RMIN Test 2
Chapter 10: Analysis of Insurance Contracts
Basic Parts of an Insurance Contract
Declarations- first part of an insurance contract
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
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
Key words or phrases have quotation marks (“. . .”) around them.
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
Insuring Agreement- heart of an insurance contract
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.
There are two basic forms of an insuring agreement in property insurance: (1)
named-perils coverage and (2) open-perils coverage.
, only those perils specifically named in the policy
are covered. If the peril is not named, it is not covered.
, all losses are covered except those losses
specifically excluded. An open-perils policy is also called a
, If the loss is not excluded, then it is covered, usually preferred.
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- basic part
There are three major types of
(1) excluded perils, (2) excluded
losses, and (3) excluded property.
1. Excluded Perils: Ex- In a homeowner’s policy, the perils of flood, earth
movement, and nuclear radiation or radioactive contamination are specifically
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.
3. Excluded Property: Ex- In a homeowner’s policy, certain types of personal
property are excluded, such as cars, planes, animals, birds, and fish.