RMIN Test 2 Notes.docx - RMIN Test 2 Chapter 10 Analysis of...

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RMIN Test 2 Chapter 10: Analysis of Insurance Contracts Basic Parts of an Insurance Contract Declarations- first part of an insurance contract o Declarations are statements that provide information about the particular property or activity to be insured. In property insurance, the declarations page typically contains information concerning the identification of the insurer, name of the insured, location of the property, period of protection, amount of insurance, amount of the premium, size of the deductible (if any), and other relevant information. o Information contained in the declarations section is used for underwriting and rating purposes and for identifying the property or activity to be insured. Definitions- page or section of an insurance contract o Key words or phrases have quotation marks (“. . .”) around them. o The purpose of the various definitions is to define clearly the meaning of key words or phrases so that coverage under the policy can be determined more easily. Insuring Agreement- heart of an insurance contract o The insuring agreement summarizes the major promises of the insurer. The insurer agrees to do certain things, such as paying losses from covered perils, providing certain services (such as loss-prevention services), or agreeing to defend the insured in a liability lawsuit. o There are two basic forms of an insuring agreement in property insurance: (1) named-perils coverage and (2) open-perils coverage. o Under a named-perils policy , only those perils specifically named in the policy are covered. If the peril is not named, it is not covered. o Under an open-perils policy , all losses are covered except those losses specifically excluded. An open-perils policy is also called a special coverage policy , If the loss is not excluded, then it is covered, usually preferred. o Life insurance is another example of an open-perils policy. Most life insurance contracts cover all causes of death by accident or by disease except for certain exclusions. Exclusions- basic part o There are three major types of exclusions (1) excluded perils, (2) excluded losses, and (3) excluded property. o 1. Excluded Perils: Ex- In a homeowner’s policy, the perils of flood, earth movement, and nuclear radiation or radioactive contamination are specifically excluded. o 2. Excluded Losses: Ex- In a homeowners policy, failure of an insured to protect the property from further damage after a loss occurs is excluded. o 3. Excluded Property: Ex- In a homeowner’s policy, certain types of personal property are excluded, such as cars, planes, animals, birds, and fish.

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