\nto apply to just one type of property
at more than one location or a single limit to apply to all types of\nproperty at
various locations.
fire resistive property

steel and concrete

insurance binder oral or written statement made by the agent that the insured
has immediate protection that is valid for a specified time lets you know you have
coerage before the actual policy has been issued. Does not guarantee that a policy
will be issued only guarantees temporary coverage. If a policy is issued then the
binder ceases as of the effective date of the policy
federal Fair Credit Reporting Act protects comsumers by requiring that the
consumer e notified in certain situations and establishing provisions for the removal
of outdated and incorrect information from their consumer credit reports
investigative consumer report gathers data through personal interviews with
friends, neighbors, and associates of the consumer
who can get a copy of your consumer credit report someone who intends to use
the information for insurance underwriting purposes or in conncection with
employment, credit transactions, or other types of personal business transactions
what is prevent from being in a consumer credit report
1. bankruptcies over 10
years old\n2. suits and judgements over seven years old or in which the statute of
limitations has expired whichever period is longer\n3. paid tax liens or accounts
placed for collection or charged to profit that are over seven years old\n4. arrests,
indictments, or conviction of crime reports\n5. any other adverse information that
took place seven years before the report\n*these restrictions are not applicable
when the credit report is used in connection with a credit transaction of $150,000 or
more, or when concerns or employment of an individual earning $75,000 or more
When must a consumer be notified about the release of their credit report?
If an
investigative report is ordered or if an insurance is rejected ,reduced, or written at a
higher premium. The consumer myst be notified an provided with the name and
address of the reporting agency\n the comusmer then has the right to obtain the
substance of the information in the report and be informed of who received the
report in the last 6 months

adverse selection the tendency for people with greater than average exposure to
loss to purchase insurance. The underwriter should protect the insurer from this
Construction classification for property insurance underwriting Class 1 frame
Class 1: Frame outside support walls, roof and floors constructed of wood or
other combustible materials
Construction classification for property insurance underwriting Class 2 joisted
masonry
Class 2: Joisted Masonryoutside support walls made of non
combustible masonry materials (such as concrete, brick, stone or tile) and a roof
and floor made of combustible materials like wood
Construction classification for property insurance underwriting Class 3 non
combustible class 3 exterior walls, floors, and roof are constructed of and
supported by non combustible material such as metal, asbestos, or gypsum
Construction classification for property insurance underwriting Class 4 Masonry
non combustible
class 4 exterior walls constructed of masonry material and a
roof and floor made of metal or other noncombustible materials
Construction classification for property insurance underwriting Class 5 modified
fire resistive class 5 exterior walls, floors and roof constructed of masonry or fire
resistive material with a fire resistance rating of 2 hours or less
Construction classification for property insurance underwriting Class 6 fire
resistive
class 6 constructed of masonry or fire resistive material with fire
resistance rating of 2 hours or more
3 ways of computing a premium 1. Judgment rating\n2. Manual Rating\n3. Merit
Rating
Judgement Rating for computing a premium premium is determined by considering
the individual risk. No books or tables are used, just thorough judgement
Manual or Class Rating for computing a premium
the most common method of
determining an insurance premium rates for a particular state are obtained by
consulting a manual. Rates are arranged by various categories or classes.
(underwriter classifies the risk using defined criteria and then looks up the rate)
Rate is then multiplied by the number of units of insurance purchased ( Rate per
unit x number of units = premium) Ex: insured purchases $60,000 of insurance at a
rate of $2 per $1000 of coverage 2 x 60= $120 premium
Merit Rating for computing a premiumstarts with manual/class rating and then is
modified to relfect unique characteristics of the risk that are not reflected by the
manual rate... experience rating is form of this which takes into account the
insured's loss experience (dollar paid out for claims vs premium paid over a period
of usually 3 years)

retrospective rating
form of merit rating which bases the insured's premoum
on losses that occurred during the policy period
schedule rating
form of merit rating which applies a system of debits and credits
to reflect the characteristics of the particular insured
certificate of insurance (COI)
proof that a policy has been written contains
general summary of the policy's coverage and is frequently required in loan
transactions and other legal matters
Under what conditions may an insurance company cancel insurance during a policy
period?
1. Misrepresentation\n2. Concealment\n3. Fraud
Misrepresentation written or verbal misstatement of a material fact (fact that
would cause an insurer to deline a risk, charge a differnt premium or change the
provisions of the policy that was issued) involved in the contract on which the
insurer relies.\n may be intentional or unintentional
concealmentwithholding material facts
fraud deliberate misrepresentation that CAUSES HARM always intentional
What 4 elements are needed in an act of fraud
1. someone deliberately lies\n2.
the intent of the lie is for someone else to rely on that lie\n3. another person relies
on that lie\n4. another person suffers harm as a result of relying on that lie
Representations in an insurance application statements that the applicant believes
to be true. A policy may not be voided on the basis or representation.
Warranties specific agreements made between the insured and the insurer that
certain conditions will be met (ex: while a business is closed, a security guard will
be on duty). \n\nIf these agreements are breached the policy can be voided
whether or not the breach was intentional
Waiver
intentional relinquishment of a known right knowingly overlooking a
condition or exclusion that would normally have been grounds for denying
coverage, increasing the premium, or reducing the benefits provided. The
requirement of an insurable interest and facts cannot be waived
Estoppel
If an insurance company representative intentionally or unintentionally
creates the impression that certain facts exist when they do no and an innocent
party relies on that impression and is damaged as a result, the insurance company
will be estopped (prevented) from denying this fact (ex: if an agent states or
indicates by his actions that a particular loss is covered, the insurance company will
be estopped/prevented from denying that coverage)
What happens when an insured wants to cancel insurance during a policy period?
the insured needs to write a letter to the insurance company or surrender the

policy itself to them then the insurance company must give back any unearned
premium (premium not yet used up at that point in the policy period)
short rate basis
if an insured cancels before the expiration date the insurance
company no only keep the premium for the insurance already provided but also
keeps an allowance for expenses, such as issuing the policy
What happens when an insurance company wants to cancel insurance before the
expiration date of the policy?
this is governed by state regulations usually can
only be cancelled for nonpayment. Usually the insurer is required to notify the
insured in writing a certain number of days before the impending cancellation.
pro rata basis
when the insurance company cancels a policy, unearned
premium is returned to the insured on a pro rata basis company retains only the
earned premium and is not allowed to keep an extra amount for expenses (as in the
short rate basis)
flat cancellation
cancellation of insurance by either insured or insurer on the
effective date of the policy
nonrenewal not providing coverage for the next term once a policy expires.
Insureds can nonrenew for any reason, but insurers are limited in the reasons for
nonrenewal and have to notify the insured of the decision to nonrenew

What are the three (3) components of Insurance? Risk: the uncertainty of an
outcome; positive or negative\nTransfer: shifting financial responsibility\n\nPooling:
sharing losses as a whole
What are the two (2) major sectors of Insurance?
Health

Property & Casualty \nLife &

Name four (4) types of Personal Insurance. 1) Homeowners\n2) Personal Auto

Policy (PAP)\n3) Personal Watercraft\n4) Personal Umbrella
Define the Property & Liability Coverage of Homeowner's Insurance.
1) The
property coverage protects the insured from damages against the home or its
contents\n\n\n2) The liability coverage protects the insured from claims or suit

What is Personal Umbrella Liability Coverage?

A Liability Insurance Policy that
provides excess coverage above underlying policies. \n\n\nAdditional coverage
comes with higher premuims
Name six (6) types of Commercial Insurance. 1) Commercial Property\n2)
Commercial Crime\n3) Commercial General Liability\n4) Commercial Package
(CPP)\n5) Worker's Compensation\n6) Business Owner's (BOP)
Commercial Crime \n\n\nvs. \n\n\nCommercial Auto Insurance
1) Crime: protects
against theft of contents and other property; also protects from crime by
employee\n\n\n2) Auto: protects insured from exposures that come from owning,
operating, maintaining an auto
Commercial Package (CPP)\n\n\nvs.\n\n\nBusiness Owner's (BOP) 1) CPP: a policy
that combines multiple lines of business \n\n\n2) BOP: packaged policies that
combine property & liability; small business oriented
How Does Insurance Benefit Society?1) Paying for Losses\n2) Reduces
Uncertainty\n3) Uses Resources Efficiently\n4) Promotes Risk Control\n5) Legal
Compliance\n6) Establishes Credit
What are Premiums used for?
1) Paying off claims\n2) Paying for Insurance
Operation Expenses\n3) Future Investments
What is Underwriting?
Underwriting: the process of selecting, pricing and
determining insurance policy conditions
Define the Claims Process.
1) Acknowledge the Claim\n2) Identify the
Policy\n3) Contact the Insured\n4) Investigate the Claim\n5) Determine the Cause &
Loss Amount\n6) Close the Claim
What is Risk Control?
Risk Control: the conscious decision to act, or not act, in
order to reduce frequency/severity of a loss.\n\n\nEfforts to make the loss more
predictable
What is a Premium Audit? Premium Audit: an annual review or the insured's
premium for coverage\n\n\nPartial refund are possible if the premiums charged are
too high
Who is involved with an Insurance Transaction?
1) Insured (Policyholder)\n2)
Producer (Agent, Broker)\n3) Insurer (Insurance Company)
Brokerage\n\n\nvs.\n\n\nAgency 1) Brokerage: an independent organization that
represents the insured\n\n\n2) Agency: an entity that represents the insurer
Characteristics of an Exclusive Agency1) Agents can only sell insurance for one
Insurer\n2) Typically consists of IC's\n3) No Ownership over Expiration Lists

What is an Expiration List?

Expiration List: a record of policyholders with
expiration dates\n\n\nThis document grants the right to solicit policies; can be sold
between brokers/agents
Characteristics of a Direct Writer1) Agents are employees/representatives of one
insurer\n2) No ownership of Expiration List\n3) Paid via salaries
What are the seven (7) functions of a Producer?
1) Prospecting\n2) Risk
Management Review\n3) Sales\n4) Policy Issuance\n5) Premium Collection\n6)
Customer Service\n7) Claims Handling
What is Prospecting?
Prospecting: finding entities that may be interested in
insurance\n\n\nEx: referrals, ads, mailing, partners, etc
Agency Bill\n\n\nvs.\n\n\nDirect Bill1) Agency Bill: a producer send a bill to the
insured and collects the premium is sent to the insurer\n\n\n2) Direct Bill: the
insurer assumes responsibility for sending premiums to payable for producer
commission
What is a Book of Business
Book of Business: a group of policies with a
common characteristic\n\n\nEx. Location, insurer, coverage provided
What are the Purposes of Underwriting?1) Minimize Adverse Selection\n
the
tendency for those with high probability
of risk to purchase coverage\n\n\n2)
Protect Insurer's actual ability to provide coverage and not overextend insurance
(Capacity)
What sources do Underwriters use to Gather/Assess information? 1) Expert Systems
(Supplemental Software)\n2) Producers\n3) Inspection Records\n4) Gov't
Documents\n5) Claims Files\n6) Insurance Applications
What is a Deductible?
Deductible: a portion of a covered loss that is not paid by
the insurer\n\n\nTypically applied to exposure that occur frequently
What are the four (4) steps int he Underwriting Process? 1) Gather
Data/Information\n2) Make a Decision\n3) Implement the Decision\n4) Monitor the
Decision
Prospective Loss Costs \n\n\nvs.\n\n\nLaw of Large Numbers
1) Prospective Loss
Costs: loss data that is modified by development, trending or credibility; no concern
for profits\n\n\n2) Law of Large Numbers: as the number of occurrences of an
independent (but similar) event happen; the relative accuracy increases
Class Rating \n\n\nvs.\n\n\nSpecific Rating1) Class Rating: using rates that reflect
the average loss of events; all members of a class have the same rates (despite
exposure differences)\n\n\n2) Specific Rate: insurance rates for unique
characteristics

What are the two (2) goals of Claims?1) Maintain the Insurer's Promise\n
claimants to preloss state, financially\n2) Support Profit Goals

Return

First Party \n\n\nvs.\n\n\nThird Party Claims 1) 1st Party Claim: a demand from the
insured seeking to recover for loss/damage that is covered by insurance\n\n\n2) 3rd
Party Claim: a demand against the insured/insurer seeking to recover from
damages; mostly liability
Define Subrogation Subrogation: the possibility of an insurer, after a loss has been
recovered, being able to receive money from the party who is legally responsible for
the loss
Define Loss Reserves
Loss Reserves: an estimate of the amount of money an
insurer should expect to pay on future losses that have not occurred, not been
settled or not reported.
Why is Insurance Regulated?
1) Protect Consumers\n2) Maintain Solvency\n3)
Prevent Destructive Competition
How do Regulations on Insurance Protect Consumers?
1) Regulations ensure
that forms/applications/languages are easier to comprehend, and ultimately benefit
the consumer\n\n\n2) Ensure that insurance is available when needed; without
unethical business behavior
How do Regulations on Insurance Maintain Solvency?
1) Solvency: the ability
for an insurer to meet its financial obligations\n\n\n2) Gov't safeguards funds for
policyholders\n\n\n3) Premiums are paid in advance, coverage extends to the future
Domestic vs. Foreign vs. Alien Insurers1) Domestic: licensed in the state domiciled
in\n\n\n2) Foreign: insurers that write insurance in states outside their home
state\n\n\n3) Alien: insurers licensed outside the US
Admitted Insurer\n\n\nvs.\n\n\nNonadmitted Insurer
1) Admitted: an insurer
with a license by the state to perform business\n\n\n2) Nonadmitted: insurers not
authorized to do business
Define Surplus Lines of InsuranceSurplus Lines: a form of "specialty" coverage that
is not typically provided by an admitted insurer\n\n\nusually offered by non
admitted insurers
What are the three (3) types of Insurance Company Ownership? 1) Stock
Insurer\n2) Mutual Insurer\n3) Reciprocal Insurance
What is a Stock Insurer Ownership?The insurer's goal is the maximize profits for the
shareholders\n\n\nOwned by stockholder; operated by BoD
What is a Mutual Insurer Ownership?The insurer's focus is to provide insurance; no
stocks\n\n\nOwned by policyholders; operated by BoD

What is a Reciprocal Insurance Ownership? An unincorporated group of members

that support each other as insured and insurers\n\n\nOwned by members; operated
by an Attorney

Peril: A cause of loss [md] for example, fire, collision, or flood.

Hazard:
Something that increases the chance of loss [md] for example,
overloaded electrical outlets, worn brakes on a car, or building on a flood plain.
Law of large numbers:
Principle that helps insurers predict the number of losses
that will occur and allows them to provide large amounts of insurance for relatively
little money. It states that the more examples used to develop any statistic, the
more reliable the statistic will be.
Insurable risk:
A risk must meet certain criteria to be a suitable subject for
insurance. These criteria are: pure risk, definite as to time and place, not expected,
large enough to create financial hardship for insured, affordable to insured, can be
assigned a financial value, will not occur to large number of insureds at the same
time, and large number of persons with similar potential loss.
Indemnity: When a loss occurs an individual should be restored the approximate
financial condition they were in before the loss no more and no less.
Aleatory contract: Contract that is contingent on an uncertain event that provides
for unequal transfer between the parties.
Contract of adhesion:
A contract in which only one party draws up the terms
and the other party simply consents to them; ambiguities in the terms are
interpreted by courts in favor of the party who did not write the terms.
Unilateral contract: A contract in which only one party is legally bound to perform its
part of the agreement.
First named insured:
Person whose name appears first in the declarations as an
insured. Might be responsible for paying premiums, receiving cancellation notices,
and agreeing to changes in the policy.
Offer and acceptance:
One party to a contract must make an offer, and the other
party must accept it. With an insurance contract, the insured makes the offer by
completing an application and the insurance company accepts the offer by issuing a
policy.
Consideration:
contract.

A thing of value exchanged for the performance promised in the

Binder:
Oral or written statement used to provide immediate insurance
protection for a specified time period. Can be issued by the agent or the insurance
company. Guarantees temporary coverage, but is not a guarantee that a policy will
be issued.
Material fact:
A fact that would cause an insurer to decline a risk, charge a
different premium, or change the provisions of a policy that was issued. The fact
that an individual has caused three auto accidents in the past five years would be a
material fact for a company issuing auto liability insurance
Misrepresentation: Written or verbal misstatement of a material fact involved in the
contract on which the insurer relies. Can be grounds for the insurer to void the
policy. Might be intentional or unintentional.
Fraud: A deliberate misrepresentation that causes harm. Unlike misrepresentation,
which might be either intentional or unintentional, fraud is always intentional and
involves an allout effort by one party to deceive and cheat the other.
Representations versus warranties:A representation is a statement in an application
that the insured believes is true. A warranty is a specific agreement between the
insured and insurer that certain conditions will be met. The key difference between
the two is that a representation is not a part of the contract, but a warranty is. A
policy cannot be voided on the basis of a representation, but it can be voided for
breach of warranty.
Waiver:
Intentional relinquishment of a known right, such as not applying a
policy condition that could be grounds to deny payment of a claim.
Estoppel:
Legal principle that prevents someone from asserting that something is
not true after creating the impression that it is true. Under this principle, if a
producer misinterprets a policy and tells an insured that a loss will be covered, the
insurer cannot deny payment of the claim.
Short rate versus pro rata cancellation:When an insurance policy is cancelled before
its expiration date, any premium paid for insurance that will not be provided
(unearned premium) must be returned to the insured. If the insured cancels the
policy, the insurer is also allowed to keep a certain amount for expenses involved in
issuing the policy (short rate cancellation). This is not permitted when the insurer
cancels the policy (pro rata cancellation).
Direct loss versus indirect loss: A direct loss is a financial loss resulting directly
from a loss to property, such as tornado damage to a home. An indirect loss is a
consequence of a direct loss, such as the expenses required to stay at a motel while
tornado damage to a home is repaired.
Actual cash value: Method of determining reimbursement for an insured loss;
usually calculated by determining the property's replacement cost and subtracting

an amount for depreciation. Depreciation is deducted because the insured has

already had use of the property. Paying the full replacement cost would violate the
principle of indemnity.
Replacement cost: Losses may be reimbursed on a replacement cost basis, without
deduction for depreciation, if the insured agrees to maintain insurance equal to a
specified percentage of the property's value.
Blanket insurance: Insurance that is written to cover more than one item of
property at a single location or one or more items of property at multiple locations.
Personal property coverage in Dwelling and homeowners policies is an example of
blanket insurance.
Valued policy:
Certain hardtovalue items, such as art work, may be insured
under a valued policy to avoid the difficulty involved in determining the property's
value after it is damaged. The property is written for a specified amount that is used
to value losses. Also called an agreed amount policy.
Coinsurance:Policy condition that benefits insureds who insure property for its full
value. If the insured maintains insurance equal to a specified percentage of the
property's value, the insurer will fully reimburse losses (up to the policy limits). If
the coinsurance requirement is not met, the amount paid for the loss will be
reduced.
Subrogation: The transfer of an insured's right to collect from a negligent third party
to the insurance company. Under the subrogation condition, the insurance company
will initially pay an insured's loss, and then attempt to recover that amount from the
party who was responsible for the loss.
Other insurance: Policy condition that stipulates how losses will be paid when
more than one policy applies to a loss. If losses are paid on a primary/excess basis,
the primary policy pays the entire loss (up to the policy limit) first, and the excess
policy pays any amount not covered under the primary policy. When losses are paid
on a pro rata basis, each policy pays a proportion of the loss based on the amount
of coverage under its policy.
Nonconcurrency: Occurs when property is insured by two or more policies that do
not provide identical coverage. Nonconcurrency can result in coverage gaps or
disputed claim payments.
Negligence: Liability insurance policies cover certain losses arising out of an
insured's negligence. Negligence is the lack of reasonable care that is required to
protect others from the unreasonable chance of harm.
Proximate cause: Action that establishes a link between a person's negligent
actions and resulting damage to a third party.

Intervening cause: A separate action that breaks the chain of causation between a
person's negligent actions and resulting damage to a third party. The intervening
cause then becomes the proximate cause of loss.
Personal injury:
In the insurance industry, this term does not have the same
meaning as bodily injury. It refers to losses arising out of such things as slander,
libel, and invasion of privacy.
Absolute liability: Type of law imposed on those involved in activities considered
especially hazardous, such as activities involving dangerous materials, hazardous
operations, and dangerous animals. A person involved in these activities can be
held liable for damages arising out of them, even though the individual was not
negligent.
Supplementary payments:
Expenses included in a liability insurance policy
that are paid in addition to the policy's regular limit of liability. Typically includes
defense costs, claim investigation expenses, bond premiums, first aid expenses,
expenses incurred by the insured at the insurer's request, loss of earnings,
prejudgment interest, and postjudgment interest.
Covered perils: (Dwelling and Homeowner Coverages)
Dwelling forms can
provide basic, broad, or special coverage. Homeowner forms can provide broad or
special coverage for owneroccupied dwellings and broad form coverage for tenants
or condominium unit owners.
Removal coverage: (Dwelling and Homeowner Coverages) both cover property
against loss from any peril while being removed from a premises endangered by a
covered peril, and for a specified number of days while it is away from the premises.
Debris removal: (Dwelling and Homeowner Coverages)
both contain debris
removal coverage, which pays for the expense of removing debris resulting from a
covered loss.
Temporary substitute auto:
An auto the insured rents or borrows while the
insured's damaged auto is out of service because of its breakdown, repair,
servicing, loss, or destruction. In both personal and commercial auto policies,
temporary substitute autos are considered covered autos for liability coverage.
Collision:
One of two physical damage coverage options in personal and
commercial auto policies. Covers damage caused by the impact of the auto with
another object or vehicle or by the upset of the vehicle.
Nonowned auto:
In the personal auto policy, it is any private passenger auto,
pickup truck, trailer, or van not owned by or available for the regular use of the
named insured or a family member. Under the policy's physical damage coverage
(but not liability coverage), a temporary substitute auto is considered a nonowned
auto instead of a covered auto.

Transportation expenses: Physical damage coverage in personal and commercial

auto policies that covers transportation expenses incurred because of physical
damage losses to the covered auto and loss of use expenses for which the insured
is legally responsible because of loss to a nonowned auto.
Extended nonowned coverage: Personal auto policy endorsement that eliminates
most policy exclusions applicable to autos that are furnished or available for the
regular use of the named insured or family members
Named nonowner coverage:
Personal auto policy endorsement that provides
extended coverage for the use of nonowned autos to individuals who do not own a
car.
Interline endorsements:\n\n(Commercial Package policy) They may be used with
more than one line of insurance. A single interline endorsement can be included in a
package policy to modify several lines of insurance.
Eligible occupancies:(Businessowners Policy) Generally, the business may not
exceed 25,000 square feet of floor area or have more than $3 million in annual
gross sales. For some types of risks, the building may not exceed a specified
number of stories. Only certain wholesale, processing and service, restaurant,
convenience store, and contract risks are eligible.
Ineligible risks: (Businessowners Policy)The following risks cannot be covered under
a Businessowners policy: auto repair or service stations; auto, motor home, mobile
home, and motorcycle dealers; banks, credit unions, stockbrokers, and similar
financial institutions; bars and pubs; buildings with a manufacturing occupancy;
condominium associations other than office or residential condominiums; household
personal property; business operations that involve manufacturing; one or two
family dwellings; parking lots or garages; and places of amusement.
Covered causes of loss: (Businessowners Policy)
coverage is written on an open peril basis.

Businessowners property

Coverage extensions: Businessowners Policy) In the Businessowners policy, they

include newly acquired or constructed property, property off premises, outdoor
property, personal effects, valuable papers and records, and accounts receivable.
Optional coverages:(Businessowners Policy) In the Businessowners policy, they
apply only if designated in the declarations and usually require an additional
premium. Optional coverages are available for employee dishonesty, mechanical
breakdown, outdoor signs, and money and securities.
Business personal property: (Commercial Property Insurance)
Commercial
property insurance can be written to cover business personal property, such as
furniture, fixtures, machinery, and inventory.

Personal property of others:\n (Commercial Property Insurance) Commercial

property insurance can be written to cover damage to personal property of others in
the insured's care, custody, or control, regardless of whether the insured is legally
liable for that loss.
Agreed value: \n(Commercial Property Insurance) Optional commercial property
coverage that suspends the coinsurance requirement and stipulates a certain value
for designated property. If the policy limit equals or exceeds this amount, the
insured will not be assessed a coinsurance penalty.
Business Income From Dependent Properties Form:\n (Commercial Property
Insurance) Commercial Property form designed for insureds whose business
income is dependent on the ongoing operations of other businesses they do not
own. This includes businesses that: deliver materials or services to the insured
(contributing locations), are the primary purchasers of the insured's products or
services (recipient locations), manufacture products for delivery to the insured's
customers (manufacturing locations), or attract customers to the insured's business
(leader locations).
Additional coverages: \n(Commercial Property Insurance) The Commercial Property
Building and Personal Property coverage form includes the following additional
coverages: debris removal, preservation of property, fire department service
charge, pollutant cleanup and removal, increased cost of construction, and
electronic data.
Coverage extensions:\n (Commercial Property Insurance) The commercial property
building and personal property coverage form includes the following coverage
extensions, which apply only if the insured has agreed to meet an 80% or higher
coinsurance requirement or has purchased a reporting form: newly acquired or
constructed property, personal effects and property of others, valuable papers and
records [md] other than electronic data, property off premises, outdoor property,
and nonowned detached trailers.
Optional coverages: \n(Commercial Property Insurance)
The commercial property
building and personal property coverage form includes the following optional
coverages, which apply only if designated in the declarations and require an
additional premium: agreed value coverage, inflation guard coverage, and
replacement cost coverage.
Business personal property:
Commercial property insurance can be written to
cover business personal property, such as furniture, fixtures, machinery, and
inventory.
Personal property of others:
Commercial property insurance can be written to
cover damage to personal property of others in the insured's care, custody, or
control, regardless of whether the insured is legally liable for that loss.

Agreed value:
Optional commercial property coverage that suspends the
coinsurance requirement and stipulates a certain value for designated property. If
the policy limit equals or exceeds this amount, the insured will not be assessed a
coinsurance penalty.
Business Income From Dependent Properties Form: Commercial Property form
designed for insureds whose business income is dependent on the ongoing
operations of other businesses they do not own. This includes businesses that:
deliver materials or services to the insured (contributing locations), are the primary
purchasers of the insured's products or services (recipient locations), manufacture
products for delivery to the insured's customers (manufacturing locations), or
attract customers to the insured's business (leader locations).
Additional coverages: \n(Commercial Property Insurance) The Commercial Property
Building and Personal Property coverage form includes the following additional
coverages: debris removal, preservation of property, fire department service
charge, pollutant cleanup and removal, increased cost of construction, and
electronic data.
Coverage extensions:\n(Commercial Property Insurance) The commercial property
building and personal property coverage form includes the following coverage
extensions, which apply only if the insured has agreed to meet an 80% or higher
coinsurance requirement or has purchased a reporting form: newly acquired or
constructed property, personal effects and property of others, valuable papers and
records [md] other than electronic data, property off premises, outdoor property,
and nonowned detached trailers.
Optional coverages:\n(Commercial Property Insurance)
The commercial property
building and personal property coverage form includes the following optional
coverages, which apply only if designated in the declarations and require an
additional premium: agreed value coverage, inflation guard coverage, and
replacement cost coverage.
Personal and advertising injury:\n(Commercial General Liability Insurance)
In the
Commercial General Liability (CGL) forms, this is injury that results from false arrest
or imprisonment, malicious prosecution, wrongful eviction or entry, slander, libel,
violation of personal privacy, use of another's advertising idea, or copyright
infringement.
Occurrence versus claims made forms: \n(Commercial General Liability Insurance)
CGL coverage can be written on an occurrence or claimsmade basis. The
major difference between occurrence and claimsmade forms is how coverage
under the form is activated, or triggered. An occurrence form covers bodily injury
(BI) or property damage (PD) that occurs during the policy period, regardless of
when the claim is made. A claimsmade form pays for BI or PD losses for which a
claim was first made against the insured during the policy period.

Supplementary payments:\n(Commercial General Liability Insurance) The

following supplementary payments are available under Coverage A and Coverage B
of the CGL: expenses incurred by the insurance company; up to $250 for the cost of
bail bonds; cost of bonds to release attachments; reasonable expenses incurred by
insured to assist in investigation and defense of a claim, including up to $250 per
day for loss of earnings; all costs taxed against the insured in a suit; prejudgment
and postjudgment interest; and defense costs for an indemnitee.
General aggregate limit: \n(Commercial General Liability Insurance)
Total limit of
insurance coverage that will be paid in one policy for all coverages except the
productscompleted operations hazard.
Medical expense limit: \n(Commercial General Liability Insurance)
Separate
sublimit in the CGL for Coverage C [md] Medical Payments coverage. It is subject to
both the per occurrence and the general aggregate limit.
Loss sustained versus discovery forms:\n(Commercial Crime Insurance) Commercial
Crime coverage is written on a loss sustained or discovery basis. The major
difference between the forms is how coverage under the form is activated.
Coverage under a loss sustained form is triggered by a loss sustained during the
policy period, but not necessarily discovered during the policy period. Coverage
under the discovery form is triggered by a loss discovered during the policy period,
but not necessarily sustained during the policy period.
Common law defenses:\n(Workers Compensation)
negligence, and the fellow servant rule.

Assumption of risk, contributory

Compulsory compensation laws: \n(Workers Compensation)

A type of state
workers compensation law requiring each employer to accept and comply with all
the law's provisions. Most state workers compensation laws are compulsory.
Elective compensation laws: \n(Workers Compensation)
A type of state workers
compensation law under which employers have the option to accept or reject the
law's provisions. If rejected, the employer cannot use the three common law
defenses.
Exclusive remedy: \n(Workers Compensation) The benefits stipulated in workers
compensation laws are the only means available to employees against employers
for injuries covered by those laws. Employees cannot sue their employers in court to
obtain additional compensation.
Expediting expenses:
Coverage under the Equipment Breakdown Protection
coverage form that pays extra costs necessarily incurred by the insured to make
temporary repairs and expedite permanent repairs or replacement of the damaged
property.

Errors and omissions insurance: Type of professional liability insurance written for
nonmedical professionals, such as insurance agents, accountants, architects,
stockbrokers, and attorneys.
Difference in conditions insurance:Type of Commercial Property policy that covers
most insurable perils but excludes basic fire and extended coverage perils. It is
usually written on large risks with a high deductible.
Surplus lines:
Term used to describe highly specialized insurance coverages
that are not available or cannot be procured from authorized insurers within a state.
Risk

The chance or uncertainty of loss.

Hold Harmless Agreement

tenant or subcontractor.

shifts liability from an owner or contractor to a

Insurance
a contract or device for transferring risk from a person, business, or
organization to an insurance company that agrees in exchange for a premium to
pay for losses through an accumulation of premiums.
Speculative Risk
Pure Risk

risks in which there exist both the possibility of gain and of loss.

involve only the possibility of loss.

Physical Hazard
itself.

arises from the condition, occupancy, or use of the property

Morale Hazard
through carelessness or by irresponsible actions can increase
the possibility for a loss.
Moral Hazrad
When a loss or situation is created on purpose to collect from
the insurance company.
Contract
legal agreement between two competent parties that promises certain
performance in exchange for certain consideration.
Contract Characteristics
Acceptance(agreement)

Competent Parties, Legal Purpose, and Offer and

Contract of Utmost Good Faith Company relies on the truthfulness and integrity of
the applicant. In return the insured relies on the companies promise and ability to
provide coverage and pay claims.
Conditional The Insured must notify the insurer about the loss. While the insurer
must use the valuation method specified in the contract to settle the loss.
Decleration Usually on the first page, contains information like the names of the
insured their address, the amount of the coverage, descriptions of the property or
item being insured, and the cost of the policy.

Insurance Agreement
States in general what is to be covered, the losses for
which the insured will be indemnified, the type of property covered and the perils
against which it is insured.
Conditions
insured.

Describe the responsibilities and obligations of both the insurer and the

Exclusion

The losses for which the insured is not covered.

Definitions

Clarifies the meaning of certain terms used in the policy.

Endorsements

Modifications or changes to the original policy.

Stock Companies

Stockholders receive the profits.

Mutual Companies The insured's are also members of the company. They can vote
to elect the management and receive the profits in in forms of dividends or
reductions in future premiums.
Advance Premium Companies Charge non assessable premiums and are required
to set money aside in case their claims experience is higher then expected.
Assessment Companies
each policy period.

Charge members a pro rata share of losses at the end of

Reciprocal Companies
Members share the insurance responsibilities with all the
other members. Managed by an Attorney in Fact who handles the business of the
reciprocal.
Lloyd's Assosiation A voluntary association of individuals, or groups of individuals
who agree to share in insurance contracts. Each individual or syndicate is
individually responsible for the amount of insurance they write.
Fraternal Benefit Society an incorporated society without capital stock, operated on
the lodge system and conducted solely for the benefit of is members.
Risk Retention Groups
Group self insurance program formed by product
manufactures to insure against product liability.
Purchasing Groups Used to purchase liability insurance on a group bassis.
Liability Risk Retention Act
Self Insuarnace

Amended in 1986

part of all the risk comes back.

Lines of insurance Property, Casualty, Life, Health and Disability

Property Insurance Dwelling, Homeowners, Commercial Property, Inland Marine,
Ocean Marine, and Crime.

Casualty Insurance Liability, Aviation, Auto, Workers Comp, and Surety Bonds.
Life Insurance
Designed to handle the risk of premature death or the risk that
an individual may outlive their financial resources.
Health and Disability Insurance Handles the risk of medical bills and loss of income
resulting from injury or sickness.
Agent Represents the insurance company, is the link between the company and the
insured. Sells insurance, issues and counter signs policies, collects premiums.
Countersign The agent signs each new policy prepared by the company before
delivering it to the insured.
Field Uderwriting Using pre established criteria to seek out the type of business
that is likely to be acceptable to the company.
Application The insured's offer.
Suspense (Diary System) A way to keep track of when a policy will need to be
renewed.
Service Needs
Name changes, change in method of payment, and accurate
record of such changes must be documented.
Agency Relationship
When one party (the agent) is authorized to act on behalf
of another (the principal).
Express Authority The authority specifically given to an agent, either orally or
written by the principal.
Implied Authority Authority given by the insurance company to the agent that is
not formally expressed.
Apparent Authority A doctrine that holds that an agent may have whatever
authority a reasonable person would assume that they have.
Solicitor
policies.

Can sell insurance collect premiums but cannot issue or counter sign

BrokerRepresents the insured. Cannot bind an insurer to an insurance contract.

Producer
General term used to describe someone who sells insurance such as an
agent broker or solicitor.
Consultant

Does NOT sell insurance sells advice on insurance.

Earned Premium
The premium the company actually earned by providing
insurance protection for the designated period.

Incurred Loss
Include amount paid on claims for covered losses and various
expenses related to handling claims.
Underwriting Expenses

The costs required to acquire and maintain a book.

Written Premium

The gross amount of premium income on the companies book.

Combined Ratio

Loss Ratio + Expense Ratio

Underwritingthe process of selecting certain types of risks and rejecting others so

the company can have the book that it wants.
Reinsurance When insurance companies purchase insurance to cover their own
exposure and loss.
State Insurance Department Area of Responsibilities
Ratification, and Enforcement

Companies, Agents,

Admitted (Authorized) Insurance Companies Meets the states standards and is

allowed in the state.
Non Admitted (Unauthorized) Insurance Company
state under special circumstances.

May only do business in the

Insolvent
When an insure does not have the funds to meet all of the financial
obligations it is contracted to meet.
Insurance guarantee AssociationProvides funds for payment of unpaid claims when
an insurer becomes insolvent.
Fiduciary
person.

A person who stands in a special relationship of trust to another

Twisting
A form of misrepresentation in which the agent convinces the client to
cancel already existing insurance and buy another policy from the agent.
Rebating
Giving or offering benefits other then those specified in the policy, such
as cash, gifts or securities to induce a customer to buy insurance.
Unfair Discrimination
Giving a lower or higher rate then another insured in
identical circumstances.
Ratification the approval by state insurance department of the policy forms,
endorsements, and rates used by companies in their state.
Prior Approval
and rates.

Companies must obtain official approval before using new forms

File and Use Companies may use forms and rates as soon as they are filed. But
after states review they can still be rejected.
Open Competition Companies compete openly with forms and rates as long as they
meet adequacy and nondiscrimination requirements.
Rates The basic charges an insurance company sets for various types of insurance.
Adverse Selection The tendency for people with a greater then average exposure
to loss to purchase insurance.
Class 1 Frame

Structures have outside support

Class 2 Frame

Joisted Masonry

Class 3 Frame

Non Combustible

Class 4 Frame

Masonry Non Combustible

Class 5 Frame

Modified Fire Resistive

Class 6 Frame

Fire Resistive

Judgment Rating

Considers the individual risk.

Manuel Rating

Rate per unit * # of units = premium

Merit Rating Starts with manual rating and are then modified to reflect unique
characteristics of the risk that are not reflected in the manual rate.
Experience Rating Modifies the manual premium on the basis of the insureds loss
experience.
Retrospective Rating
the policy period.

Bases the insured's premium on losses incurred during

Schedule Rating
Applies a system of debits or credits to reflect characteristics of
a particular insured.
Certificate of Insurance

proof that the policy has been written.

Concealment

Withholding rather then misstating a material fact.

Representations

Statements that the applicant believes to be true.

Short Rate Basis

The company keeps the premium for services already provided
and an allowance for expenses.
Pro Rata Basis

The company retains only the earned premium.

Flat Cancellation

When a policy is cancelled on its effective date.

Specific Insurance Designates a particular item to be insured.

Blanket Insurance Coverage may mean that the insured's covered property is
insured at any location rather then only at a particular location.
Policy Period Specific date, time, and in what time zone coverage begins and ends
in.
Policy Limit (Limit of Coverage) Represents the maximum amount the insurance
company will pay for loss.
Valued (Agreed) Amount ContractWritten for a specified amount.
Direct Loss

Resulting directly from a loss to property.

Indirect Loss (Consequential Loss)Comes as a result of the original loss.

Concurrent Causation

Two or more perils act concurrently to cause a loss.

Limitaions Eliminate or reduce coverage but only under certain circumstances or

when specific conditions apply.
Loss Provisions
Conditions that specify what the insured and insurer must do
when a loss occurs.
Duties Following a Loss Prompt Notice of Claim\nProtecting the Property From
Further Damage\nDetailed Proof of Loss\nMaking the property Available for
Inspection\nSubmiting to an Examination Under Oath\nAssisting the Insurer
Salvage
Insurance company can take possession of damaged property after
payment of loss.
Abandonment
The Insured may NOT abandon property to the company and ask
to be reimbursed for its full value.
Subrogation Transfer of rights of recovery against others to use.
Liberalization
If the insurer broadens coverage under a policy form or
endorsement without requiring an additional premium then all future policies or
endorsements will contain broadened coverage.
Assignment Policy may not be transferred to anyone else without the written
consent of the insurer unless the named insured dies.
No Benefit to Bailee
insured's property.

The Bailee is not covered while in possession of the

Vacant

No People No Property

Unoccupied An absence of people.

NonReporting

A flat premium is charged every time the policy is renewed.

Reporting
Pays a deposit premium, submits reports, premiums are calculated
based on the factors in the reports.
Liability
When a person is determined to have been responsible for loss to
another person or to another persons property and is required to make financial
restitutions.
Surety Bonds
emphasize that certain things will happen.\nsomeone will
faithfully perform whatever he agrees to do.\nsomeone will make a payment as
agreed upon by that person and another party.
Contract Bonds

Guarantees the fulfillment of contractual obligations.

Bid Bonds
Guarantee that if a contractors bid is accepted, the contractor will
enter into a contract and provide the required Performance bond.
Performance BondsGuarantee that jobs will be completed by the contractor
according to contract specifications.
Payment Bonds
Guarantees that bills for labor and materials will be paid by the
contractor as they are due.
Supply Bonds
Guarantee that a supplier will furnish supplies products or
equipment at an agreed upon price and time.
Completion Bond Guarantee that when contractors borrow money to fund
construction projects, the project will be carried out and the work will be delivered
free and clear of liens and encumbrances.
Judicial Bonds
forth by law.

Guarantee that the principal will fulfill certain obligations set

Fiduciary Bonds
Commonly used to bond guardians, administrators, trustees, and
executors, all of whom are fiduciaries, or persons appointed by a court of law to
manage the property of others.
Court Bonds Are used to settle legal arguments that do not involve monetary
damages. Their primary purpose is to protect obliges against loss in case principals
are not able to prove that they are legally entitled to the legal remedy they sought
against the oblige.

Public Officials Bond

Which are required by law guarantee that public officials
will handle public money correctly and otherwise perform their duties faithfully and
honestly.
License and Permit Bonds Are sometimes required in connection with the issuance of
license by government agencies. They guarantee that the person who posts the
bond will comply with all the applicable laws pertaining to their activities.